Sunday, May 29, 2016

The MAX-X Formerly Known As The "MOM"

The problem then is found in the marketing point where aircraft parts for a Max-X would be significantly different than its formal offering on current Max types. However, Boeing is already stuck with a stand-alone type citing its aging 757, as it loses airspace due to its eminent retirement. A 737 Max 10-X is under consideration as reported by Reuters

The real decision tree will be based on units "possibly ordered" if it decides taking this route. The Max-10X would have to have 1,000 plus units committed "what Ifs",  in order to spend scarce resource capital on a new single aisle type. Boeing is taking a customer headcount on how many would order if launched or announced. 
The window for a decision of this nature will come soon after the 777X makes first delivery so Boeing will take the next four years making that decision before announcing. It is just in the white board phase of concept with erasers being handy. 

The key to this mystery is coming from what the engine makers are doing to develop an engine fit for this new aircraft configuration. If CFM is testing a larger Leap-1 it isn't for Airbus and it won't fit on a current 737, therefore the Max-10 is under consideration with some developmental money on the table. The MOM could be a reality by 2021.

Saturday, May 28, 2016

What IF The F-22 Inventory Grows

The what-ifs are tossed about as Generation 4.5 F-22 resurgence appears on the horizon. The F-22 could impact the F-35 and it should not become a reality until the F-35 reaches IOC or has proven its fifth generation status in actual world time duties. The F-22, became a much beleaguered program so much that Lockheed Martin were only allowed to build 187 of its type during the first decade of the 21st century. However, things happen such as ISIS, Iraq and all things terrible in the world and the F-22 had a real world shake down.

It proved to be a real fighter, and so much better than a 4.0 fighters, the Air Force wants another (at least) 200 F-22 in its inventory. It’s truly a remarkable aircraft as it covers the battle field with two engines and can benefit from the F-35 development. The F-35 and F-22 have a symbiotic relationship. Everything learned on the F-35 program may transfer to the F-22 standing inventory. The Air Force would like to increase its standing F-22 force as the world's most capable fighter in its time slot. The F-35 can give the F-22 some of its highly developed and secret capabilities. The F-22 is very fast with two engines and has Gen 4.5 stealth capability. It’s a blue collar fighter with all the bells and whistles that any adversary regrets meeting in air space. It can out fly China, Russia and any other nations most advanced fighter. 

The F-22 will give the F-35 more time in the tinkering shop to make it whole. If the F-35 is a fifty year airplane, then its concurrency has fallen behind its fifty year objectives through its slow maturation into service. The F-22 can cover for F-35 as a wing man would in aerial combat. It can give much needed cover for F-35 maturation process working out "all" its kinks. A decision needs to be made in 2016 whether or not to restart the F-22 production. 

If or when any production starts, it will transfer a cost to the F-35 program through the number of its own units built. It was once conceived that 3,000 F-35's would be built during its life cycle. That unit number has dropped as cost on its development have increased. The pentagon and congress will have to come to terms soon how they will manage two projects and maintain effective levels for the F-35's development. 

The answer is simple, for every F-22 built, one F-35 will be struck from its production run. Since every F-22 built is very capable of replacing a one for one F-35 struck from production, the Air Force will maintain its over-all capability. If building only two hundred more F-22's, then there will be 200 less F-35 built over its program life. The only detrimental caveat is the cost of production ramp-up for the F-22 is very expensive. That costs may reduce total F-35 units even more by reducing its air wings size more than planned. 

If the US is planning a Generation 6 JSF, then it makes sense to cap the F-35 force to a significant number such as 1,800 having another two hundred F-22's at its flanks making the composite force of F-22's and F-35's equaling about 2,200 aircraft in the US Air Force.  Counting F-15, F-16 and FA-18 retirements, provides for smooth transition which can be accomplished during both production runs as the F-22 enhances the F-35 better than any of its predecessors are capable of complimenting. The F-22 is significantly better than any of the aforementioned Gen 4 aircraft that are aging rapidly. Making more F-22's is the bridge to the F-35 dominant role, it will play over the next 50 years. Perhaps in another 20 years there will be enough Trillions for adding additional Air Force aircraft for the world security objectives.

Friday, May 27, 2016

Since December 2011 The 737 Order Book Grows

Starting with SWA anchor order in December 2011 for 150 Max and ending with an order chart through April 2016. A summary view not including one hundred Vietjet 737's or eight Norwegian 737's, shows a robust Boeing order book for its single aisle first four months during this year. In fact, 2016 may surpass Airbus single aisle order count for the year. Knowing that Airbus prefers sandbagging order announcements for airshows, a steady pace has been established by Boeing for its single aisle offerings. The Neo-Max gap continues to shrink. The game change could occur, once the first Max delivers while falling into customer hands when comparing the Airbus A320 offering having a rough first delivery.

Single aisle by the numbers:

  • Max Ordered since          2011-December: 3,090
  • NG Ordered since            2011-December: 1,356
  • Military Ordered since      2011-December:      79
  • Other 737 Ordered since  2011-December:        8

                                                  Total      4,532

Starting with January 2012, the time represents just over four years and 4 months or about 52 a month backlog build for the 737 family of aircraft. Dividing 4,532 by 52 months a straight line order rate can be established of 87 units ordered a month worldwide since the first Max order.

An Airbus snap shop since January 2016 shows a single aisle order pacing for only fourteen A320 NEO's. This falls well below Boeing's 2016 order pacing for the first four months as it totals 35 single aisle booked per month. Adding Boeing's May order count of 108 737 (to date) would increase its order pace up to 50 from 35 single aisle per month during 2016. 

Having a pace of 87 orders a month on average since 2012, the current 2016 total for Boeing of 249 is well below the last four years pace where the total units ordered should be about 348 units booked, if it were maintaining its four year pace.

Even though this is an off order year for both giants I would expect Boeing to outpace the single aisle production with its orders through December 2016.

Monday, May 23, 2016

VietJet Has Ordered Up With Boeing

Counting 100 single aisle Max 8-200C's as an opening headline is a considerable boost for the VietJet Airline and its airplane maker, Boeing, with its aspirations in the East Asia's market.

Not wanting to go on about the deal it is apparent Boeing is busy in the region making significant headway with Vietnam's other commercial carrier, This order is for VietJet and not its own Vietnam Airlines, who currently and already has booked both the Boeing 787 (19) and the Airbus A350 (14) aircraft in a prior significant order. The region will explode with Boeing aircraft having the 100 Max 200C's on order. This is the same type Ryan Air (Ireland) ordered a few years back when it  required a stretch version of the 737 Max 8 and Boeing accommodated it with a 197 seat Max 8 with additional doors and a modified galley. Now VietJet’s order solidified the model production for Boeing.

Saturday, May 21, 2016

The Ever Important Boeing 777X Wing Center Opens

Boeing has now opened its newest building for business. The 777X wing center built on the massive 777 campus adjacent to the 777X future assembly building.

Boeing Opens 777X Wing Center

The Boeing 777X Composite Wing Center covers more than 27 acres under one roof. (Photo: Boeing)

This now starts the race to first flight.

Friday, May 20, 2016

Today Is National Zumwalt Day: It Delivered!

DDG 1000 delivered today after 4.4 billion was spent and follow-on Billions will be spent pushing forward a Navy dream of Oceanic dominance protecting US interest, allies, and it defense of America. What can the DDG do is the big mystery? So far it has shown it can go stealthy, run fast, and mess with any electronic warfare imposed on the ship. It can light up a small city with its gas turbines generation. 

Navy photograph

DDG1000 US Navy Photo

What is proposed for the DDG 1000 while in San Diego during 2017?

·      Complete ship’s array of weapons (known/unknown)
·      Install war fighting capabilities (unknown)
·      Test in secret operational capability (Unknown)
·      Complete training of war fighting crew (about 140 members)

The 33+ knot and 16,000 ton Zumwalt is something not to criticize as another DoD expenditure that is flawed. It’s the pride of Bath Iron Works and Raytheon Technology. All systems will be go in 2018. It will turn lose a capability, the Arleigh Burke class of destroyer cannot not match. The DDG 51 series is a twentieth century tool of defense from the 1990's. This destroyer, who can't be found easily, and does not yet have installed its full lethal function will change geopolitical aspirations. First assignment maybe the South China seas where China is building military sand castles in the sea region of multiple nations.  China is imposing its will and the US has a ship China can't build at this time.

Winging It solutes the people of Bath Iron Works and the US Navy having made this day possible. It’s the first of a family of three, but once accomplished the added value will be more follow-on Zumwalt types as a repayment for billions invested. 

Thursday, May 19, 2016

Ruili Orders Six 787-9's

Boeing, who is stuck in a ordering down cycle, does a pick six 787-9's from Ruili, a Chinese airlines expanding its footprint going forward. This year, in particularly is noted as a "order pause year" for Boeing citing low fuel costs and customer's solid fleet inventory as a reason for the 2016 pause. Airbus also has had a slow order start, thus making any order binges "so last year". This period sets up as an airshow dependent year for order announcements. 

Ruili 737 in action

The airshow grows in importance when Boeing or Airbus tents have something to say at the shows. Even though Boeing holds this year’s order lead during the first half of 2016, an airshow may change whose doing what to whom. My own order predictions are out the window as the makers are shaking the order tree for any ripe commitments.  Any prediction will be coming from the airplane makers themselves born out of hopefulness from a friendly customer. The other side of the order business is hanging onto any orders placed prior to 2016, and preventing cancellations. This year remains prone to order cancellations in the wide body arena.
The economy is not the culprit for airline ordering malaise, but underlying factors contribute to the order pause such as competitive risks. Opening a new route with its current aircraft inventory is a risk when the competitive margins are slim going into a new market served by another airline. Buying new aircraft for such a market is a greater risk. An expanding airline such as Ruili may hesitate investing with new equipment when they have older. However, in Ruili's case they have a small inventory to begin with including any wide bodied aircraft. Summarily, all Chinese based airlines are strictly given oversight by its government and its respective fleet expansion mode. Making Ruili's order transaction an accomplishment for Boeing completing the deal.

This does indicate the condition of the world airline market where special situations makes the order during 2016. The remainder of the year should see sales with customers who have rendered down to a decision point, where risk taking becomes the higher priority for its business model, rather than waiting for all the tea leaves to line up before ordering. The six Ruili 787-9's is a big deal in today's market.

Wednesday, May 18, 2016

Airline Aging Inventory FIFO Bodes Well For 787

The US airline giants American, Delta and United have inventory that will be approaching 20 years old by 2020. The combined fleets contain a variety of both Airbus and Boeing frames. The fleet renewal paradigm is now in play. United is running up 787 deliveries without replacing older models as they become a serious target for Boeing's order making team. The Boeing backlog is becoming ripe for order placing with its family of 787 and 777. United recently converted fourteen 787's into 777's on its books. That particular move by United, suggest a near term fleet adjustment during a time of a retiring fleet age and increasing fleet capacity. United moved with a lower financial impact while increasing its order book.

American airlines became a Boeing star when it received its first 787 in the bright colors of its hanger. It too has its fleet shuffling as jets retire, routes are expanded, and passenger capacity changes. Out goes older 767's and in comes the 787 so Boeing hopes will happen. The battle field has changed to the fleet renewal scheme of things and both Boeing and Airbus are suitors expecting big orders from these three US shoppers during the next two years. When placing an order an airline should expect a five year window in which a delivery is completed. Manufacturing analyst see the customer's fleet age per unit, they can expect orders to be placed in a certain window of time.

Image result for american airlines 787 delivery

Delta is a wild card for Boeing as they have demonstrated a propensity for choosing any manufacturer at any time. The result is a mixed fleet of Airbus and Boeing where Boeing maintains the lead and Airbus has an aging fleet. The Single aisle is the anxious area for Boeing while Airbus has received favorable order status for its wide body. They just stalled Boeing by ordering 25, A330-900 and 25, A350-900's which becomes not a good day is for Boeing, as the Airbus good day replaces its aging Boeing aircraft such as the 767. Boeing didn't beat Airbus on pricing and Delta went for the best price. 

Delta Fleet Age and Numbers

The First in First Out (FIFO) market mode is the buying impetus for 2016-2017. The oldest aircraft in a fleet must go and be replaced by any aircraft manufacturer offering the best deal. That buying environment will extend Boeing's $30 billion development charges beyond the 1,300 unit block, before all sunk coasts are recovered from the "Pit". 

Sunday, May 15, 2016

787 Is Expanding The Market In An Overlapping Coverage

A long headline for saying the 787 is rapidly fulfilling its promise of connecting all the world's loose ends when aviation could not connect those ends before the 787. Previously, a connectivity outlook would involve the 777 or the 747, but the 787 isn't about mass, its about convenience. The 787 can land at "almost" any sensible sized airport in the world without much ado. That is the 787 market, and everyday the news headlines searched by "787" opens another new route at an alarming pace.

Asia, the Mideast and America are rapidly filling the skies with new 787 routes. The A350 has stumbled out of the gates where Qatar threatens a Boeing purchase over another A350 delivery delay. Time is Qatar's enemy as the world routes are rapidly being filled with 787's. The 787 market overlaps in all corners of the earth is noticed after delivery number 400 from the 787. Every week the news documents how some airlines is assigning the 787 to current or new route.  All 787 equipped airlines are announcing route expansion with its fleets of 787's. The Dreamliner will soon turn a momentum corner, as it will soon become a fleet replacement model for older aircraft including the venerable A330 flock and its routes flown.  

Friday, May 13, 2016

Boeing Taking A Moon Shot On Market Management

In a "what if", one can dream? Boeing is playing its future "what if" card clear from the production floor. The leadership of Boeing has made its pronouncement. It is a target capability of production units, coupled with a reliance on wide body cash and profitability engines. Boeing will once again depend on its 787's as a make or break aircraft for its gigantic mega corporation.

Business News Net Work:

"Boeing Co's top executives laid out an ambitious, five-year strategy on Wednesday to increase revenue and profits and secure the company's future for the next 100 years, promising to boost efficiency, return free cash to shareholders and expand the after-market services and parts business."

Ambition is that "what if" dream coming from Muilenburg, Boeing chief, as he outlined the: who, what, when and where, of the financial sources and uses for stockholder value. Part of that plan is maximum productivity.

"Boeing described how it will pay back nearly $30 billion in deferred costs from the 787, saying 70 per cent would come from selling larger, more profitable versions of the plane and higher prices.

Boeing also addressed whether its output will overshoot demand if there's a downturn in the aerospace cycle. New plane orders have slowed, and by 2020, Boeing will be making more than 900 planes a year, a position some analysts questioned."

My own head took a snap at that expectation of 900 airplanes made a year by 2020. The following head shaking conditions will exist then as does now:

  • Whose money will build the production capability needed?
  • Will there will be Department of Defense (DOD) terminology or acronyms used such as Initial Operational Capability (IOC)?
  • Can I get a Real estate License before 2020?
  • Does Just in Time actually mean Just in Time?
  • Is Boeing betting Airbus can't meet, match, or exceed Muilenburg expectations?

The sum of Boeing's parts will push Boeing to market resiliency which is a noble concept originating from a multitude of terabytes from a business computer analysis. The accounts agree that it is possible if you have your "what Ifs" in a row. Now talk to the people who will build 900 aircraft a year and see if it flies.

Thursday, May 12, 2016

The F-35 Is Different And Changes War Fighting

A recent article illustrates how the F-35 is not in a dog fight with the F-16 but is actually micro managing combatants to its own demise. The Article of note headlines.

It becomes a "Winging It" reading assignment structured towards unconventional aerial warfare. The F-35 does not dogfight, it just out thinks any known aircraft today, and into the future for years to come! Please refer to the link above for a different perspective on the F-35 and why its problematic architecture must use resolve for fixing the amalgamated war fighting capability. The word fusion is tossed about when naming the conceptualized intent of bringing all things together that has inherently evolved since flying began.

Image result for F-35 straight up

The F-35 is not an evolution of faster, bigger, or more mobile fighter when it doesn't have to be. It just cheats during the waring conflicts of the air. The F-35, as this article illustrates, and then I go on (metaphorically), how a pudgy little bumble bee can fly circles around the other insects of the air and strike with a finality not yet experienced in aerial combat. 

Keep in mind the word "fusion", its key to this whole discussion, and why pilots are learning to love flying this aircraft. The pilots see it all (helmet) and then they see it all again (electronic fusion/sensors), without even an adversary noticing the F-35 has its number. The first question up, why dogfight? Second question up why the need for speed?

Read on via the link above and you will understand why a faster horse travelling can't beat an automobile or why the F-16 can't run with the F-35.  

Wednesday, May 11, 2016

Boeing Needs 100 787 A Year Onto Its Books

Faced with a thirty billion 787 money pit. Dealing with a 1,300 787 unit block point for that little matter. When all is said and done, Boeing needs to keep selling and booking about 100 787's a year going forward. Boeing has booked about 15 787-9's during 2016 with the Farnborough Air show coming up next. Hopefully they have come up some forty orders from the event. Once the 787-10 gets rolling, errh flying, an impetus may strike the market for ordering more 787-8's and 787-9's just because its time to line-up on the Boeing Backlog.

Why order a 787-8 at this time? It out flies the A330 NEO and it out performs every legacy wide body found flying in the first decade of the 21st century. Some have stuffed 334 passengers on its own fleet. Other have managed 291 seats without any bodily harm. Boeing has less than 150 of its type on backlog suggesting another reason an airline can order up the model. The 787-8 is perfect for many an airline special operational needs. The question before us today what is the 787-8 sweet spot. A spot that is defined by fuel load balance by passenger capability and market need. The fuel price upward will motivate fleet renewal in a hurry. This is coming sooner rather than later as the low fuel price is coming to an end. All that old tin will reach the scrap heap when fuel prices go up by another 50%. The Boeing backlog will be ready for a special inter destination retirement of older aircraft where customers won't be ordering the same of what they are replacing.

Why Order a 787-9 at this time, while the backlog is tedious for impatient stock holders of an Airline company? The reasons come from a Boeing production efficiency, evolving since successfully converting 787-8 productivity into 787-9 productivity. There was a time when the common view of Boeing was steeped in anxious anticipation when the 787-9 hit the production floor. Boeing seamlessly introduced the 787-9 and promptly built over 106 of its type while building another 188 787-8's during the 9's introduction. All expectations are now set for the 787-10 program, as a do-over of the 787-9 exercise. Customers can assuredly get its 787-9 faster than an Airbus A350-900 if ordering one of each today. The compelling reason for buying the A350-900 has faded as Airbus enters its own version of being late concerning its prime customer such as Qatar.

Why Order the 787-10? Because it makes money in the heart of the Market. It will carry over 330 comfortably seated passengers going 7,000 miles which happens to be over 90% of the market span of travel. Once this aircraft assuredly flies like the 787-9 more orders will follow as its utility maximizes passenger demand for a customer’s profit line. Boeing is building an airplane for every customer's purpose or business intent as its overarching business model.

Monday, May 9, 2016

Boeing is a Fighter and Airbus Has A Punchers Chance

Boeing keeps bobbing and weaving its way through its order book and Airbus has thrown some pretty good punches staggering Boeing a bit. The 787 was a strategic move for world dominance and Airbus punched back with A350 family of aircraft. The 737 is the single aisle champion having over 9,001 737 delivered and 13,364 ordered at some recent point in time. Even though the Airbus NEO has punched its way into the Single Aisle ring, Boeing is making headway back into the fight with its Max. The goal for Boeing is Single Aisle parity in a split scimitar decision during round five. 

The undisputed heavy weight, A-380 is left shadow boxing in a corner, while the 747 became fashionably retired. Boeing the fighter, and Airbus the puncher goes to round six which brings the Light heavy 777X to the forefront. The A350-1000 or presumptive unannounced A350-1100 will not match well against the craftier 777-9X. Once Airbus fans get done screaming and cheering about its Light-Heavy's A350-1000's when purchasing its tickets, the fight will be over. The 777-9X comes through as a better fighter.

As Airbus keeps punching away with its family of aircraft types, they lack an innovative edge for a ten round fight. A lucky blow is the lost leader of the A-380 whose ship has already sailed along with the pigs that can still fly.

Airbus becomes arm weary before anything is decided. Boeing keeps circling its prey looking for an opening is the 777-9X and not the 737 Max nor the 787's blows. The fight reaches a culmination of the sum of its techniques over the numerous blows Airbus offers. The tenth round is a Boeing knockout.

Saturday, May 7, 2016

The China Eastern 787 Sale Is A Sea Change For Boeing

China Eastern just placed an order with Boeing for fifteen 787-9's. To the casual observer they will mention Airbus is besting Boeing with a twenty count A350-900 order during the China Eastern announcement from its buying spree for the year.

Image result for nose to nose A350 787

Youtube Photo credit
However it is better to examine a little deeper into the story as Motley Fool has examined with the headline:

The not so fast my friend approach and sale with the Airbus’ 20 wide bodies, suggests Boeing has breached into a market where it has not had much success.

Motley Fool on the 787 Sale:

"Given that the China Eastern Airlines order was not mentioned in last week's order update, and that since it was announced on April 28, it just missed the cutoff for reporting as a firm order in that update (which covered orders placed up through April 27), it seems safe to say I think we have found our buyer: China Eastern was the company that bought the 787's this week."

It is more import to note that China Eastern is an Airbus Company and would only order twenty A350-900 for its fleet consistency. 

Motley Fool Quote:

"China Eastern currently operates a mostly Airbus (NASDAQOTH:EADSY) fleet."

"Weighed against China Eastern's 293 Airbus aircraft of all shapes and sizes, that makes Boeing a relative bit player at the carrier -- but now its presence is growing.
For a company that places so much faith in the potential of the Chinese market, that's a good thing."
Boeing did not lose an Airbus battle going with a score of 20 A350's to 15 B787 wide bodies. It won a significant beach head in the Chinese aviation market place. Boeing keeps chipping away just as Airbus did in the 1990's. 

Friday, May 6, 2016

June 2016 Schedules: 17, 787's For Delivery

I got excited by Boeing's production intent for the month of May, the month of June production Queue was ready for view from the All Things 787  website. Once again the data was extrapolated and presented from a filtered view for the month of June 2016 delivery schedule. The number on the list is Seventeen 787 models which are scheduled for June delivery. The biggest observation; is Boeing has set its sight on making the 787's at a 100% production capacity pacing over the next two months.

A delivery of note is Ethiopian will take a preteen   #12 build number, a long wait from the Change Incorporation-Rework Center lady in waiting. This is the first of Ethiopia's next six terrible teens, all fixed up. Even though these are heavier than current 787-8's, it will provide a 15% improvement on fuel economy, but its buy price does compensate and will buy many gallons of Jet A. It is also significant to note, this unit # 12 has all the latest upgrades equal to what now comes off the production line today. The weight of this aircraft is the main penalty.
British Airways will receive its second 787-9 late from the Zodiac Seat production snag. Note it is a 396 build number. Boeing will be delivering in the 430's build numbers during June 2016. The highest number scheduled for delivery in June is build #447.

Air China will receive two more 787-9's in June bringing its first three 787's delivered in two months.  The rapid delivery pace will make an Airbus production response not worthy of mentioning, as Boeing will have delivered 31 787's in this two month period, that is if no delays are encounter from the production floor or from the customer. Boeing has shown in the last several years, its production capability is at a premium level for the 787 type. 

Monthly Type Production:
  • 787-8 Three
  • 787-9 Fourteen 

May 2016 Schedules 14 787's For Delivery

I often do research with All Things 787 and pull data into my own work sheets. From Uresh own website Winging It has used this data for a preview look at the Month of May, 2016. It looks as if Boeing will accomplish its 12 a month pacing with Its 90 day moving average cycle if it delivers the Fourteen 787's currently in the production Queue.

Deliveries of Note:
  • Unit build # 22 Air Austral, a first group production build for the 787 is now going to market 
  • Unit build #404 British Airways in Storage awaiting its Zodiac seats. Is now ready for delivery.
  • Unit build #419, Air China, an inaugural delivery or its first 787 with a big bow and balloons for a May Day.

 Type count for May:

·      Four 787-8's
·      Ten 787-9's

Thursday, May 5, 2016

Boeing 6.02 Billion For April Sales

Boeing has accumulated 34 more aircraft orders valued at approximately 6.02 billion in April. This keeps the Boeing total book pacing ahead of Airbus, one month shy of the midpoint during 2016 and before Farnborough. I am expecting a slow month for Airplane orders for both makers in the Month of May as the Farnborough airshow draws near.

Boeing appears to be working through a large backlog for the 737 and 787 achieving a consistent flow for orders since the first of the year. The China Eastern order for both Boeing and Airbus was a noteworthy order pairing as Boeing booked 15 of the 787-9's and Airbus tallied 20 of the A-350-900 on the same purchase cycle.

The split ordering suggests the wide body market is still up for grabs as Boeing is in the dominate position while having higher production and a lower backlog than Airbus.

Boeing Data via website: 

However, in a down year for both makers, Boeing is still showing order strength at a nominal level, where the Airbus YTD has illustrated a docile single aisle order streak. The posting will be updated when more Airbus information is revealed for the month of April.

Monday, May 2, 2016

Will Delta Turn The Corner For Connor?

Recently Delta has chosen the Bombardier C Series (100 seats) over the Boeing 737-700 offering (125 seats). Then Delta made an order with Airbus for its A3210NEO (185 Seats) over the Boeing 737-900. Boeing can't win with Delta during this episodic ordering binge. Ray Connor’s relationship with Delta's CEO Ed Bastion, seems to be very solid.

King 5 News:

"Delta’s new CEO Ed Bastian shared a bit of insight in a briefing. Bastian says he's good friends with Boeing Commercial Airplanes CEO Ray Conner, and the carrier told us they would like to have a larger 737. Boeing is already investigating that, a possible replacement for the no longer produced 757, which Delta also flies in large numbers. Sometimes referred to as the "middle of the market" airplane."

If Boeing would approach a “middle of the market” aircraft it would cause an enormous ripple effect in the industry. But would they do it for just one such as Delta airline?  

The answer is that Boeing is between a rock and hard spot, as it marshals its financial resources with the following:

·      737 Max Family
·      777X
·      767 Military program

Past postings were made about the middle of the market MOM. With Delta Friendship aside, Boeing is only just "looking" at this market wedge between single aisle and duo aisle aircraft. Boeing has a "MOM plan in hand", and Delta has rebuffed Boeing while its in its hard spot. Boeing has to solve these points on the road to MOM.

·      Plant Capacity
·      Financial Resources
·      R&D resources
·      1000 airplane soft commitment book

They can or will have a plant capacity plan when Boeing announces the MOM. The financial resources will become available after the Max cash flows begins and the 777-9X's entry into service arrives. The R&D resources also becomes available when both the above mentioned airplanes progress matures from the design stage.

Finally, it is probable that Delta has made its case with Boeing referring to a unique type found in the middle of the Market for which Airbus does not have an answer. Delta may have an exclusive position as a launch customer for the MOM in numbers of 150 of this type. If this assumption is sound, then Boeing has another 850 commitments to go before it says it's so.

Everything points to 2020 in Three and a half years. There are 757 aficionados who love their aging aircraft and a 2020 announcement date fits smartly into place for achieving the four above mentioned obstacles Boeing is facing while sitting on its "Rock".

They could pull in another 500 units committed from its varied customers currently flying the 757. It also could pull in a commitment from a customers like Ryan Air or Norwegian Air. Having a complementary model to its existing fleet and current order books synergizes those fleets. It is feasible that Boeing has a commitment book in secret and already exists a solidification for a 1000 unit announcement. 

A MOM would be a hybrid type from coming from the Max and connecting the 787 commonality for a 4-5 thousand range aircraft. The Atlantic Ocean market would be perfect for a MOM. The Pacific basin is too vast for a MOM trans-crossing it, but it could easily become a regional flyer in that basin making an optimal fit. 

The MOM is four years off or not at all. Boeing will have its bullet point ducks in-a-row by the year 2020, and by making Boeing whole it will make Delta happy.

Sunday, May 1, 2016

Is Boeing Ready For A 787 Market Pause

Boeing's, Dennis Muilenburg, has surveyed the airplane making business and states, it has taken necessary steps towards any economic downturn within the markets before it happens, and Boeing continues with a robust production schedule for its aircraft. Central to this, is managing its backlog while using market pricing for its order stimulation.

“The decisions we’ve made to ramp up 737 to 47 a month, 52 a month, and then 57 a month and the ramp-ups we have planned for 787 all take into context these historical factors,” Muilenburg said. “If we were to see deferrals and cancellations begin to creep up, we wouldn’t change our plans. We’ve in fact designed our plans to envelope those historical averages.”

Central to this quote is the many years prior to this pronouncement Boeing realized its backlog was the key to managing not only its cash position, but its market position as well, and it then at the time Boeing demanded a backlog reduction to achieve its long range goals. Boeing has positioned itself for managing cash flow through its production output and it is affecting the market through a more flexible backlog, motivating customers to place orders. The A350 is being anxiously watched on the production floor by its customers.

Having a flexible backlog with a robust capacity allows Boeing some power brokering its ways forward. The Boeing five year plan has completed pushing Boeing ahead of Airbus' through its own 787 family of aircraft. If you order an Airbus class aircraft from its single aisle to duo aisle there is a longer wait for the majority of its aircraft. Boeing established a flexible backlog during the last five years where Boeing is producing forty-two 737 a month and another twelve 787 a month, surpassing the Airbus A350 production capability. Eventually, Boeing will produce fifty-seven 737 a month and up to fourteen 787 a month in the next four years. Having a backlog supporting that productivity is what Muilenburg is seeking. A stable Boeing cash flow also offers accommodations for its customers own five year plans.

The past Boeing problem was the expensive start-up for so few 787's a month coupled with a huge backlog of over 1,100 787's in 2011. They had an inflexible backlog as potential customers sought out the A350's having easy delivery slots clear back in 2011. Having a production condition which accommodates any customer's financial plans within a five year buying program, sell airplanes. Boeing was out there with a 7-10 year window for its potential customers and that condition hurt Boeing’s market plan.

Boeing needed cash, and production was the means for that cash. It began ramping up the 737 production rate matching the Airbus single aisle production rates five years ago. Boeing’s production commitment has finally paid-off as the 787 program has reached a maturation point of making its worth of twelve 787's a month and another forty-two 737's a month. The wild card was the 777 program as it made about nine 777 a month. The 747 production became a value added to Boeing's portfolio. The 767 has transitioned to freighter and military mode with a combined backlog of fifty freight and 179 KC-46 totaling about 229, 767.

The long range production planning allows for some seasonality within its marketing program. The seasonality factors refine projections using history and making fairly accurate outcomes by assuming where and when the orders will come. 

Muilenburg has those projection in hand and sees if Boeing maintains its due diligence producing aircraft it will expand its sales over time. This is where prognosticators and Bloggers earn their keep. The industry sense is that Airbus will have its moments as well as Boeing will too. The latest example is the split order with China Eastern for 15 787 and then 20 more A350's. Splitting the order is an historic leverage of both Boeing and Airbus as both have needs for more orders from its respective programs. China Eastern had no bias only to the best dollar value and how it would fit into its plans.

In the above example it is not who has the better airplane moreover who made the best deal, and it seems that China Eastern did that when not knowing how it will turn out in the long run. Boeing has entered into a new 787 age. All those buying the 787 are now measuring how well its decisions were for buying the first aircraft. As it now stands there are new margins on balance sheets point towards a 20% better margin with its 787's in operation. Even Air India has found room for a recovery with its government and the use of the 787's even though they advertise their own incompetence operating the 787. They are beginning to get its arms around the 787 with improved operational execution for its 787. They can't live with it or without the 787 at this time and that time is changing finally.