Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing’s new fighter award moves away from money-losing fixed price contracts March 24, 2025
- Airbus still struggles to deliver planes on time March 24, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 14. March 21, 2025
- How good is the COMAC C919? March 20, 2025
- Boeing CFO Brian West: OK on tariffs for now, backlogs and inventories help March 20, 2025
More delays for 787, A380: German magazine
Reuters picked up a report from a German magazine saying Boeing and Airbus are notifying customers of new delays in the 787 and A380 programs. Here’s the report; we’ll try for comment ourselves.
New, 1045 AM PDT: Reuters has a follow-up report, quoting Yvonne Leach, a Boeing 787 spokesperson, denying the German magazine story. According to the new Reuters report, Leach says there’s been no change to the basic 787 schedule announced last month, in which a 15-month delay for initial entry-into-service was identified. Reuters reports Leach said that on average, delivery delays will be about 20 months.
Note the phrase “on average” in the Reuters story. This doesn’t specifically discount the 27 month figure reported by the German magazine while affirming the 15 months EIS delay.
Monarch Airlines, in an internal memo, reportedly told employees its 787s will be 30 months late; Monarch has not confirmed (to us, anyway) the authenticity of this memo. This was followed by an interview by Royal Jordanian Airlines in which it expects 787 delays of up to 30 months; and Lan Chile, which anticipates a 24 month delay for its 787s.
So how could this be, when Boeing announced a 15-month delay for EIS?
It’s because there will be a much slower ramp-up on the production schedule. Boeing’s original plan was to be at 10 per month by 2010; now this won’t happen until 2012, Boeing said in its April program update. The ripple effect is what’s at hand here.
As for the same original report by the same German publication that there is another delivery delay in the offing for the Airbus A380 2009 schedule, we’re still trying to nail this one down.
New, Sunday, 800 AM PDT: The European news agency AFP picks up a report from another German magazine saying that Airbus will “nearly” deliver 13 A380s this year (which by our interpretation means Airbus “won’t”) and that it will miss its target of 25 deliveries next year. Here is AFP’s story. Our inquiry of Airbus produced this response, quoting directly:
Airbus and in particular Airbus President and CEO Tom Enders have said on several occasions that our delivery schedule has always been and will continue to be a major challenge for the company until the ramp-up is completed.
Currently, the A380 is in the critical phase of steep production ramp-up and the changeover from the recovery wiring installlation (Wave1) to the ramp-up mode with full industrialization (Wave2) .
A major review of the programme at this transition phase is standard practice.This includes amongst other things an analysis of the progressive shift of the experienced work force from Wave1 to Wave2 aircraft, the ramp-up readiness of the supply chain and the status of the delivery schedule. It confirms the continues tight management attention the A380 programme and its delivery schedule are receiving in order to satisfy our customers.
So far, no A380 customer has specifically revealed new delay timeframes although the Reuters report indicated that the first German magazine said Airbus has notified customers.
New, Monday, 715 AM PDT: Airbus spokespersons, reached Monday by European media, decline to comment on the reports of the German publications that it won’t deliver 13 A380s this year or 25 next year, causing EADS stock to fall.
A380 lease rates
Commercial Aviation Online (CAO), the subscription-based news service owned by the company that owns Flight International, Airline Business and other publications, reports that Singapore Airlines completed financing of its third Airbus A380 with a lease structure in Europe. The purchase price by the lessors is reported to be $198.6 million with a lease rate of $1.7 million a month, for what’s know as a lease-rate factor of 0.85%.
Before people jump to conclusions about the purchase price, comparing it to today’s list price of more than $300 million for the A380, remember that Singapore ordered the A380 years ago and received launch customer pricing for it. (Business Week reported at the time that launch customer pricing was in the $140 million range, something neither Airbus or Singapore ever confirmed.)
The lease rate factor for an airline of Singapore’s quality is also fairly standard.
Disclosure: We write for CAO, but did not write this story.
30 month delay on 787?
Flight International reports that Royal Jordanian Airlines believes its order for Boeing 787s could be as much as 2 1/2 years late. Monarch Airlines is also reported to be thinking its 787 orders could be 30 months late, but this one as yet is unconfirmed.
New, 0950 AM PDT: Flight International’s affiliate Air Transport Intelligence reports Lan Chile expects a two-year delay in its 787 deliveries. Writes ATI: “With regards to the delivery schedule of the Boeing 787,” says LAN CFO Alejandro De La Fuente, “It is likely there will be significant delays estimated around two years.”
For all the confidence Boeing expressed on its program update call about its revised schedule, outlining a 15-month delay, it’s becoming clear that its customers are unconvinced. The question for Boeing is how does it deal with the continued skepticism?
New, 120 PM PDT: Boeing issued this press release about the fifth 787 entering final assembly, with some detail about the reduction in traveled work.
More A380 delays or not
In a confusing set of stories, reports suggest that there may be a new round of delivery delays for the Airbus A380. These generated from comments made by Airbus CEO Thomas Enders, who said Airbus is engaged in a major review of the A380 production to assess the delivery schedule of 13 A380s this year and more in succeeding years.
This apparently was interpreted to mean that Airbus might not deliver the 13 airplanes promised this year. A spokesman immediately denied that’s what was meant.
We’re told by two sources–one inside Airbus and one a former Airbus executive–that program reviews are normal and there’s much ado about nothing on this one. The former Airbus executive told us he was puzzled why Enders even made the remarks.
Given the A380’s delay history, any hint of delays–whether founded or unfounded–are bound to cause concern and questions such as expressed in the news reports. This is similar to the trials now experienced by Boeing with the 787 program and fears by 777F and 747-8 customers of knock-on effects to these programs.
The 777F program appears to be on track now that there is no conflict in flight testing schedules between the 787 and 777F, as emerged on a previous 787 revised schedule. Some customers remain concerned–and are predicting–delays of several months in the 747 program, however, because of the level of engineering resources previously diverted to the 787. These customers believe Boeing won’t have time to catch up on the 747 to keep this program on track. Boeing previously pushed back roll-out by three months, according to reports, but has vowed to keep to the delivery schedule even if it means initially delivering a plane that’s about 1% overweight, according to Flight International.
New, 2:00 PM PDT: Speaking of A380 delays, Reuters has this report about Airbus penalty payments to Emirates Airlines for the delays. An excerpt: DUBAI (Reuters) – European plane maker Airbus paid Dubai’s Emirates EMAIR.UL as much as $110 million during the last year in compensation for the late delivery of the A380, of which the Arab carrier is the largest customer, Emirates said.
To fuel or not to fuel
Here are a couple of items about the refueling capability of the KC-30/KC-330 tanker, which is one point of controversy in the continuing saga of the Boeing-Northrop Grumman tanker contract award.
Boeing likes to point out that Northrop’s KC-30 hasn’t passed gas through its bloated airplane (sorry, we couldn’t resist the puns) and that there are delays in the EADS/Airbus KC-330 program to Australian. The KC-330 is the basis for the KC-30.
Aviation Week has this story about the KC-330 and some issues with the refueling boom. Northrop Grumman provided a link to this video showing fuel transfer on an Airbus A310 test-bed aircraft.
Northrop likes to point out that Boeing’s sixth generation boom proposed for the air force hasn’t been built, nor has the airplane to which this boom will be installed.
New, 0920 PDT: A Reuters report published in London’s The Guardian raises precisely the issue we raised weeks ago: that efforts by the US Congress to overturn the tanker award based on jingoism can potentially do more harm do Boeing in the global market than letting the USAF award stand, assuming the GAO reject’s Boeing’s protest.
Leeham website updated 4/29
Our Corporate Website has been updated with a new Commentary, News Articles and the Boeing Conference Call transcript.
This week we examine the pledge by Boeing CEO James McNerney to tone down the rhetoric in Boeing’s protest of the USAF tanker contract award to Northrop Grumman, and Northrop’s response to McNerney’s pledge. We also touch on the 747-8I, the close tie between GE and Boeing on the 787 program; and Boeing’s Shadow.
Profile on Boeing’s McNerney
The Wall Street Journal’s Lynn Lunsford has a good piece on what Boeing’s CEO, Jim McNerney is doing about the 787 and KC-X and how McNerney views things at the moment. It’s a rare interview granted by the low-key McNerney.
Speaking of the tanker, Northrop Grumman, in one of its e-blasts, cites a National Journal story suggesting Boeing is willing to spend an eye-popping $250 million to overturn the tanker decision. Boeing denies the figure. The story may be found here.
News on the tanker, 787, Boeing earnings
The last 24 hours have been busy news days on the tanker and the 787.
Reuters published a story yesterday about the Air Force calling the CEOs of Boeing and Northrop Grumman on the carpet for the vitriolic nature of the protest. Boeing has been engaged in a high profile advertising campaign that many view as a scorched earth approach toward the Air Force. This was the subject of an in-depth column we did last week on our Corporate Website.
Although Boeing kicked off the latest round with its post-protest ad campaign, Northrop hasn’t distinguished itself, either. In e-blasts, Northrop’s language is as over-the-top as is Boeing’s rhetoric. Both companies, which by their nature fall into the “world class” category, ought to be embarrassed by their respective efforts.
Other tanker news in the last 24 hours: US Sen. John McCain, the GOP presidential candidate who killed the Boeing KC-767 tanker lease deal in 2004 and who has been blamed (unfairly, in our view) by Democrats for killing Boeing’s chances this time around, told the parties to “get on with it,” as outlined in this report by The Moble Press-Register.
The Citizens Against Government Waste awarded US Reps. Norm Dicks (D-WA) and Todd Tiahrt (R-KS) the “Porker of the Month” award (named for pork-barrel projects, a US term for wasteful government spending) for their efforts to kill the USAF tanker contract with Northrop Grumman. This makes a good sound bite, but The Washington Post previously reported that Northrop helps fund CAGW. Northrop did not confirm or deny the funding story when The Post inquired. So take this one with a grain of salt.
On the 787 front, Jon Ostrower last night obtained a memo to employees from Boeing CEO James McNerney, discussing the 787 program and the production model. Ostrower’s Flightblogger has the write-up and the memo. Dominic Gates at The Seattle Times followed with his story and copy of the memo in today’s paper.
Boeing’s first quarter earnings call is tomorrow at 10:30 EDT. The webcast may be found here. Boeing is expected to reaffirm its 2008 earnings guidance (as it did on the program update), but maybe there will be some information about penalties and lost/deferred revenue. We provided an analyst estimate recap in our own estimate on revenue lost through 2013 in our column last week on our Corporate website. The analyst estimates of penalties range from $800 million to $5 billion. Our guesstimate on revenue loss through 2013 is about $30 billion. Extra production costs are on top of these numbers.
Sorting out reports of new 787 delay
For anyone who has picked up the reports on Yahoo or Google News about the Focus magazine story of another potential round of 787 delays, and Boeing’s response Sunday denying the report, this all must be very confusing.
We don’t know if the report, which cites unidentified sources in the FAA, is correct or not. The report also says Boeing will announce another delay of three to six months in May, though the English-language reporting of the Focus story doesn’t say where this timing information comes from.
What we do know is that since before the 787 roll-out, the FAA has been concerned about a variety of issues relating to the ground-breaking technology of the 787 and has issued several “special condition” rules that Boeing has to meet. This is not anything to get exercised about.
We also have been told, however, on many occasions–also beginning before the roll-out–that the FAA is short on the technical expertise to assess some of the technology and that it’s had to rely on engineers at the US Air Force who have greater experience in composites and other areas than those at the FAA. This lack of technical expertise at the FAA may be what’s at work here, if the Focus report has any validity.