Steven Udvar-Hazy, the CEO of International Lease Finance Corp., carries enormous weight in the airline industry. His ILFC is the biggest customer of Airbus and Boeing. His public criticism of the A350 (Version 4.0) at the ISTAT conference two years ago (in response to a question we asked, BTW) set the stage for Airbus to redesign the aircraft.
Hazy once said he doesn’t think the A380 will sell more than 300-400 and he doesn’t think the 747-8I will sell well, either. Both predictions remain to be seen, but people listened.
While the world waits for Boeing to tell us about the latest delay for the 787, Hazy told the JP Morgan Aviation & Transportation conference today that he expects an all-in delay of 15-16 months from the original May 2008 delivery schedule, according to someone who was there. That means August or September of 2009 before the first delivery.
Hazy is usually extremely well clued in on these sorts of things. He told us of the third delay for the A380 before this became public, and we broke the news at the time.
It’s like the old EF Hutton slogan: When EF Hutton talks, people listen. EF Hutton is defunct, but this analogy isn’t to suggest that ILFC is headed that direction. It’s simply a great line.
Our corporate website, Leeham.net, has been updated with an in-depth look at the Boeing protest of the KC-30 tanker award; the surprise doubling of the Northrop Grumman jobs for the KC-30; and a Wall Street Journal story looking at the reasons for the Boeing protest.
Boeing has had a long run in the spotlight, given the tanker award and protest and the Goldman Sachs report predicting another six month delay for the 787.
For a change, let’s take a look at the Airbus and the A380.
Airbus predicts a market of nearly 1,700 passenger and cargo airplanes in the Very Large Aircraft (VLA) category in its new forecast issued this year. Boeing forecasts 960 VLAs in its market outlook issued last year. Each prediction is for a 20-year period, or 2027 for Boeing and 2028 for Airbus.
The math is pretty simple: to achieve 1,700 VLA sales under the Airbus forecast (and it doesn’t matter whether it’s Boeing or Airbus, both the A380 and 747-8 are VLAs), this is an average of about 85 sales a year beginning this year.
To achieve the 960 figure from Boeing beginning last year, that means an average of 48 VLA sales a year.
Airbus predicts 30 sales for the A380 this year. Boeing hasn’t made a public prediction for the 747.
It’s pretty clear Airbus is just a tad short.
For comparison, Boeing has sold 1,522 747s since the first order in 1966, 42 years ago. That’s an average of 36 a year, and this started when the 747 had a monopoly for a few years as the world’s first jumbo jet–and maintained a monopoly on trans-ocean routes until the DC-10-30/40 and L-1011-500 began making serious inroads.
We’ve always thought Boeing’s forecast of only 300-400 sales of the A380 was woefully inadequate. But we’ve also thought the Airbus forecast of 1,700 VLAs in 20 years was wildly optimistic.
The math certainly suggests as much.
Because we were traveling this week, we’re a little behind on these sorts of things. Boeing’s press releases concerning the tanker protest don’t do justice to their reasoning. James Wallace of The Seattle Post-Intelligencer posted an audio of the 64 minute conference call in which Boeing executives explain why they protested. You may listen to this audio here.
Here’s an 11 minute podcast on the Boeing protest of the tanker award to Northrop Grumman.
Here’s an 8 minute podcast on the latest travails of Southwest Airlines and what might this mean.
As we noted Tuesday, Northrop issued a press release saying that its KC-30 program will produce 48,000 new jobs. This compares with the 44,000 jobs Boeing claims for its KC-767AT.
We find something really odd here. Setting aside for the moment that Northrop for more than a year claimed its tanker would produce 25,000 and accused Boeing of grossly inflating its figure, and setting aside for the moment the methodology described in the press release, here’s the deal:
The KC-30 has only 60% US content by value vs. the 85% claimed by Boeing (Northrop’s analysis of the KC-767 US content is 69% but that’s neither here nor there for purposes of this discussion). Northrop now claims its airplane, with less US content than the KC-767 (using either the Boeing or Northrop claim of content for the KC-767, BTW) will produce more jobs than Boeing claims. (Boeing also has previously said its number was conservative.)
Considering that one key message of the political battle is the “exporting” of US jobs, Northrop’s new jobs claim comes at an interesting time and with an interesting number despite its tanker’s lower US content.
The Politico, a website that follows all things in the political arena, reports that Northrop and EAD lobbyists are focusing on the jobs that they assert will be created by the KC-30 program.
The timing and new number certainly have the appearances of oddity and desperation.
Lexington Institute’s Loren Thompson provides a report of why Boeing protested the tanker award to Northrop.
Until we get through with our travels, this will have to suffice for our readers. We plan a full report Tuesday on our Corporate Website with our bi-weekly update.
Our first reaction to this piece of news from the St. Louis Business Journal was, What the hell?
“Northrop Grumman Corp. has nearly doubled its estimate of the number of jobs its KC-45A tanker contract will support, using a different projection formula, the company said Monday.
“Using more recent data from suppliers and the Labor Department’s formula to project aerospace jobs at the state and local level, Northrop said the KC-45A program will employ about 48,000 direct and indirect jobs nationwide, the company said Monday.
“Its previous estimate of 25,000 direct and indirect jobs in the United States was based on the U.S. Department of Commerce jobs projection formula for the aerospace industry. The supplier base includes 230 companies in 49 states, according to a release.”
After all the dissing by Northrop of the Boeing forecast that its airplane would produce 44,000 jobs (and we had trouble believing this figure, too), now Northrop one-ups Boeing?!?
We’re traveling but we’re going to follow this up when we get back.