Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Embraer downplays tariff impact on 2025 results May 6, 2025
- JetZero readies effort for private equity fund raising May 5, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 20. May 2, 2025
- Supplier Howmet exceeds expectations despite tariffs May 1, 2025
- Airbus 1Q2025 results: So far, so good, but US tariffs make future results unpredictable May 1, 2025
Boeing Capital Corp. to be “realigned” within airplane division
By Scott Hamilton
Feb. 16, 2023, © Leeham News: Boeing Capital Corp. (BCC) will be absorbed by Boeing Commercial Airplanes (BCA) as Boeing continues to restructure following the 2019 grounding of the 737 MAX, a 20-month suspension of 787 deliveries, the COVID pandemic and challenges in certifying the 737-7, 737-10 and 777X. Airfinance Journal (AFJ) first reported this latest move.
BCC is Boeing’s aircraft leasing arm. About 181 airplanes are owned, managed, and ordered by BCC.
BCC’s future has been the subject of internal discussion for at least a year. LNA first learned of the discussions last year. Several scenarios were considered, ranging from a spin-off, total sale, partial sale, or a structure that could see Boeing rearranging assets within Boeing Commercial Airplanes (BCA). A partial portfolio sale and retaining certain airplanes appears to be the solution most favored. In recent weeks, multiple market sources indicated some decision was imminent.
Realigning BCC
“We plan to realign the Boeing Capital organization to operate within Boeing Commercial Airplanes, while maintaining strong coordination with Boeing Treasury,” said Brian West, CFO of The Boeing Co., in a memo to BCC employees, AFJ reported. “With the vast majority of BCC’s work focused on our commercial business, this alignment will help ensure consistency of support to our commercial customers. And as we realign, we will look for ways to simplify the organization and focus resources on our core work of supporting our customers and their financing needs.”
AFJ notes that BCC is Boeing’s aircraft leasing arm that was inherited in the 1997 merger with McDonnell Douglas Corp. (MDC) Then called McDonnell Douglas Finance Corp, MDFC served as a financier of last resort for poor-credit companies, aircraft trade-ins, and remarketing, and occasionally providing what’s called backstop financing for more creditworthy airlines, the trade publication wrote.
BCC historically has been a small part of The Boeing Co’s business model. It’s not considered core to its business. Following the prolonged 737 MAX grounding, the suspension of deliveries of the 787 from October 2020 to August 2021, the long-delayed certification of the 777X, and the impacts of the COVID pandemic, Boeing began considering alternatives for BCC. These included closing it, spinning it off, or selling its assets.
Airbus posts solid 2022 full-year results despite supply chain problems
By Bjorn Fehrm
February 16, 2022, © Leeham News: Airbus presented its results for 2022 today. The company announced net profits of €4.3bn on revenue of €58.8bn despite several disruptive events during 2022.
Disruptions like the effects of the Russia-Ukraine war and the supply chain ramp after COVID kept the delivery increase for 2022 at half the target of 110 jets, resulting in 661 deliveries instead of the originally guided 720.
Guidance for 2023 keeps the 720 airliner delivery target, an operating profit of €6bn, and a Free Cash Flow of €3bn.
Figure 1. Airbus results highlights. Source: Airbus.
What is the ticket price influence of SAF? Part 2
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By Bjorn Fehrm
Feb. 16, 2023, © Leeham News: Last week, we looked at the ticket price influence if airline fuel costs would increase going forward, either through increased use of Sustainable Aviation Fuel, SAF, or higher environmental emission fees.
We realized that ticket prices have other parts than fuel and aircraft-related costs. For instance, an airline has sales and marketing, administration, and airport ground staff. We got an overview of such cost parts depending on whether the airline was a mainline carrier or a Low-Cost Carrier (LCC).
Now we use this knowledge and our airliner performance and cost model to check the influence of varying fuel and emission costs on ticket prices going forward.
Figure 1. Jet fuel price variation over time. Source: IATA Jet Fuel Price Monitor.
Summary:
- We check the influence of SAF blends and EU emission permits on end-of-decade energy costs.
- Then we discuss how increased flight energy costs can influence ticket pricing.
HOTR: China’s desire for aerospace self-sufficiency threatens Airbus, Boeing
By the Leeham News Team
China’s goal for C919
China’s state-run aviation industry is working toward self-sufficiency because of sanctions. But it is these same sanctions that will make it difficult to achieve.
Beijing wants to shift to supplying its single-aisle jet needs to the COMAC C919 by the end of this decade, according to a person familiar with the situation. But ramping production up to meet future demand is difficult under the best of circumstances.
With Western-built suppliers a key to the development of the C919, including the CFM LEAP 1C engines, there is little chance the domestic industry can shift exclusively to domestic suppliers on the scale required in the time desired.
Regardless of the feasibilities, these goals are bad news for Boeing—and most likely for Airbus, too.
Boeing’s dilemma with China is well known. Aside from the geopolitical challenges between China and the US and the well-known slow return to service of the in-country 737 MAXes, Boeing can’t deliver 138 new-build MAXes to China.
Deliveries are blocked for the aforementioned geopolitical considerations. Beijing’s three-year-long zero-COVID policies cratered domestic demand. With the policies recently lifted, passenger traffic is building but it is still well below pre-pandemic levels.
But that’s not all.
Howmet taking cautious approach projecting OEM deliveries for 2023
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By Bryan Corliss
Feb. 15, 2023, © Leeham News – Howmet Aerospace is taking a “cautious and conservative view” that Boeing will build 30 737s a month this year and Airbus will build 53 or 54 A320s and A321s.
That’s what CEO John Plant told investors Tuesday, as Howmet reported its year-end and fourth-quarter earnings.
That’s far more conservative than the 737 build rate that Spirit AeroSystems had projected the week prior, Plant acknowledged. Executives with the Wichita airframer project sending 42 737 fuselages a month to Boeing by the end of this year.
Howmet, which fabricates fasteners and casts pieces for aerostructures and jet engines, reported annual profit of $1.3 billion for last year, up 12% when adjusted for one-time items. For the fourth quarter, its adjusted profit was $336 million, up 13%.
- Howmet ended last year with excess inventory
- Company still projects 17% growth in Commercial
- Howmet hiring, but not everyone is sticking around
Read more
Pontifications: Ihssane Mounir’s big challenge at Boeing
By Scott Hamilton
Feb. 14, 2023, © Leeham News: Ihssane Mounir was named senior vice president of Global Supply Chain and Fabrication for Boeing Commercial Airplanes (BCA). Appointed in December, he previously was the top salesman for BCA.
Ihssane Mounir. Credit: Boeing.
Mounir has a huge challenge ahead of him that goes beyond managing the logistics of BCA’s huge supply chain. He faces an irate group of suppliers who are increasingly openly angry. Some border on open rebellion.
As LNA reported last week, suppliers at the Pacific Northwest Aerospace Alliance (PNAA), some suppliers on the sidelines of the conference openly complained about Boeing’s lack of transparency and reliability. Some vowed to reduce their exposure to Boeing or even abandon working with the company. As always, Boeing’s Partnering for Success program—a long-running cost-cutting effort that demanded suppliers cut costs or be terminated—was another complaint.
Some who also supply Airbus but have to trim costs for it as well nevertheless praised Airbus’ gentler, collaborative approach vs Boeing’s threatening tactics.
The latter is relevant for some of the panelists.
Aerospace supply chain needs capital, which isn’t always easy to find–and it may be expensive
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By Scott Hamilton
Feb. 13, 2023, © Leeham News: The aerospace supply chain is still struggling to recover from the grounding of the Boeing 737 MAX, the suspension of deliveries of the 787, the delays to the Boeing 777X, and the COVID pandemic.
Labor shortages and workforce quality/experience is also a challenge for the supply chain.
Profits remain elusive and capital is available at high interest rates, if at all. CFM, GE, Pratt & Whitney, and Rolls-Royce continue to face technical challenges with their engines. The CFM LEAP and PW Geared TurboFan engines have durability issues and must be taken off wing for maintenance and warranty work at a fraction of the time their predecessor engines were on wing.
It’s a rather bleak picture painted of the state of the aerospace industry during the annual conference of the Pacific Northwest Aerospace Alliance (PNAA) last week in a Seattle suburb.
Summary
- Suppliers need capital; Boeing should return to 30-day payment terms for immediate capital injection.
- Recovery not over, suppliers can make better investments in defense.
- Without a new airplane, there’s no reason for suppliers to invest in commercial.
Bjorn’s Corner: Sustainable Air Transport. Part 57. Summary
By Bjorn Fehrm
February 10, 2023, ©. Leeham News: We started the present series around Sustainable Air Transport on the 7th of January 2022, more than a year ago. During this time, we have covered a lot of subjects regarding the emissions from Air Transport.
It’s time to wrap up the series and summarize what we covered and learned.
Figure 1. Our energy consumption and where it’s coming from. Source: Our World in Data.
HOTR: Boeing slammed in absentia at conference
By the Leeham News Team
Feb. 9, 2023, © Leeham News: Boeing wasn’t present, but that didn’t stop a succession of speakers and suppliers from slamming the company during the annual meeting of the Pacific Northwest Aerospace Alliance this week in Lynnwood (WA).
Boeing boycotted the conference for the second year in a row. In October 2021, Boeing withdrew from the February 2022 conference over an alleged sexual discrimination lawsuit filed by a woman against the then-executive director of PNAA and against the organization. The lawsuit was settled out of court and the executive director today is a woman. But Boeing declined to return to the conference this year.
Boeing’s absence was roundly criticized by suppliers on the sidelines of the conference. The suppliers complained about Boeing’s payment policies (deferring payment to them for 90-120 days) after years of cutting prices under Boeing’s Partnering for Success. They also complained bitterly about Boeing’s lack of transparency and frequently changing production plans. Boeing should have been at the conference to face them and communicate with them.
Kevin Michaels, managing director of Aerodynamic Advisory, is a supply chain expert. For many years, he criticized Boeing’s approach toward the supply chain. Tuesday wasn’t any different. He once again criticized Boeing for its treatment of the supply chain. Noting that suppliers, mainly Tiers 1 and 2, went through “Partnering for Poverty 1 and 2” cutting prices, Boeing then promised payment terms of 30 days. In subsequent days, payments stretched to 60 days, 90 days, and now up to 120 days. Coupled with the 737 MAX grounding, 787 delivery suspension, and the COVID pandemic, the extended payment terms put additional stress on the suppliers.
In terms unusually blunt for Michaels in this forum, he predicted it will not be long before “the shit hits the fan.”
The long, slow death of Mitsubishi’s SpaceJet
By Scott Hamilton
The Mitsubishi MRJ90, rebranded the SpaceJet, was to be replaced by the M100. The M100 was Scope Clause compliant and certifiable, unlike the poorly conceived MRJ90. Credit: Leeham News.
Feb. 9, 2023, © Leeham News: Mitsubishi Heavy Industry’s (MHI) announcement this week that it finally killed the SpaceJet program is hardly new. This was apparent as far back as January 2020 when all the Canadian and American leadership at Mitsubishi Aircraft Corp (MITAC) was unceremoniously booted out. Then, in May 2020, using the COVID pandemic as an excuse, all US operations were closed; so was the recently opened Canadian engineering center; the budget was reduced by 95%; and nearly all the engineers at the home office in Nagoya, Japan, were laid off or reassigned.
MHI refused to state the obvious. Instead, officials said repeatedly that the program was “paused.” This drip, drip, drip was all about saving face. Thus, the slide in MHI’s presentation about why the program was finally being killed was more candid than expected.