Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 19. April 25, 2025
- How good is the C929? Part 2. April 24, 2025
- Boeing First Quarter Results Update: China is 10% of the backlog, with 500 in “Unidentified” April 24, 2025
- Boeing First Quarter Results: Tariffs, Return flights, $10.55bn asset sale April 23, 2025
- RTX Q1 2025 Earnings: GTF Talk Takes A Back Seat To Tariffs April 22, 2025
New Boeing economic impact analysis issued
The Washington Research Council today (April 14) issued an eight page analysis entitled, “What if Boeing Left Washington?” The PDF file may be found here.
The WRC is a local, Seattle-based conservative think tank that focuses on economic issues in the state. The report was issued through its Washington Alliance for a Competitive Economy affiliate (WashACE).
Among the findings:
UBS predicts 30%-40% 737 rates cuts
UBS Securities today (April 13) predicted Boeing will have to cut rates on the 737 line by 30%-40%, forecasting an announcement later this year.
This is more agressive than the 30%-35% suggested in January by ILFC CEO Steven Udvar-Hazy and greater than anything we have heard that is being discussed in Boeing. UBS’ forecast suggests a monthly production rate of 21.7 (30%) to 18.6 (40%) per month. The lowest number we’ve heard being discussed in Boeing is 24-26 a month (23%-16%). Boeing currently produces the 737 at the rate of 31 a month.
UBS forecasts 361 737 deliveries this year, or 30 a month; 300 next year (25) and 240 (20) in each of 2011 and 2012.
The company forecasts just 25 787 deliveries next year and 60 in each of 2011 and 2012.
Airbus details Watchtower Committee
We previously wrote a story for Commercial Aviation Online about Boeing Capital Corp.’s War Room methodology in tracking the “funding gap” for 2009 deliveries. We posted that story on this website at this link.
We followed that CAO story up with a profile of the Airbus BCC equivalent, the Watchtower Committee. Here is that story:
Boeing cuts production
Boeing just announced it is cutting production of the 777 from seven to five a month and delaying plans to increase rates on the 767 and 747, effective next year, it was announced today. No rate adjustment is planned for the 737 at this time. The rate for the 737 is 31 a month.
The decision comes a month before BCA President Scott Carson previously said it would.
Washington State lags competitively
Update, 3:25 PM: Gov. Gregoire announced the new aerospace council, as reported by the mainstream media, and she also announced a plan to increase aerospace training. But her plan calls for coordinating community college aerospace training programs and the aerospace programs of the senior colleges.
All well and good, but this misses the mark. We’ll be talking about this at our speech to the Economic Development Council of Snohomish County on April 22.
Also missing the mark: Gregoire made the point several times about building airplanes in Washington vs. other states. Washington officials and all the stakeholders, including the unions, need to convince Boeing to bring work back to Washington from other countries and commit future work for future airplane programs right here in Washington. Nothing was said about this.
Update, 1:55PM: The Associated Press reports, via The Seattle Post Intelligencer, that the Governor is going to announce the establishment of an aerospace commission–one of the recommendations of the Deloitte report. The AP said it got a copy of the report through a Public Records request. The report, of course, was here first. Andrea James of The P-I is updating her blog with new information. It may be linked here. Dominic Gates of The Seattle Times has this report in advance of the Governor’s press conference.
Update, 1:45 PM: Gov. Gregoire will hold a press conference at 2:45 PM PDT April 9 to discuss this study. It will be carried live by the Washington State TVW public information network, which also streams on the Internet. The link to the main TV page is here; you’ll have to scroll to the event itself.
Update, 9:30 AM: We were just told by a member of the Washington State Legislature who was briefed on this report that no copies were going to be distributed to the Legislature:
We had the briefing from Deloitte on Monday night and the Gov. was briefed on Tuesday morning. We were told we could not have copies and the presentation Powerpoint would be erased because circulation would be “devastating” to the state’s competitive posture. From my reading of the materials, it was fairly common sense and not necessarily profound on issues we have known for quite sometime, at least from an insider’s perspective.
We find the plan to keep this report from the Legislature, which would be asked to make any changes to laws and compensation, to be very troubling. It’s also very stupid. Anytime someone tries to keep key documents from key stakeholders and decision-makers, someone is going to leak it. There is no greater resource than a pissed off one.
Additional Note: We are making a speech April 22 on the topic of retaining the anticipated second 787 production line in Washington before the Economic Development Council of Snohomish County and are addressing some of the issues in this report.
Original Post:
A new study by Deloitte performed for the Economic Development Council of Snohomish County (where Boeing’s Everett wide-body plant is located) concludes that Washington State is uncompetitive in attracting new aerospace business.
The report, which has not been released publicly and is to be used by the Governor to make a case for changes in state laws to ease business costs for Boeing and other firms, was obtained by us.
The Aerospace Industry Competitive Study may be downloaded. It is a 38 page PDF file.
Among the conclusions:
GE Boss seeks tanker compromise
The head of GE backs a plan to split the acquisition of the KC-X USAF aerial tanker between Northrop Grumman and Boeing, according to this interview done by the Cincinnati Enquirer.
GE Aviation will supply the engines on Northrop’s KC-30; Pratt & Whitney was selected to power Boeing’s KC-767.
And now, a plug for a conference organized by Air Transport World and Leeham Co.
Airbus predicts 480 deliveries in 2010
Airbus’ COO-Customers, John Leahy, predicts 480 deliveries in 2010, about the same number as this year, according to this Aviation Week article by Robert Wall.
Boeing takes hard hit on DOD budget
Boeing took a hard hit on the Defense budget announced today by Sec. Robert Gates. The C-17 program will be canceled after the current contract is filled. The CSAR-X helicopter procurement is canceled. The Airborne Laser system based on the 747, is reduced to research only. The Next Gen bomber is off the table. There are other programs in which Boeing was involved that are gone, too.
This makes the recompete for the KC-X aerial tanker all that much more important. Gates said this will proceed in the summer.
Update: Defense Industry Daily has this superb recap of the winning and losing programs.
We did a podcast with Addison Schonland of IAG and George Talbot of the Mobile Press-Register about the implications for the tanker procurement.
Here is a link to Gates’ formal statement.
Boeing Capital details methodology
Following the annual ISTAT meeting in March, we published a piece about the Boeing view of the so-called funding gap for 2009: the financing shortfall seen by just about everyone except Boeing and Airbus as between $10bn and $25bn this year needed to pay for more than 1,000 airplanes due for delivery by the Big Two and Bombardier and Embraer.
Boeing believes the gap is $0-$5bn and Airbus, though not presenting at ISTAT, has a similar view.
We mentioned in our story that we have been invited to visit Boeing Capital officials to get detail about their methodology. We did, and we wrote that piece for Commercial Aviation Online, for which we are a regular contributor. That piece was published April 2. We can now reprint it below.
Major shift on split tanker contract
Update, April 3: The New York Times has this long piece on the prospect of a split procurement.
Original post:
It is a subtle but major shift on the controversial proposal to split the KC-X aerial tanker contract between Northrop Grumman and Boeing.
KIRO TV (CBS) in Seattle interviewed US Rep. Norm Dicks (D-Boeing/WA), who throughout the previous competitions has been dogmatically in favor of a single contract to Boeing. Dicks is #2 on the House Appropriations Committee, where any funding bill will have to originate. The chairman of the committee is US Rep. John Murtha (D-PA), who came out solidly in favor of a split contract as the only way to break the logjam over an award.