Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Five for Five: Air India crash points to systemic problems at Boeing that CEO Ortberg must fix June 15, 2025
- Airbus sees Boeing as medium-term competitor, with Comac next June 14, 2025
- Boeing bullish on 20-year forecast, despite short-term headwinds June 14, 2025
- Embraer’s 20-year market forecast under 150 seats: fewer turboprops, jets about the same June 14, 2025
- Airbus Canada CEO: Airbus is here to stay in Canada June 14, 2025
No immediate effect from WTO ruling
Update, Sept. 6: There is a report out of Germany that the WTO found state loans to Airbus to be acceptable. The conflicting information and enigma goes on.
Update, 2:00pm: The New York Times says 70% of the USTR/Boeing complaint against Airbus was rejected by the WTO. The link is contained in the NY Times reference below in the list of articles.
News Flash, 11:35 AM: Reuters is now quoting EU sources that the WTO didn’t hand the US and Boeing the victories that have been claimed:
BC-TRADE/AIRCRAFT-EU-WTO (URGENT)
WTO did not rule Airbus aid illegal – EU sources
BRUSSELS, Sept 4 (Reuters) – Comments that the World Trade Organisation on Friday backed a U.S. complaint against European Union aid to plane maker Airbus are wrong and misleading, EU sources with knowledge of the WTO ruling said.
“The ruling is not a black-and-white case. It simply is not a great victory for the United States,” one source told Reuters on condition of anonymity.
“The claim that the WTO ruled that subsidies given (by the EU) to Airbus for their A380 plane were illegal is wrong and misleading.”
Reuters reported earlier from Washington, citing a person familiar with the case, that the WTO had ruled that billions of dollars in European loans to help Airbus develop civilian aircraft were an illegal subsidy under world trade rules.
Another EU source said aid given by Brussels to the European plane maker for its A350 aircraft was “not mentioned in the (WTO) report and so would not have to be repaid”.
He was speaking after the WTO issued a pivotal, but highly confidential, ruling on subsidies given by the EU to Airbus that stands to impact the global aircraft sector.
The Hill, Aug. 31: This specialty web publication follows Congress and has this long analysis of the prospect of the WTO ruling on the tanker competition, published in advance of the Sept. 4 report.
Key articles on the WTO dispute:
Reuters, Sept. 3: This one is a good recap of implications, reported in advance of the WTO staff report.
Financial Times, Sept. 3: Another good story in advance of the ruling about the broader implications of the US/Boeing win.
AP via Business Week: This story presents a good analysis on how the WTO ruling could hurt both Airbus and Boeing.
Reuters, Sept. 4: This is a great Fact Box recapping all the issues involved.
Reuters, Sept. 4: Boeing’s Defense unit says the Pentagon will have to decide what, if any, affect the WTO action will have on the tanker competition, according to this Reuters report.
The Economist, Sept. 4: Here’s a European take on the WTO trade dispute.
SkyNews (Europe), Sept. 4: As expected, the UK said it will go forward with plans to loan Airbus more than $500m for the development of the A350.
Bloomberg News, Sept. 4: This report says the WTO did find illegal subsidies were provided on the A380, conflicting with the Reuters report above.
Bloomberg News, Sept. 4: It didn’t take long for a Boeing supporter to tie the WTO report to the KC-X tanker bid. Note on comment on this issue below the jump at the end of our assessment:
U.S. Air Force Tanker Bid Should Consider WTO, Rep. Dicks Says
2009-09-04 19:22:06.212 GMT
By Gopal Ratnam
Sept. 4 (Bloomberg) — The U.S. Air Force must tailor its new refueling tanker bid by considering today’s World Trade Organization’s ruling that Airbus SAS received some illegal subsidies, Representative Norm Dicks, a Democrat from Washington state, said in a statement.
“It would be inconceivable for the Defense Department to issue its request for proposals for the new Air Force refueling tanker without including a provision which recognizes the ruling issued today by the WTO panel,” Dicks said in the statement.
“The U.S. government cannot reward illegal market actions that have harmed U.S. manufacturers.”
The Hill, Sept. 4: This specialty web publication follows Congress and has this long analysis on the possible effect of the WTO report on the tanker competition.
Aviation Week, Sept. 4: Reporter Robert Wall, one of the most insightful aviation journalists, is based in Europe and has this very good report on the WTO conclusions.
New York Times, Sept. 4: The NYT says the WTO found some but not all Airbus aid was illegal and that “most” of the financial aid to Airbus was legal.
Financial Times, Sept. 4: This London-based story has some specificity on the illegal launch aid attributed to the A380.
Reuters, Sept. 4: This article focuses on the affect of the WTO ruling on the pending KC-X tanker competition.
Our Take:
There won’t be any immediate practical affect from the World Trade Organization staff report that Airbus benefited from improper subsidies in the development of its entire line of aircraft. The immediate affect will be political and public relations points.
Risks to 787 Line 2 in Charleston
Here are some thoughts about the risks Boeing faces about establishing 787 Line 2 in Charleston vs. Everett. An understanding of Washington State politics is at the core of these musings.
- Federal politics. Certain members of the Washington Congressional delegation, notably Sen. Patty Murray and Rep. Norm Dicks, along with Sen. Maria Cantwell and Rep. Jay Inslee, are very vocal about keeping Line 2 in Everett, which lies in Inslee’s district. Dicks and Murray are powerful members of their respective appropriations committees. How pissed off will they be if Boeing puts Line 2 in Charleston, and will this affect their advocacy of Boeing interests in Congress, notably the….
- KC-X tanker impact. In an unfortunate coincidence of timing, Boeing’s decision on locating Line 2 (set for year-end) will come shortly after the new Draft Request for Proposals is issued (expected in September) for Round Three of the KC-X competition. Murray and Dicks are hyper-vocal advocates for Boeing’s tanker and opposing Northrop’s tanker. Nobody expects these two to reverse themselves, but they certainly could mute their opposition to Northrop as a pressure point on Boeing or in retaliation for a Charleston decision. Read more
Analyst reaction to 787 schedule
Market reaction Thursday to Boeing’s new schedule for 787 first flight by year end, and EIS in 4Q10, was good: stock closed up more than 8% or $4 to $51.82. The Dow Jones Industrials were up a mere 0.39%.
Aerospace analyst reaction was a bit more muted.
Boeing webcast on 787 8/27
Update:
Here is a 16 minute podcast about the conference call and news.
Original Post:
Here is a running recap of the Boeing webcast on the announcement today of the new schedule and $2.5bn charge.
Present on the call are CEO Jim McNerney, CFO James Bell, Scott Carson, CEO of BCA, and Pat Shanahan, VP Products at BCA.
McNerney (JM): There is no question the execution of this program has had challenges and there is work still to be done. We see the 787 adding tremendous value to the customers and Boeing.
Carson (SC): We are contacting customers with timing of deliveries. 787-9 first delivery in 4Q13. As part of schedule adjustment increased time between first flight and first delivery to address issues that might arise during testing. First three test airplanes, suitable for flight testing and certification, have limited commercial value.
787 Schedule, $2.5bn charge announced
Boeing’s Press Release: Note webcast at 0700 PDT referenced at the end.
The 787 is to fly by the “end of the fourth quarter” and frst flight in the 4th quarter of 2010. Production rate to 10/mo is now projected in late 2013, a year later than planned on the previously revised schedule.
Split view on 787 forward loss
During the 2Q09 earnings call, Boeing seemed to be laying the foundation that a forward loss might be forthcoming on the 787 program and some analysts shortly thereafter issued notes predicting there will be one. However, within the last two weeks two analysts that we know of have taken a different view. (We see reports from only six of the aerospace analysts who cover Boeing.) Read more
C-17 profile
Defense Industry Daily has a superb profile of the Boeing C-17. It’s timely because Boeing is ramping up efforts to convince Congress to fund more C-17s over opposition of the Air Force and the Obama Administration. Read more
Keeping Boeing in Seattle
Update, Aug. 26:
Bloomberg’s story; the Seattle Post-Intelligencer’s story; Charleston Regional Business Journal.
Update, Aug. 25:
KING 5 TV Seattle (NBC) reported today that Boeing will file for permits tomorrow to expand the Charleston, SC, plant in anaticipation of a Line 2 for the 787–but that no decision about placing the plant there has been made. The story may be found here.
Original Post:
On-line newspaper Crosscut has an interesting piece about the debate over how and whether to keep Boeing in the Puget Sound region (Seattle). (Link warning: Crosscut is very slow.) The debate is heating up again because of the recent purchase by Boeing of Vought’s 787 plant in South Carolina, and the presumption by many that this is a prelude to locating a second 787 production line there. Read more
Former defense official favors split tanker buy
George Talbot of The Mobile Press-Register has an article about John Lehman, a former defense official in the Reagan administration, favoring a split buy for the KC-X program. Read more
USAF Cadets work on tanker fuel burn reduction, and other things
US Air Force Cadets are designing wing refinements for the aging fleet of Boeing KC-135R tankers to improve fuel efficiency by 8%, reports CleanTechnica.com.
Why a bunch of cadets? Perhaps because the US Air Force Academy in Colorado Springs aerospace engineering programs ranks in the Top 5 in US News & World Report’s annual rankings (2009). (None of the universities or colleges in Washington State, where the KC-135 was built and where Boeing Commercial Airplanes is headquarter, ranks even in the Top 15 aerospace engineering schools.)
Airbus analysis
AirInsight’s Addison Schonland and Ernie Arvai have published a 54-page report about Airbus, A Market Analysis and Outlook. The report looks at each A3-Series program, including the forthcoming A350, and the A400M and KC-30.
A350/UK Funding
It’s a bit of old news this week, but as readers know the UK agreed to kick in GBP340m to fund the A350 development. Predictably, the US Trade Representative and Boeing objected. As long-time readers know, so do we. We don’t like government participation of any kind to corporations (it doesn’t matter what industry it is). Furthermore, at June 30, EADS had $9bn in cash vs. $5bn for Boeing.