Leeham News and Analysis
There's more to real news than a news release.
Can China pass on Boeing airplanes? A deeper look
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By Vincent Valery
Introduction
Aug. 8, 2022, © Leeham News: The FAA lifted the Boeing 737 MAX grounding more than 18 months ago. However, Chinese airlines still have not returned their 737 MAX fleets to passenger service.
Air China 777-300ER
Chinese airlines have also not taken delivery of any 737 MAX since March 2019. Separately, a Boeing 777-300ER for China Southern Airlines has now been pending delivery for more than two years. While Airbus announced a large A320neo order from Chinese airlines on July 1, no similar order materialized for the 737 MAX at the Farnborough Air Show.
The above raises the question of whether China intends to place new commercial aircraft orders with Boeing. Last year, LNA concluded that China could not rely exclusively on Airbus and COMAC to meet its aircraft requirements.
This article revisits whether Chinese airlines can do without Boeing for single-aisle and twin-aisle aircraft. Airbus announced its intention to increase A320 family production to 75 per month by 2025. The analysis incorporates replacement needs but also looks at different growth assumptions to see whether output by non-Boeing OEMs can accommodate the fleet requirements of the Chinese market.
Summary
- Current China passenger fleet profile;
- Fleet replacement and growth rate assumptions;
- Estimating maximum possible production rates for China without Boeing;
- China needs Boeing airplanes in most scenarios.
Pontifications: A bad feeling for the JetBlue-Spirit merger
By Scott Hamilton
Aug. 8, 2022, © Leeham News: I don’t normally report on airline mergers except as these may relate to aircraft fleet planning and the impacts on Airbus, Boeing, and Embraer.
However, the JetBlue-Spirit Airlines merger is an exception.
Much has already been written about the questions arising about whether the US Department of Justice will approve the merger; the incompatibility of the two business models; the cost to reconfigure Spirit’s airplanes to the JetBlue cabin standards; and, to some degree, the disparity in labor costs.
It’s the latter I will focus on today.
Bjorn’s Corner: Sustainable Air Transport. Part 31. Mixed architectures.
By Bjorn Fehrm
August 5, 2022, ©. Leeham News: This week, we look at two eVTOLs that don’t fit the terminology we use; Multicopters, Vectored thrust, or Lift and Cruise. The Vertical VX4 and Archer Maker are Lift and Cruise designs, but they use vectored thrusters for the cruise thrust, Figure 1.
Figure 1. The Vertical VX4. Source: Vertical Aerospace.
Embraer 2nd Quarter 2022: Mixed results as EVE is spun off
By Bjorn Fehrm
August 4, 2022, ©. Leeham News: Embraer presented its 2Q2022 results today. The airframer booked lower revenue and net profit as deliveries of the E195-E2 tanked, but margins were up in all divisions except Defence and Security due to strict cost control.
Revenue and net profit were down by 10% compared with 2Q2021, whereas margin and cash flow improved due to cost containment and the spin-off of the EVE VTOL activity. Sales were positive, with backlog growing 0.5bn from 1Q2022 to $17,8bn. The company confirmed the 2022 guidance.
Dual or Single Aisle for Long Haul, Part 3
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By Bjorn Fehrm
Introduction
August 4, 2022, © Leeham News: We’ve been analyzing whether flying long-haul is better with a single-aisle or with a widebody under identical conditions.
To have equal conditions, we fly between Milano and New York at the practical range limit for our single aisle, Airbus A321XLR. We finished the analysis of Cash Operating Costs; now, we look at passenger and cargo yields and the generated margins on the trips.
Summary
- The margins with identical conditions point the same way as the Cash Costs.
- Any cargo traffic on the route will favor the widebody.
Boeing avoids strike as St. Louis Machinists OK contract
By Bryan Corliss
Aug. 3, 2022, © Leeham News: Machinists Union members working for Boeing’s St. Louis-area defense plants today ratified a three-year contract with the company.
The vote means that Boeing will avoid a strike that would have shut down production of new T-7 trainers for the U.S. Air Force and MQ-25 Stingray refueling drones for the U.S. Navy.
Members of International Association of Machinists District Lodge 837 on July 24 had rejected an earlier offer from Boeing with a 91% no vote, with 94% of members voting to go on strike Aug. 1.
That prompted Boeing to go back to the table over the weekend. It came up with a new offer that added an $8,000 ratification bonus, with the option for workers to take that in cash or as a contribution to their 401(k) retirement funds.
That, apparently, made all the difference.
Update 8-3: Contract Approved (St. Louis Machinists vote Wednesday on latest Boeing contract tweaks)
Update, Aug. 3, 2022: The IAM 837 approved the revised Boeing offer for a three year contract. No strike tonight.
By Bryan Corliss
Aug. 2, 2022, © Leeham News: Machinists Union workers at Boeing’s St. Louis-area defense plants will vote on a revised three-year contract offer from the company Wednesday.
Workers on July 24 had rejected a previous offer from the company with a 91% no vote. In addition, 94% of workers voted to strike. The strike was scheduled to start at 12:01 a.m. Monday, but after a marathon weekend bargaining session, the union side agreed to take Boeing’s latest offer to its members in today’s vote.
Negotiators from International Association of Machinists District Lodge 837 had urged their members to reject the company’s previous proposal, saying it did “not equate to a fair and equitable offer.”
As of mid-day Tuesday, the IAM 837 negotiating committee hadn’t issued a public recommendation on the latest offer. However, our read is that it’s doubtful that Boeing has improved its package enough to satisfy Machinists, who are looking for significant improvements in pay and retirement benefits after giving up major concessions in their last contract.
Jump in R&D spending at Boeing Commerical Airplanes points to renewed studies for new airplane
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By Scott Hamilton
Return of the NMA? Photo credit: Leeham News.
Aug. 1, 2022, © Leeham News: Buried in Boeing’s second quarter results released last week was a sharp jump in research and development spending.
It wasn’t just a small increase at Boeing Commercial Airplanes (BCA). Boeing spent more on research and development in the quarter and the half year. Expenses hit $1.33bn for the half-year compared with $996m a year earlier. For the quarter, expenses rose $996m vs $497m. R&D for Commercial Airplanes rose to $693m for the half and $372m for the quarter, compared with $524m and $255m, increases of 32% and 46%, respectively.
Spending is still short of the peak in 2019. But the reduced spending post-grounding of the 737 MAX and the COVID-19 pandemic was reversed in the first six months of this year.
Pontifications: Two books examine GE’s fall from grace
Lights Out: Pride, Delusion, and the Fall of General Electric
By Thomas Gryta and Ted Mann
Mariner Books, $17.99, 361 Pages
The Man Who Broke Capitalism, How Jack Welch Gutted the Heartland and Crush the Sole of Corporate America—and How to Undo His Legacy
By David Gelles
Simon & Schuster, $28.00, 264 Pages
Aug. 1, 2022, © Leeham News: Two recent books about GE and its most prominent CEO, Jack Welch, offer different focus and fascinating insight.
By Scott Hamilton
One, Lights Out, is a detailed chronicle of the Welch era and those who followed. This book goes into much more detail than Gelles’, which is more of a biography of Welch than a corporate history—although obviously, there is pollination of both.
Gelles, a reporter for the New York Times, goes into some discussion about Boeing and the Welch-influenced people who came to lead Boeing, notably Jim McNerney and David Calhoun. But don’t expect Gelles’ book to take a deep dive into how Welch’s tutelage of McNerney and Calhoun affected Boeing. The discussion is superficial. This is, after all, a book focused on Welch.
Update 2: (Boeing modifies offer, strike called off for now) After upbeat air show and 2Q financial report, Boeing faces strike Sunday
Update, 2:45PM (PDT) July 30: Overnight negotiating resulted in a modified offer from Boeing to IAM 837, resulting in postponing the strike set to begin at 12:01 AM CDT Aug. 1. A new vote has been set for Aug. 3.
By Bryan Corliss
Analysis
UPDATE: 4 p.m. (Pacific), July 29: On Friday afternoon, a St. Louis television station reported that Boeing and Machinists Union District Lodge 837 were heading to mediation. The station quoted an IAM 837 spokesman who said a federal mediator would lead the talks. The station said Boeing has not confirmed this.
Meanwhile, the St. Louis Business Journal reported that negotiators on both sides had met with a mediator but made no progress.
Neither side has issued a statement on potential mediation.
We will update if developments warrant.
July 30, 2022, © Leeham News: Boeing’s Wednesday earnings call had some pretty big news in it: After years of red ink, Boeing now anticipates generating free cash flow.
But there’s a big potential blocker on the Defense side of the house, in the form of a looming strike with the Machinists Union workers in St. Louis.
Workers rejected a contract on July 24. Leaders of International Association of Machinists District Lodge 837 said 91% of those voting rejected Boeing’s “best and final” offer, and 94% of voters authorized a strike, which could begin at 12:01 AM Monday. The leadership did not release the vote totals.
Three plants in and near St. Louis would be affected by a walk out.
Boeing didn’t mention it in its earnings press release, and CEO Dave Calhoun didn’t mention it on the earnings call and downplayed the significance of the labor strife during a live interview with CNBC the same day.
“They do have high expectations,” Calhoun said. “We feel we have made a very strong offer.”
The union workers, however, disagree, and that could very well mean another stumble for Boeing, as it moves to bring the key new programs – the T-7A trainer for the U.S. Air Force and the MQ-25 Stingray UAV for the U.S. Navy – into full production.