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 22. May 16, 2025
- Services are driving revenues and profits in difficult times, Part I May 15, 2025
- The BWB has a long way to go before flying passengers, freight May 12, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 21. May 9, 2025
- Does an A220-500 need a new wing and engines? Part 2. May 8, 2025
Boeing loses another defense contract
Make it four. That’s the number of defense contracts Boeing has lost this year. This AP story outlines them.
Maybe it’s just coincidence, but Boeing certainly hasn’t done very well since protesting the first loss, that of the KC-45A tanker program. Maybe there’s no retaliation going on with the Pentagon. Maybe we’re just being cynical. But we can’t help wondering if there’s a connection.
Government R&D for A350 wing
The Financial Times reported today (May 15) that the UK government will help fund the research and development for the composite wing for the Airbus A350.
An excerpt:
Aerospace groups are joining forces with the government and regional development agencies to fund research and development aimed at strengthening the UK’s leading position in the manufacture of wings for commercial jets.
They are planning to invest £103m ($200m) in a three-year programme to develop and manufacture wings out of carbon-fibre composites, rather than aluminium. The R&D programme will be led by Airbus, the European aircraft maker, which has its wing design and manufacturing operations in the UK at sites near Bristol and in north Wales.
The full story may be found here, but it’s Subscription Required.
Our immediate thought, of course, was about that old bugaboo, government “subsidies” and the entire WTO/EU/USTR/Boeing/Airbus/USAF tanker series of fights.
This will only add fuel to the fire of the complainers over Airbus “subsidies.”
The Airbus response, of course, will be that Boeing gets plenty of R&D and “subsidy” support from NASA and the US Department of Defense.
UA-US, DL-NW, Boeing-Airbus
Richard Aboulafia, Addison Schonland and Scott Hamilton discuss the winners (or not) between Airbus ands Boeing in the potential tie-up between United Airlines and US Airways and Delta and Northwest in this 15 minute podcast by AirInsight. (Subscription only.) The link is here.
EADS profits on increased production
EADS, parent of Airbus, reported a stronger-than-expected profit on higher production at its principal subsidiary. The details may be found in this AP story.
A couple of take-aways:
- This better performance, despite the worries over the dollar-Euro exchange rate, slower-than-desired progress in Power8 cost-cutting and new issues with A380 production, may make it more difficult to get cuts from the already recalcitrant labor unions; and
- The A320 family, where higher production rates have kicked in (and going higher still) has proved to be a key to the Airbus recovery and cash flow. When Airbus announced plans to boost production of this family, Boeing criticized the move as unwarranted by market conditions. That was hardly the point; because of delays and cash flow shortfalls in the A380 program, Airbus really had little choice. (That Boeing is now considering boosting the 737 production seems to demonstrate Airbus was right about the market demand, too.)
Airbus plans to take the A330/340 production to 12 a month by 2010 in response to demand for this airplane, higher and sooner than expected. This will further aid the cash flow shortfalls from the A380 program.
Jumping the gun, perhaps?
Northrop Grumman announced the grounding breaking for its KC-45A tanker even though the Government Accountability Office hasn’t rendered its decision on the Boeing protest of the tanker contract award by the USAF to Northrop.
This strikes us as incredibly premature and reminds us of another premature declaration:
Groundbreaking for the KC-45 Tanker Manufacturing Facilities
Set for June 28
Mobile, Alabama Site to Provide KC-45 Tankers to United States Air Force
WASHINGTON – May 13, 2008 – Northrop Grumman Corporation (NYSE: NOC) and its key subcontractor, EADS North America, will join local, state and federal officials and the citizens of Mobile, Ala., in a groundbreaking ceremony on Saturday, June 28. Ground will be broken at Mobile’s Brookley Field, where two adjacent manufacturing facilities will be built to produce the nation’s new fleet of aerial refueling tanker aircraft.
The ceremony has been scheduled pending the outcome of the Government Accountability Office review of the tanker contract award. “We anticipate a favorable decision and look forward to starting construction on this historic facility,” said Ronald D. Sugar, Northrop Grumman chairman and chief executive officer. “We’re committed to transforming Mobile into the centerpiece of an expanding aerospace corridor.”
“This event underscores the fact that we are ready to get to work now,” Sugar said. “We need to move forward quickly to provide our men and women in uniform what the Air Force has identified as its number-one acquisition priority – the new refueling tankers they so desperately need.”
Northrop Grumman and EADS North America are committed to the U.S. Air Force and also have contractual agreements in place with one another, the state of Alabama and the city of Mobile to ensure construction of the facilities is ready to move forward.
“We are excited that Brookley Field will once again be a hub of American military aircraft manufacturing,” said Rep. Jo Bonner of Alabama’s 1st Congressional District. “There is no doubt that Mobile is poised to be the crown jewel of a rapidly growing aerospace center of excellence in the Southeastern United States, bringing thousands of jobs and creating endless opportunities for our entire region.”
EADS North America will deliver the KC-45 aircraft platform to Northrop Grumman. Airbus, an EADS company, is responsible for manufacturing at its Mobile final assembly facility and will assemble, test and certify the aircraft before delivery. Following delivery to Northrop Grumman, the aircraft will receive the necessary military modifications to turn the commercial airframe into a U.S. Air Force KC-45 Tanker. In keeping with U.S. Department of Defense requirements, only Northrop Grumman and U.S. government employees with appropriate security clearances will militarize the tanker aircraft.
“EADS North America is fully committed to providing Northrop Grumman with an aircraft built in the U.S.,” said Ralph D. Crosby, Jr., EADS North America chairman and chief executive officer. “More importantly, our men and women in uniform require and deserve the most capable system available. They have been waiting far too long for a modern tanker. Our entire team is ready to get to work now.”
Northrop Grumman’s architectural and engineering firm for the facility, BRPH Companies Inc., was selected last year and is prepared for the construction phase. Northrop Grumman’s facility is scheduled for completion and initial operation late next year. BRPH is leading a team consisting of KBR’s Mobile office and Thompson Engineering, headquartered in Mobile.
The groundbreaking ceremony occurs just a few days after the 60th anniversary of the start of the Berlin Airlift. This is significant because Brookley Field was the base from which C-54 transport aircraft supported the airlift.
About the KC-45
The KC-45 Tanker aircraft will be assembled in Mobile, Ala., and the KC-45 team will employ 48,000 American workers at 230 U.S. companies in 49 states. It will be built by a world-class industrial team led by Northrop Grumman, and includes EADS North America, General Electric Aviation and Sargent Fletcher.
Northrop Grumman Corporation is a global defense and technology company whose 120,000 employees provide innovative systems, products, and solutions in information and services, electronics, aerospace and shipbuilding to government and commercial customers worldwide.
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0508-292
Airbus revises downward A380 deliveries
It’s official: new delivery schedule for the A380 shows fewer than planned for this year and next.
A 43 minute webcast on the press conference is available at www.eads.com.
Here’s the Airbus PR:
Airbus has completed the A380 programme review and is now informing customers about changes to its delivery schedule. The review assessed the programme status at the critical juncture of transitioning from low rate “individual” production, so-called Wave 1, to the full serial design and manufacturing process, called Wave 2.
Overall, the recovery programme, initiated in summer 2006, is progressing well. Four aircraft were delivered as planned and are performing very well in airline operations on long-range routes. Seventeen aircraft are in various stages of production, mainly in the wiring installation and system testing phases. Most aircraft earmarked for delivery in 2008 have already flown.
However, the review has also shown that the steep ramp-up planned in 2006 is not fully achievable. Time and resources needed for Wave 1 production aircraft are higher than expected, and this has created some delay in the changeover to Wave 2 with its new design and manufacturing process.
As a result, Airbus plans now for 12 (instead of 13) deliveries in 2008 and
21 (instead of 25) in 2009. Details about the new plan and the further
ramp-up and delivery slots in 2010 and the following years will be discussed with customers in the coming weeks.
The results of this review do not, at this stage, cover the financial impact. The extent of the additional costs will be influenced by the actual production and delivery scenario. This will follow discussions with the customers and a more precise evaluation of the implications of the new delivery schedule for 2010 deliveries and beyond. This will therefore take some more time to determine.
Airbus is an EADS company.
Checking jobs at Northrop? Check Boeing, too
US Sens. Patty Murray (D-Boeing) and Maria Cantwell (D-WA) have asked the White House to investigate the claim by Northrop Grumman that 48,000 direct and indirect jobs will be created with the KC-30 program.
The KC-30 will be assembled in Mobile (AL) for the USAF’s KC-45A program.
Murray, who is actually D-Washington, is Boeing’s most vocal and hyperbolic advocate (along with US Rep. Norm Dicks, also D-Boeing/Washington), and has vowed to block the Air Force award to Northrop because the KC-30 is based on the Airbus A330-200, and Murray has been leading a crusade against Airbus for years.
Murray, Cantwell and a couple of other members of Congress want the White House to determine how Northrop’s job count increased from 25,000 to 48,000 after the award was announced and after the jobs issue erupted as a major point of controversy, according to this report in The Seattle Post-Intelligencer.
It’s a fair question and one we raised at the time in this report on our Corporate website. We were surprised and skeptical of the doubling of jobs claim as well. Our report details how Northrop got its new number.
Whether one accepts Northrop’s methodology or not is a matter of debate, but at least Northrop offers up one. Boeing does not for its job claims of 44,000 direct and indirect jobs for the KC-767 program, despite having been asked several times by reporters and analysts (including us). Furthermore, there is ample reason to suspect the Boeing figure.
In 2001, Boeing claimed 22,000 jobs were tied to the 767 program when the company was producing these at a rate of 36 a year–two to three times the rate proposed by the Air Force for the KC-45A program. Boeing also claims just 25,000 jobs associated with the C-17, which is has more US content than the 767 (the 767 fuselage, tail and certain wing components are built in Japan, Italy, the UK and Canada while these are built in the US on the C-17). The production rate for the C-17 is similar to that proposed for the KC-45A.
So how can Boeing claim there are twice the jobs at as little as one third the rate for the KC-767 vs. the commercial 767 at its peak? How can there be nearly twice the jobs associated with the KC-767 vs. the C-17? Boeing has never answered either of these questions.
As long as Boeing boosters want an investigation about Northrop’s jobs claim, this should be expanded to include Boeing’s job claims.
Having said all that, on the merits of the award, the entire jobs issue is irrelevant anyway. Jobs were not part of the RFP or evaluation process. This issue has been political from the get-go, and should have no bearing on the award at all; the award should be entirely about technical merits.
ILFC 787s face 27+ month delay for all 74 orders
Leasing giant International Lease Finance Corp. revealed today in a federal filing that its entire order of Boeing 787s will be delayed “an average in excess of 27 months per aircraft and span across ILFC’s entire order.” The company’s parent AIG Group revealed this news in its March 31 first quarter Securities and Exchange filing, accompanying the announcement of a huge loss for the quarter made after the stock market closed Thursday, May 8.
The first of ILFC’s 787s were originally scheduled to be delivered in 2010 through 2017. The delay, which is in line with other customers that have so far publicly revealed the impact, means that the first ILFC 787 will be delivered in 2012 or 2013 (depending on what month the original delivery schedule began).
More, 3:00PM PDT: James Wallace of The Seattle Post-Intelligencer just published this item about Air Canada’s 787 order being 30 months late.
New, Monday, May 12, 1000 AM PDT: ILFC’s own 10Q filing (made Friday) with the SEC is more detailed about its 787 delays. ILFC says the airplanes will be delivered 19-30 months late, with the average delay in excess of the 27 months reported in the AIG 10Q.
Clarity on the A380 delays, sort of
With conflicting news reports over did the letters Airbus sent to customers specifically refer to potentially new delivery delays in the A380 program or not, we today spoke to one of the airlines at the center of the controversy. We’re told that the reporting media took some liberties with interpretation about what was in the letter and what it meant.
While the carrier declined to provide us a copy of the letter so we could see for ourselves, our interpretation (we deliberately choose this word for the irony here) of the airline’s comment is that delays were not mentioned.
Qantas Airways received the aforementioned letter and told a local newspaper that nothing about a delay was contained in it. The news report of this letter is here.