Thursday, September 21, 2017
Egad, Dubai is about eight weeks away and Emirates shrinks in stature as Boeing marches on in the wide body zone, all during a reported order down year. Boeing is pushing and shoving its way to an insurmountable lead over Airbus and its A-350 aspirations. The secret 787 sauce is popular and its not just the XWB moniker that customer's crave.
Boeing market research is now paying big dividends as it guessed correctly with its 787 family of aircraft. Airbus has only sold 8- A-350-800's, 625- A-350-900's and about 200- A-350-1000's. Boeing beats Airbus over the head with both the its 787-8 and 787-9's and is in a parity with Airbus' A350-1000 with its 787-10 bookings. The Airbus book keeps experiencing A-350-1000 cancellation trend as customers transfer down for its more popular model A-350-900. After Dubai, Boeing will exceed Airbus overall with the Airbus family A-350's. Boeing will remain having a significant order lead.
The more important consideration is all of Boeing's sales flood a thin widebody market leaving Airbus with little or no room to expand with its XWB type with sales.
Secondly, repeat business now favors Boeing as prior customers will add 787's to its fleets when refreshing its wide body fleets ten years into the future. Boeing customers studying the A-350 case will often more prefer the 787 when expanding its fleet inventory because it is a better business model than owning the fractured A-350 family of aircraft.
With the A-350-800 as a none starter and the A-350-1000's suffering some book changes away from the model, the business case falls apart. The 787 family is complete and customer's can step into a proven business case for owning a whole fleet of various 787's. This is beginning to show in the latest transactions where both Airbus and Boeing were in the order fight and Boeing won those orders.
The 14 a month rate change is more about what orders are pending, and those orders that are verbally committed from reliable customers who usually follow through with its intentions. Emirate's pending order for about 70 medium wide bodied aircraft from either Airbus or Boeing is being delayed once again, and is no longer a key for Boeing's push towards 14 a month production.
Boeing can wait for an Emirates order when the airline is ready, maybe by 2018. However, Airbus finds itself in a pickle with its own production ramp-up where it will not have enough A-350 orders to keep up with Boeing's production schemes in the next five years.
The A-350 has entered the market place and customers do appreciate the aircraft because is such an advancement over classic airplane versions, but Boeing is presenting a better business case for operating the 787 in customer's wide body fleets.
Furthermore, when the 777X starts delivery, the market paradigm will firmly shift to a Boeing preference for a broad spectrum of customers and its family of aircraft possibilities.
Tuesday, September 19, 2017
There is a dichotomy of travel pairs in China. Single aisle connecting large villages of a million or more and duo aisle connecting large towns for million or more. The A-380 can do people, but it can't do regional airports while China is currently building in abundance for its emerging economy. Airbus insists China will need the A-380 in numbers until Airbus turns a jumbo profit on its A-380. The A-380 would be used for intercontinental travel. Future travel pairs will run into the same trouble the A-380 currently faces. There are only so many world-wide airports for the A-380. A population of 500 Chinese travelers may board the A-380 in Shanghai, but were would it fly?
The mid body duo aisle configured aircraft can go as far as the A-380 but land pretty much anywhere in the globe, though it will carry a load from 250-300 passengers. The single aisle can virtually island hop around the Pacific ocean and can land anywhere in China.
There are also small villages in China of 100,000 people or more and the 737 will keep those airports in mind. There are multiples of multi-million peopled cities in China and the mid wide bodies are on the case. Where would the A-380 land if it left China? Where would it land in China having A-380 capable airports?
It obviously can find 500 enough wealthy Chinese for buying tickets and filling an A-380 everyday going somewhere. The pride thing does wonders on a government's mind set. China will buy a handful of A-380's because they can.
The emotional limit will soon be reached for China's want for super big/jumbo aircraft. The transportation plan will come down to having more flights going everywhere everyday rather than having more Super Jumbos going once everywhere everyday. That objective should make it clear for everybody.
Time will play the A-380 out of vogue and onto the desert for a parts bin.
The plan will eventually evolve into a competitive nature. The best wide body operating in the environs of China will win. The best wide body is defined as what gives China the best deal for its economy. That is why both Airbus and Boeing want to build plants in China. The new norm is not importing into China but building foreign product in China for export. The win- win combination is a technological opportunity and a work force opportunity for the Chinese people and nation. China would like to learn how it too can build high tech aircraft for its many reasons.
Chrysler in America almost had Mercedes working with them when creating a better 300 touring car, then it left America allowing a Fiat take-over. In the aviation world there are no scenarios like the Chrysler mishaps with Mercedes and China hopes to land a major air framer long enough in order to build its aviation portfolio. Both Airbus and Boeing know this as well, but the carrot of selling wide bodies and single aisle is too much a temptation for mega makers to ignore. They hope to get in and out before China takes what it wants for stocking its own techno shelf just as Chrysler did with Mercedes. The 300 was one fine car.
Monday, September 18, 2017
The next step for any fan of any aircraft maker is to always look at the positive after losing out on an opportunity. Both Boeing and Airbus have much to gain with a major wide body order either for its 787 or its A-350 aircraft. The question is what will move Emirates towards making an order announcement at the Dubai airshow. The quick answer is a nominal order with a big option floated about. Emirates would be locking in a price going forward until its aviation market improves. Having said that, a mixing order of types would be the case. Optimism suggests 10- 787-9's and 10- 787-10's are booked with 50 frames optioned into the future. Emirates may further direct options for 20- 787-9's with another 30- 787-10's in a sprawling Boeing order book at the show.
The pressure is on Boeing to give Emirates the "right" price in light of Airbus chomping at its heels. If Emirates were to wait for its right moment to order, it might be another seven years out before it would start receiving those aircraft and things change quickly, overnight, in some cases. The risk of waiting hangs heavy on Emirates' buying plan. That is why ordering twenty 787 is better than just waiting. Somewhere in between is always the logical conclusion.
An Example, Qantas Airlines for a longtime had ordered a multitude of 787's and then cancelled the order, but kept its 787 options intact as it regrouped its financials. It is just now Qantas has begun to take delivery of those former 787 options in a negotiated firming of 787-9's. It may not get all of its options sealed up for delivery but it will gain a substantial lot in the process at a decent price.
Another consideration is what the two makers are offering Emirates. Boeing may have locked a price in with Emirates if it just signs an MOU for 70 aircraft to be firmed in the next 24 months. There are many scenarios for either Boeing or Emirates with this impending order and a commitment at Dubai is more likely than having a hard order.
Friday, September 15, 2017
American President Robert Isom said, “I don’t like small fleets in an airline our size,” The Airbus deal could go large, but having a Boeing Order Book representing a possible 94 wide bodies, remains skeptical for any additional A-350's. The American Airline's wheeler and dealers say they have a place for the A-350 in its fleet. An often used ploy for incentivizing price reductions with both mega builders of air frames.
American Airlines has its needed goals and objectives in a secret place. If Airbus would just give away its airplanes then a deal would be made with the airline.
It would be easy to cancel its options for 52-787's, but a move in that direction may cost American Airlines (dollars lost) from breaking up its commonality efficiency with Boeing.
On the other hand Airbus cancellation penalties exists for any order cancelled from the airlines order of 22 A-350's. American Airline is less interested in having a big mixed fleet than just a small fleet of anything, so the stakes rise for both makers.
By this time American has worked out several scenarios.
- One, in which what it would cost American cancelling the Airbus order?
- Second, a mixed fleet cost of operations can have a big financial impact.
- Finally, going all-in on with Boeing or Airbus is in its objective goals.
American now knows the cost of cancellations, and that will probably cost them the equivalent of one or two aircraft delivered. Boeing may cover the cost of the Airbus penalty with the remaining 52 on option. In fact, American Airlines may find a lessor in a sell lease back arrangement thus avoiding an Airbus cancellation penalty and utilizing 22 of the A-350 over time as a fleet supplement until all 787's are delivered going forward. Point number one above is a "bite the bullet" moment and American is seeking the least financial impact during its continued negotiations with Airbus.
The American Airlines president has essentially stated, American is a "Big One Fleet" airline company casting a light on cancelling the Airbus order, and it is already positioned for having a Big Boeing Fleet inventory. The negotiation with Airbus could be taken for minimizing its cancellation penalty from the Airbus maker.
Going all-in is the obvious outcome as American has already set up a massive 787 fleet in the books and it would be an efficiency drag to its operation having the A-350 in operation, where the 787-9 and 787-10 could do the job well if the 787-10 is ordered by American after these negotiations.
Expect another loss for Airbus where some A-320 single aisle are parleyed into any remaining Airbus deal, as a face saving announcement. The talks will continue during the balance of 2017. Any book changes will occur during the first of 2018. Boeing is too embedded into American Airline's DNA. I can say this because I'm retired 😊!
Thursday, September 14, 2017
Wednesday, September 13, 2017
The first item up is future orders. Boeing knows something big is coming this way.
“We expect to add 100 airplanes to the 787 block. That will factor in to the financials and is accretive to our margins,”
Financial Definitions: "Accretive"
An accretive acquisition will increase the acquiring company's earnings per share (EPS). Accretive acquisitions tend to be favorable for the company's market price, because the price paid by the acquiring firm is lower than the boost that the new acquisition is expected to provide to the acquiring company's EPS. As a general rule, an accretive merger or acquisition occurs when the price-earnings (P/E) ratio of the acquiring firm is greater than that of the target firm.
In finance, accretion is the change in the price of a bond bought at a discount to the par value of the bond. Accretion can be thought of as the antonym of amortization.
- YTD, the order book nets 78 units for the 787. That number is twenty-two short of the magical 1,300 unit number in the current accounting block. A 100 unit increase would suggest moving the block out to 1,400 units. Boeing is already making money for each 787 delivered while each unit contributes to the reduction of its set aside deferred costs of $27 Billion. Boeing's job one, is to eliminate the deferred cost of about $27 billion.
- The second Item up is cash, Boeing will increase its cash inflow by two more 787 units a month when making revolutions for fourteen units a month pace. The current twelve a month pace stands at 144, 787 units a year delivered. Moving to 14 units a month suggest about 166 units delivered each year into the foreseeable future. If Boeing sells each unit for about 150 million at "deal" prices it will add an additional $3.6 billion a year to its cash coffers. An important stockholder indicator indeed.
The third item up is Suppliers.
- Boeing cannot announce going 14 a month without going to each supplier and gaining a commitment for every part provided will be there without delay. A big part, the jet engine, is an example. It is probably the most complex and expensive part on the 787. Both mega suppliers, Rolls Royce and GE, also have high tech suppliers stretched all over the world when it provides an engine for its customers. It seems Boeing has checked the supplier resource off its to-do list and can go 14 a month by 2019. Therefore, its seat makers are on-board by 2019.
There are many more subset items when announcing a rate increase from 12 to 14 787 production capability. The trickle down impact is big on workers, plant and equipment.
The tea leaves read in all this,
...is that Boeing would not make this announcement from the top unless it has the orders already "bagged" even though not announced or publicly confirmed. Forecasting a demand is not a significant enough reason for increasing its production output. Something concrete has already occured while not announcing the who-what-when and where details. Even though the close of 2017 is near and the order scramble has started for both mega air frame makers, Boeing had started earlier this year scrambling towards a robust 787 order year.
Tuesday, September 12, 2017
The Malaysia MOU only bumps Boeing's book by eight 787-9's and eight 737 Max eights. This is just the sweetener. It is also reported a total of 25 Max were in the talks with another 25 Max flying in the background. The 8-787/50-737 order mix includes 737-Max 10's.
Airbus was also in the works for this order, but Boeing appears to lodge its foot first in Malaysia's Air big hanger doors. Trump of course was right there with Malaysian Prime Minister Dato’ Sri Mohd Najib Tun Abdul Razak in talks at the White House today.
The MOU was all they could present for the cameras, but it is well known up to Ten Billion (US) in orders are in play.
Since John Leahy announced his impending retirement this fall, Boeing is on the order rampage. The 777-9X family recently doomed the A-350-1000 as a second chair offering within the aerospace marketplace.
The 777X is an actual Super Jumbo downsize fitting in at every major hub. The A-380 has reached its white elephant potential and Airbus scrambles on what to do! An A-350-1100 prospect has a thin market with the 777X already absorbing most of the potential sales. Euros are hard to come by when considering any A-350-1100 do-over in light of its A-380's aging. The Airbus Top end is vulnerable.
Boeing once again got aggressive on the big chess board when it quickly moved forward with the 777X. It simply "Castled" with its 777X and took the Airbus queen's pawn in the process. The A350-1000 is now a lost leader in the market place. Airbus must do a moon shot at this time or gradually lose its place chasing Boeing.
Back to Malaysia Airline. It has aging A-330 and the 787-9 MOU explains the A-330's fate. The Max order is a key signal when having the single aisle turn of events going to Boeing and not Airbus. For every Max ordered is not a NEO ordered. The battle is in the trenches and Boeing has become aggressive in those proverbial trenches. The gap closes between the two mega makers of single aisle backlog.
The first Max to hit the market place will now sell the majority of Boeing's future single aisle aircraft. Politics aside, as it can only go so far. President Trump cannot tip the balance for Southwest Airlines into buying more 737's nor can President Emmanuel Macron of France convince Indigo to buy more A320 NEO's. It's a business plan thing and politics is a four year cycle in the US.
Time is a sand shifting wind. Over time no one knows how any airline will play its hand for prosperity's sake. Indigo may collapse under its own weight or Southwest could merge with a bigger fish like United, causing some sort of change to occur. Currently, Boeing won a big one today with Malaysia's tip of its hat towards both the 787 and Max. The trend line is a dog fight between the two giant manufacturers as no outcome can be predicted. At this time Boeing has the high ground over Airbus in the 2017 dog-fight.
Monday, September 11, 2017
EP 2591996 A1 ...
The now, and much speculated flying oval. Could this be the enigmatic 797 (unannounced)? Here are some quick points of interests found in the patent papers.
May 16, 2013
Nov 10, 2011
Nov 10, 2011
Also published as
Okay some attention points are made above
A Point of interest: the above sketch is 10 across seating.
Didn't see this one coming a "Flying Egg" above?
The design suggest a shorten body length is the big sketch takeaway. Expect a streching in length and some narrowing of body when configuring for a 797. Instead of ten across, I'm staying with 7 seats across with dual aisle within the elyptical shape at the passenger level, The ceiling and under passenger areas will probably gain some inches for obvious reason's.
A wheels up will need some design modifications as well see below.
Note: Below the engines ride high on the stabilizers, as a lower ground clearance would make wing mounts unattainable in this design. Under wing engine mounts will take some more design effort unless the old style tail engines are once again in favor.