Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- 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
- Embraer downplays tariff impact on 2025 results May 6, 2025
- JetZero readies effort for private equity fund raising May 5, 2025
HOTR: Eviation claims “almost” 300 orders worth more than $2bn; Boeing vs Airbus
By the Leeham News Team
Nov. 10, 2022, © Leeham News: Eviation, the developer of the all-electric airplane Alice, today added another 20 commitments to its tally for the aircraft. The latest is from Australia’s Northern Territory Air Services. The commitments are in a Letter of Intent.
A short time before this latest commitment, Eviation issued a press release stating it had “almost” 300 orders (not “commitments and orders”).
“Our order book passing the US$ 2 billion mark is a significant commercial milestone,” said Gregory Davis, President and CEO of Eviation.
“With almost 300 aircraft now on order, the Alice is receiving strong customer endorsement,” Eviation VP Eddie Jaisaree said.
The press release is a little ambiguous on figures: “almost” 300 airplanes and “passing $2bn.”
Using 300 and $2bn for the math, this means the airplanes are $6.67m each. That’s $741k per seat. This compares with $506k per seat for a 787-9 (296 seats, $150m true sales price) and $309k per seat for a 737-9 (178 seats, $50m true sales price). The ATR-42, with 48 seats and a sales price as low as $12m, is $250,000 per seat.
The capital cost of the Alice is awfully pricey and makes the economics challenging, not even counting the maintenance costs of replacing the batteries after a short period of time.
When asked about these facts, Eviation’s PR firm provided this response from the company.
“Our cost is competitive with aircraft in the same class as Alice, and customers will see significant cost savings in operating and maintenance costs. For example, Alice will reduce operating costs by two-thirds when compared to traditional aircraft.”
LNA’s Bjorn Fehrm has analyzed the operating cost of electric, hybrid, and hydrogen-powered aircraft in a series of articles. His conclusions are that these methods are a lot more costly than promoted.
The A350 enhancements, Part 3
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By Vincent Valery
Introduction
A350 Fuselage, Credit: Airbus
Nov. 10, 2022, © Leeham News: Last week, we saw the impact of the New Production Standard (NPS) on the Airbus A350-900’s economic performance against the Boeing 787-10. While using a ten-abreast economy class cabin configuration negatively impacted passenger comfort, it significantly improved the relative competitiveness of the A350-900.
We now turn our attention to the larger variant that will benefit from the NPS, the A350-1000, and compare it against its closest competitor, the 777-9.
Summary
- Future major large-twin sales campaigns;
- Comparing aircraft cabins;
- The extra seat changes the economic pecking order;
- It is not all about unit costs.
New air cargo operators to drive freighter demand, Boeing says
By Bryan Corliss
Nov. 9, 2022, © Leeham News: The Boeing Co. projects the world’s air cargo fleet will grow by 80% in the next 20 years, as new operators rush to meet demand caused by a global boom in e-commerce.
This will translate into orders for nearly 2,800 new and converted freighters by 2041, said Darren Hulst, Boeing’s vice president of commercial marketing.
Boeing 747-8F jets at Boeing Field, Seattle, during initial flight testing in 2011. Bryan Corliss photo.
As many as 40 new companies are getting into the air cargo market, ranging from start-ups to traditional shippers diversifying into the air cargo market, Hulst said.
“Cargo has been, relatively, the bright spot in aviation since the beginning of the pandemic,” he said during a briefing with reporters prior to today’s International Air Cargo Association forum in Miami..
SUMMARY
- Cargo market hanging on to most pandemic gains
- Demand strong for dedicated cargo jets
- Boeing doesn’t see need to replace 747-8F until ‘mid-century’
Read more
Excluding China in Boeing forecast recognizes trade, geopolitical realities
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By Scott Hamilton
Nov. 8, 2022, © Leeham News: Boeing CEO David Calhoun last week said Boeing’s future through at least 2025/2026 doesn’t include assuming China is part of its equations.
It’s a good thing. Relations between the US and China are heading south. The Pentagon last week outlined an extremely pessimistic outlook pointing to future military conflict with China. The Biden Administration not only didn’t reverse tariffs imposed in 2017 by the Trump Administration, but in some respects, Biden upped the game.
Related Article
Boeing started remarketing 737 MAXes ordered by China. It also began taking engines off those airplanes to put onto new production aircraft. Boeing—and others—don’t see China taking any new deliveries from China in the next two or three years or placing orders with Boeing.
Michael McAdoo of Boston Consulting Group. Credit: Leeham News.
Trade publication Airfinance Journal reported Oct. 31 that nearly one in five leased aircraft owned by Chinese lessors are being offered for sale to non-Chinese interests. LNA previously reported that Chinese lessors were being allowed to accept a small number of MAXes providing they were leased outside China.
A trade expert for Boston Consulting Group outlined how he sees relations between China, the US and Europe in an Oct. 26 interview with LNA.
Summary
- China considers the US to be the enemy, one well-placed observer notes.
- The US, EU see China differently.
- Airbus has a window of opportunity.
How Boeing can pursue new airplane sooner than 2030 decade
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By Scott Hamilton
Nov. 7, 2022, © Leeham News: Boeing is methodically working through the full return of the 737 MAX to service, a process that will continue to early 2025 to clear the stored inventory. There were 270 stored MAXes at the end of the third quarter, Sept. 30.
David Calhoun. Source: Boeing.
Delivering 115 787s that were built but stored during a pause of nearly 20 months from October 2020 will also take two years to complete.
Ramping up production of each line is a slow, arduous process. The 737 line was shut down in December 2019. The line now is geared to produce 31 737s a month, though meeting this target has been erratic.
The 787 line in Everett was shut down permanently and the Charleston (SC) line was reduced to just half an airplane per month. It will be a couple of years before production returns to 5/mo, the level at the start of the pandemic and reduced when deliveries were suspended.
CEO David Calhoun said stability and reliability are keys to Boeing’s recovery from the MAX and pandemic crises that sapped finances and all but destroyed a once-sterling credibility.
Calhoun also said he has no plans to launch an airplane program to fill a gap in the product line—a reference to Boeing’s weak position vis-à-vis the Airbus A321neo. Rather, he wants to launch a game-changing airplane that at a minimum is 20% more efficient than today’s aircraft. He believes engines coming off today’s technology will only host a 10% gain.
He added that Boeing won’t launch a new airplane program until the next decade because a new engine won’t be ready until then. He made his remarks at the first investors day since 2018. Three weeks before that, Boeing hosted a meeting with advisors, consultants, and opinion makers.
Pontifications: Boeing is fighting the last war instead of the present one
By Scott Hamilton
Nov. 7, 2022, © Leeham News: With the firm declaration that Boeing won’t launch a new airplane program until the next decade, CEO David Calhoun is signaling he’s content to see the company shrivel into a distant number two position after Airbus.
Amazingly, one Boeing executive told one of the attendees of the investors day event that he (the executive) was okay with that for now.
It’s a recipe for Boeing to follow the path of McDonnell Douglas Corp. (MDC) in its long decline into commercial oblivion. MDC merged into Boeing in 1997. Boeing hasn’t been the same since. Its legacy as an engineering company shifted into one focused on shareholder value. McDonnell Douglas had become a company where Derivatives-R-Us prevailed. Boeing long ago shifted to this mode as well.
Calhoun is a creature of Jack Welch’s GE mantra. Cut costs. Emphasize profits and shareholder value. And while Welch’s philosophy that GE should always be No. 1 or No. 2 in any industrial sector it played in, Welch’s vision of No. 2 was a close No. 2. Boeing’s decline into a distant No. 2, with only a 40% market share against Airbus (and less when looking only at the total single-aisle sector) began long before Calhoun became CEO in January 2020.
David Calhoun. Source: Boeing.
Calhoun told his audience of investors and aerospace analysts that he’d like nothing more than to return cash to shareholders. Knowing who your audience is is part of any speaker’s requirement, so in isolation, I’m not going to chop Calhoun up for this statement. The trick is to balance shareholder return against the future of the company.
As I’ve written in the past, returning 100% of free cash flow to shareholders isn’t necessary. Before suspending the dividends and stock buybacks after the MAX grounding, Boeing returned more than $62bn to shareholders over a decade. Using part of this for new airplanes would have been a good approach.
Calhoun declared that even if all the advanced design and manufacturing is ready this decade, he won’t support a new airplane until the next decade when a new engine that can reduce fuel consumption by at least 20% is ready. Any new airplane must hit this target to benefit airlines and the environment, he said.
Well, there are other ways to hit this target. LNA discusses this behind today’s paywall.
In the meantime, Boeing is content to rest on the past.
Boeing’s product move kills direct 767F replacement, puts 787F in doubt
By Scott Hamilton
Nov. 4, 2022, © Leeham News: David Calhoun’s decision to tank all-new airplane development kills the direct replacement for the Boeing 767-300ERF that was under development. It also places in doubt the development of the 787F.
Calhoun, the CEO of Boeing, said on Nov. 2 that Boeing won’t launch any new airplane until the mid-2030 decade.
Will Boeing’s cancellation of all new airplane development until the next decade breath new life into the 767-300ERF? It might. Source: Leeham News.
Boeing’s Product Development (PD) department was working on a 767-sized airplane that would begin with the freighter. For lack of a better term, we’ve called it the NMA-F in previous articles. The NMA-F would then be followed by passenger models for a full family of airplanes.
PD was also working on a derivate freighter for the 787, the 787F. Internally, the two teams were competing, as is Boeing’s process.
Killing all new airplanes kills the NMA-F. Funding for the 787F has been reduced, LNA is told. But there is no assurance that the 787F will be launched. If it is, as a derivative its launch would not be considered a “new airplane” program.
Although not the principal reason for Calhoun’s move, killing the NMA-F and casting doubt over the 787F may help Boeing in its effort to exempt the 767 from stringent standards adopted in 2017 by the International Civil Aviation Organization (ICAO). The Federal Aviation Administration announced earlier this year it plans to adopt the ICAO standards. The emissions standards cannot be met by the 767. (Nor could the 777 Classic freighter, the 777-200LRF, meet them. Boeing launched the 777-8F program which will meet the standards.)
Under the ICAO standards, production of the 767-300ERF (and 777-200LRF) must cease from 2028. Boeing already seeks an exemption should the FAA’s plan become US policy.
Bjorn’s Corner: Sustainable Air Transport. Part 44. eVTOL operating costs.
By Bjorn Fehrm.
November 4, 2022, ©. Leeham News: This is a summary of the article Part 44P, eVTOL operating costs. It discusses the operational costs of a typical eVTOL flying a feeder mission from a city center to an airport.
The dominant cost factors are not the ones eVTOL companies love to discuss, like the electricity bills.
Figure 1. The Vertical Aerospace VX4 in an early rendering with similar looks to the eVTOL we discuss. Source: Vertical Aerospace.
Bjorn’s Corner: Sustainable Air Transport. Part 44P. eVTOL operating costs. The deeper discussion.
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By Bjorn Fehrm
November 4, 2022, ©. Leeham News: This is a complementary article to Part 44, eVTOL operating costs. It discusses the typical operating costs we can expect from an eVTOL when used in an air taxi operation.
Despite the operation of such transports being years off, an eVTOL has dominant cost factors that can be estimated today.
UPDATE: Spirit close to breakeven in a ‘dynamic’ environment, CEO says
By Bryan Corliss
Nov. 3, 2022, (c) Leeham News: Spirit AeroSystems said today its third quarter revenues grew by 30% year-over-year, driven by an increase in deliveries for Boeing’s 737 MAX program.
The company posted positive operating income of $4.5 million for the quarter – its first positive income since 2019 – but reported an overall net loss it said was due mainly to charges connected with the cost of terminating an employee pension plan.
Spirit said it delivered 69 Boeing 737 shipsets during the third quarter — 23 a month — compared to 47 shipsets in third quarter 2021.
Boeing deliveries are expected to be stable at 31 a month for the foreseeable future, Spirit President and CEO Tom Gentile said.
“Given that our production rate is set at 31 aircraft a month on the 737 program now, and we will likely remain at that rate for much of 2023, we are initiating a focused effort to reduce structural costs to enhance our profitability and cash flow in 2023,” Gentile said in the company’s earnings release.
The company faces challenges, however. “We continue to see disruptions in our factories due to part shortages, increased levels of employee attrition and volatile schedules,” Gentile said.
Spirit, which had reduced its quarterly dividend to 1 cent a share in 2020, said it will suspend dividend payments entirely starting in the fourth quarter, “due to the current challenging macroeconomic environment.”
SUMMARY
- Labor and supply chain issues ‘dynamic’
- Spirit to slowly work through 737 backlog
- Defense diversification helps bottom line
- More demand for spares and maintenance