Is The Boeing China Report Too Soft Or Too Hard.

Rnady Tinseth Boeing Marketing VP, recently made a forecast on China Airplane needs over the next 20 years.

Via Randy's Blog:

Over the next 20 years, we project China will need 6,020 new commercial airplanes valued at $870 billion. That accounts for more than 16 percent of the total global demand in terms of both new deliveries and market value.

Some say this is too soft of a number since it does not take into account fleet renewals over the course of time. I personal cannot fathom not compiling in its forecast a variable for renewal as some kind of percentage occurring every year in the math model. Here is what IBA Had To Say.

IBA Calls Boeing Forecast For New Aircraft In China 'Too Conservative'

David Yu, IBA’s Regional Director - China, comments: “Whilst the new policies will stimulate growth throughout the region, it is also important to consider that over 900 aircraft are expected to be retired over this period. According to JetData, IBA’s commercial aircraft database, the current Chinese fleet is composed of over 2,400 aircraft, with an average age of 7.8 years. With a current outstanding backlog comprising 42 A320 family aircraft, 35 A330 aircraft, 24 A350 aircraft, 87 737 family aircraft, six 747 aircraft, 50 777 aircraft and 22 787 family aircraft, coupled with the predicted aviation industry growth over the next 20 years, there will be an abundance of opportunities created for the supply chain, and especially for local aircraft leasing companies who have steadily grown over the last five years. At present, 34% of the current fleet is on lease.” 

IBA sees significant opportunities for experienced support from global aviation consultancy companies to provide a range of services to the Chinese airlines, as well as lessors, investors and lenders who will finance the deliveries. Owen Geach, IBA’s Commercial Director explains: “The Chinese Government and many leading operators are engaging with expert advisors who have experienced the complex organisational and financial structures that such fast growth demands. As an independent adviser in the financial sector, IBA is aiding the management of new order delivery processes and works with stakeholders to create sustainable growth as the market expands both in terms of regional rates and in the number of aircraft. The Chinese aviation sector will need financing, so lenders, lessors and export credit agencies will seek asset management and advisory services to protect their exposure.” 

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Indices Check In Randy's Number and the IBA Statement.

All forecast take into account a seasonal affect on its mathematical projections. This seasonality will try to replicate affects of economy, demand and/or fleet retirements. Without knowing how Boeing compiled the seasonality factors it would be difficult to understand how Randy's people or the IBA reached its own conclusions. However, most forecast try to error on the side of conservatism, not to over exagerate a prediction. It is important when relaying a financial outlook for the industry, by not leading those who will be influenced on your remarks, with a large presumption for that outlook.  

The Boeing Philharmonic

The head conductor of the symphony usually stands in an orchestra pit and conducts the symphony producing excellent classical music. Where the audience may close its collective eyes and just listen to a hundred or more instruments, and virtuosos making music. Just one Tuba may make a wrong note at the wrong time every one notices and the symphony is spoiled That is the metaphor of Boeing's production symphony in Everett, Charleston and Renton. Thousands of partners join the symphony for every type of product Boeing builds. Boeing showed the conductors pit in Everett a few years back where a room full of people are in tune with every part in an aircraft build. They know where the parts are and when parts arrive for the production line. Any misstep in the supply chain is flagged.

 Below is the Boeing Conductors Symphony  Pit

Boeing's 787 Operations Control Center. Phil LeBeau | CNBC. Boeing's 787 Operations Control Center

This is where they track what seat goes onto what production position. Every piece is tracked, planned and implemented into the the production flow. Not just any seat goes into an aircraft. Full suites of specific business cubes are needed for fitting into the 787, per the customer requirement on the right aircraft with the right color. Even the engines are not a given. They must arrive during the production flow at the right time, within a several day window for the right airplane. The conductor of the operations control keeps every one  and every thing on the same page of music. Without this "conductor's pit", it would be kayos, not production music and a mess. Everything comes just-in-time to the production floor and in the right spot, every minute, of every hour, each day.

If something goes south on the floor, the music doesn't stop. However, they work through the log jam through the conductors assistance as found in the control room. "Hold the landing gear" and pass the "electrical panels". "Hey, where are the wheels and brakes? Oh, they are still in France, and are coming in 72 hours check!" The undercarriage work starts in four days and so forth. The conductors keep the floor in sync, and on pace. Even when the floor encounters a snag. The job reflects a mastery over the unexpected, not unlike what an air traffic controller experiences, but with far more parts specific to just one airline on the giant production floor. Not every airline in process has an traditionally assembly line format, as the next station in auto motive process just does cup holders and LED lighting. Its not as simple as found in the automotive industry. Each airplane is customer specific much like building a Rolls Royce Motor Car. Even though the structures are identical in assembly and the electrical or computer functions are the same it gets complicated quickly. Some have different entertainment systems with different added value Boeing systems or packages. Such as electronic flight bags or other options. Each variations from the order sequence is planned for and executed from the center from above, tracking the exact piece at the time and place on the floor.

A New Class MAX Emerges With Ryan Air

Will the 737 MAX 200 be a one hit wonder, only for Ryan Air, or will other customers follow suit on this 100 airplane MAX order. Ryan Air has ordered 100 737-200's as a new 737 MAX configuration with two hundred seats. Basically, Boeing has pushed around the interior a little, and added one exit door, as an accommodations for eight additional seats within the 737MAX-800 cubic feet of space. Michael O'Leary, Ryan Air's "Chief of Everything", went to Boeing and pleaded for more seats in the the same space for its customized order. The observation is whether others will follow O'Leary's and Boeing's agreement for a 200 seater.

More importantly, others may see an opportunity for increased seat revenue for the same new found Boeing efficiencies on the MAX. A single aisle premium is a 737 -800 with 189 seats. However, eight more seats may straddle density Markets found in China, Asia or the Americas. Expect some order book revisions from the MAX 800 to the the New 200 class 737. Not adding new strength to the 737 Order Que but adding flexibility to a customers inventory.

A current 737-800 MAX order holder might review its fleet passenger dynamics and determine that they could optimize capacity with an additional eleven seats (MAX) over its current 737-800 (189 seat MAX just ordered) on certain routes. They may have ordered 50 787-800 MAX originally, but now would like to convert 20 of its fifty  ordered to the MAX 200.  Which would have a a fleet capacity of an additional 220 seats within its every day operation.

Added Value within the order book is what an Airline would gain. O'Leary is always about added value. After all its a "bus with wings". He is interested in booking passengers on the flight they want and not bumping customers to the next flight out, because of over capacity on that optimal flight departure time for a particular passenger. Eleven more seats will reduce bumping problems. When is enough seats enough? A growing business plan needs options and equipment affords  those option.

That theoretical 50 Max order has now converted from 50 MAX 800's to a split of 30 MAX-800s and 20 Max 200's. This gives an airline juggling options with its inventory of aircraft. Matching the right seat count with the right market demands while keeping its airplane's operational points intact with the same flight characteristics. That would make a case for adding seating flexibility within its fleet.
                                         (Commit /option) 
Ryan Air goes and buys a 100/100 order with Boeing. With last years 175 NG order and the 200 combo order from above, Ryan Air has positioned itself with a flexible inventory of new aircraft no matter what competitors will do. A second consideration is Boeing timeliness, and where Ryan Air
falls into the production que, and how much it has to wait.. Boeing's needs that block of 175-737's ordered last year by Ryan Air as it will fill a production block of time while developing the MAX. It also will give Ryan Air Just-in-time new equipment in a continuous low. There are other NG orders in the factory line-up. Boeing needs another year of NG order product to feel really comfortable for its factory transition to the MAX/NG  duo production slots.  The MAX backlog stands at 2219 confirmed orders at this time. Its about 1000 behind the Airbus NEO. It doesn't take into account the existing backlog of unfilled NG's or Classic A320 types. Over -all aircraft backlog comparisons from the the classic to Max would be a good comparison at this time. There are about 2219 Max and 1850 NG's unfilled on the books. This changes almost every day and does not consider the recent Ryan Air 100 Max order. Adding on that 100 it brings the MAX backlog to 2319. Everyday it seems to change, so these are rule of thumb numbers. Both airplane companies seem to have robust campaigns in the single aisle market.

Today's  Ryan Air order is not a turning point, diminishing Airbus' headstart, but is more of Boeing doing its work with existing customers. Its combined backlog 4,069 single aisle of unfilled sales is an indicator Boeing made its case with its customers. They will have to get its MAX flying, ASAP, and prove in the market who has the the best solution. Ryan Air, though, has opened possibilities of what other airlines may do thinking outside the box. All Ryan Air has to do now, is sell food/treats grab bags at the terminal waiting area for $10, before loading. Buy the ala cart snack box DIY loading with drink and snacks or not. The Ryan Air Kitchenless airplanes can afford a trash can on board for convienient disposal when done eating during your 90 minute flight to somewhere.

Michael O'Leary Ryan Air and Boeing All In?

It has been reported that Michael O'Leary and Ryan Air Cohorts have thrown down the gauntlet of all-in for 100 of the MAX type 737. Right now it floats as a rumor while these players meet and greet their ways through paper work for a 10 billion dollar deal.



What's at stake, cost savings per unit? The 737-800* (*200 hundred seater). Knowing O'Leary from past deals, he will want the 199 seater more precisely. Two hundred seats would require an extra flight attendant on flights. The two hundred seat class 737-800* MAX would eclipse the A320 NEO by about ten revenue seats, upping savings increases by about 5%. The A320 NEO is rating itself as a 3.5% increase for savings. Boeing is determined in this dog fight. "Never say MAX, O'Leary" has been overcome ever since ordering 175 737 NG's last time. The possibility is that he will order 100 737 MAX, and then option for another fifty at a locked price. This Airline General is not fighting Boeing, but is grabbing supplies for the bigger battle in Europe. Look for a deal by end of this quarter financials, before September 30, 2014. Never Say Never, Michael.

LOT Airlines Experiences, "The Dreamliner Effect"

The Dreamliner is building an impressive list of financial make-overs. The reports keep flowing out of various financial statements how respective airlines have managed to go in the black do to its expert measures taken for pulling it out of Red Pool of financial loss, then comes the caveat word "787". Those financial execs hope no one notices that little descriptor as they, themselves, are seeking hefty bonuses for their financial acumen. But there it is, the 787, a eight hundred pound Gorilla sitting in the backroom of accounting stacking coins Below is my "Difference Making" list of rehabbed airlines who coincidentally fly the 787.

• Ethiopan
• LOT
• Air India

Yes, even Air India has gained significant ground on the bottom line and its breakeven point.

LOT Polish Airlines Is Now In The Black

"Aviation Pros Quote"

PR NEWSWIRE ON SEP 5, 2014 
SOURCE: PR NEWSWIRE

"LOT owes its positive results to continuous transitions. The carrier continues to improve the quality of services, launch new products, expand its portfolio and approach new passenger groups.

LOT has also increased its transit capacities by as much as 40%, meaning passengers travelling via Warsaw are able to change more comfortably on their way to other cities in Poland and destinations in Central and Eastern Europe.

2014 marks the first year of the "Dreamliner's effect".  The first LOT Boeing 787 jets started flying in June with now all long-haul flights operated with Dreamliners since August. This aircraft is not only popular among the passengers, but brings tangible benefits, such as fuel savings.

In July 2014, the European Commission made a positive decision about LOT.  The Restructuring Plan was approved and public aid was granted. The restructuring process of the company will end at the end of 2015. Until that time, LOT may not operate new flights. However, the first new flights are to be announced at the beginning of 2015."

Mr. Tinseth The Podium Is Yours, (from China with love)

Boeing VP Randy Tinseth in his solid Rick Moranis style of a wry smiles. Stated in China this week, it needs 6,020 aircraft over the next twenty years having 16% of the world's demand or value.

 Randy Tinseth , Boeing VP For Marketing 

   Rick Moranis (Honey I Shrunk The Kids)

Rick is a really Funny and Adorable guy.  Mr. Randy Tinseth, VP is quiet and driven about his products. He makes no jokes when he says China will need 6020 airplanes over the next 20 years. He hopes not just China, but the whole world gets this message. Boeing is here to stay and Boeing "will make your day", in a Clint Eastwood manner.

CAPA came to the front with an article after reading 20 like minded news articles on this subject, and I wanted to share the subtle importance on Randy's delivery in China.

CAPA report below:

Boeing projects demand in China for 6020 new aircraft over the next 20 years

CAPA Details of new aircraft deliveries in China from 2014 to 2033 is as follows:

• Regional jet (90 seats and below): 200 deliveries for total value of USD10 billion;
• Single-aisle (90 to 230 seats): 4340 deliveries for value of USD430 billion;
• Small wide-body (200-300 seats): 780 for value of USD200 billion;
• Medium widebody (300 to 400 seats): 640 for value of USD210 billion;
• Large widebody (400 and above): 60 for value of USD20 billion;
• Total: 6020 (16.4% of world total) for value of USD870 billion (16.7% of world total).

Boeing noted that more than 50% of commercial aircraft sold in China should be Boeing aircraft. 

The above is a listing of potential sales, as this is given to the Boeing Sales Members. A goal has been set and its greater than 50% of those numbers. The 737 plays an import role in this effort. Pricing plays an important role in this endeavour. As the 787 reaches full bloom it will be a significant wide body player as well. The 747-8i will snag some China orders after hearing what Boeing will do for the China Market. The 777X is the next big thing. China awaits Randy's next offer.

Caught This Message Today

The 747-8I Is The NEED Aircraft Beating The Want A380.

The news is full of China's need for aircraft by 2033. Boeing says it will need over 6000 aircraft by that time. The 747-8I is positioned well for China's need factor. Mark Twain would be proud of this market condition. "Rumors of My Death, have been greatly exaggerated", fame. That is the 747-8I. The 747-8I is a purpose driven aircraft as it will fit into most airports of transportation significance.

The A380 is a "want aircraft", the type of pair of shoes that are only warn on Saturday Nights but lack a practical nature. It flies around  at only the biggest and most fancy airports, where airport authorities have invested millions in order to seat this aircraft at the table. "I also want the 10 meter sail boat instead of the power boat, even though one lives on a small lake." That won't happen its not rational or practical.



The 747-8I should have a separate China prospectus from Boeing, which I imagine they do, but is not published for people like me. But with an over 6,000 aircraft demand backlog identified in China, I am sure the 747-8I fits in that number somewhere. If only it can hang in there a little longer, the market is coming back to the 747-8I. Now for some details as to what it will take.

• Seat Mile
• Passenger Capacity
• Fit
• Reliability
• Price

Every one of those bullet points has been addressed by Boeing. Even lead time to market is quicker than the A380. China can and probably will fit some 747-8I's into its airports, while those fancy shoes are only shown in fancy airports. I am not saying China's airports aren't fancy, but its emergence requires efficient and effective aircraft, because of its strong potential growth. Boeing is pitching effective and efficient at this moment in history and its winning. They have flipped the market paradigm on its head from Airbus back to Boeing. Airbus is scrambling to keep up with Boeing. In sales and in production. Boeing exceeds Airbus in both Gross and Net Orders, this years production results will give Boeing a huge advantage at the end of December, 2014. Boeing didn't lay down during the early part of this century. In fact it rallied to the point it will be hard for Airbus to catch it with its disjointed family of aircraft. They are calling in all customer markers at this time in order to catch Boeing. Those customers are in lock step for the NEO concept and a shredded A350 family where the A350-900 is only standard bearer for plastic. Boeing has pulled off the triple play with its family of 787s.

The 747-8I will come out of hibernation with the China Market as the A380 is too cumbersome and ill fitted for the market. The 777X will seep in, as bridge builder for the mid-body 787's. The 737 MAX is the rice and bamboo shoot server for China's regional needs. Boeing is crowing with 6,000 aircraft needed, as report by 2033.

Boeing's Plastic Pause

Boeing has entered a new phase sometime ago, when it announced the 737 Max followed by the 777X. Both were essentially metal and not plastic. Nor did the 747 8i follow the all plastic route. A curious observation of Boeing's greatest accomplishment, all plastic 787. What both Airbus and Boeing discovered is a spot where metal can compete with plastic. Whether it uses an amalgamation of both plastic and metal parts or new airframe design tweaks both manufacturers can build a composite design of parts, (both metal and plastic) that will compete with the all composite 787 design.

The Max uses engine advancements aero design and other transition technology, making the 737 fly farther, cheaper, and better without going all plastic. The 777X will use all plastic wings with an advanced wing design and a little old school on the folding part. It remains with the all metal body. Boeing with use advanced aluminum skin and a refined frame that strengthens the frame accepting larger windows and better cabin pressure. People will think they are on an extremely large 787 when in fact its a metal 777X.

The next advanced airplane won't be all plastic, but it will all new technology and a better evolved version of the prior generation of aircraft. It will have less expensive  R&D cost for the 777X than the 787, but it will be more efficient per weight and design. All Plastic is not the total answer at this time. It is the answer for Boeing and the 787. The A330 will straddle the the plastic and metal gap by being all metal, but will under perform the plastic competitor found in the 787. The Max and Neo will run neck and neck in the metal class where ones design will beat the other. Boeing claims it got it right in its engineering balance on the MAX. The 747 is a lost led er at this time more in the market than the A380 new acceptance. It will live out its life in the pasture of niche markets. The A380 is closer to that same pasture, than having an expanding future. Its too big to land and park.

The plastic revolution has entered a pause period while metal aircraft adapts. In this pause plastic construction will revisit how it makes its parts and what is best for that construction for its use and disposal. New fabrics and plastics will emerge during this great pause. Once the evolution of the market has settled, the one who perseveres with plastics will emerge with something greater than the 787. The 787 will have a follow-on model in 10 to 15 years with better applications of the plastic concept, better flight deck, and leading edge technological advances all around. Engines in the future will incorporate better and more plastic within in constructs, but may never depart from the metal portion of the engine.

Let's pause and wait and see what aviation has learned with the 787 as it keeps flying.

The Import Export Bank Conundrum

Any time you partner with a government on financing major capitalization one enters the ring of politicization or AKA, politics, and it ceases being a logical solution for emerging airlines. A claim can be made that its airline welfare. An Industry claims its committed its resources towards a significant part of its customers through Export-Import Bank financing. The political twists and turns become turbulent financial air for both the airline and its airline builder. It could have a parallel story to the housing industry supported by a government during the big bubble housing burst during 2007-2011.

However, rather than reaching for an on-off switch through congressional correctness, they should review the whole matter, by going back on export-import bank legislation's "intent". Obviously, some things have unintended consequences and make a miserable law for some who compete against those who are blessed with a solid EXIM financial backing. The real problem is either throwing the on/off switch, to "off", on Boeing when what is really needed is an Export-Import Bank "Dimmer Switch".



Eliminate the unintended consequences portion of this type of finance, and clarify with all potential customers of newly modified financing constructs. That it has attached "strings " for this type of financing. Boeing has become dependent on this kind of street money as if it were a drug. Foreign aircraft builders have little or no connection for this type of money. The implementation of this finance becomes a dependency for the manufacturer, namely Boeing. Now they have filled its order book gaps with Export-Import orders of significant proportion, and as it does not compete entirely from price points, but through financing points. The analogy would be in car sales when the dealership is selling a monthly payment amount, rather than the product itself.

Domestic partners have also entered into the Export-Import Bank complaints, further attacking the political side of this arrangement. Labor and American owned airlines claim it impedes upon its ability to function and compete with this type of governmental relationship hanging over its heads while competing airline customers love cheap financing. This is often the condition when a competitor considers buying a multi-billion dollar purchase through EXIM.

If a foreign airline company can't afford standard financing, then why are they seeking a multi-billion dollar airplane purchases of wide-bodied 787's in the first place? That is the case (or condition) for most American owned airlines, where it went through its own standard banking process (competing for money), and then an EXIM customer makes it uncompetitive for that "Standard Financed Airline", as a foreign airline enters into the US market with its Export-Import Financed aircraft landing into the American airline market. American owned airline employees get into the complaint at this point.

It's not a simple answer for any American Owned Airlines, who has done it the old-fashioned way through going to the "standard bank", and now EXIM Airlines Types makes it hard to compete.

The US Congress should not hit the "off" button on the Export-Import Bank Legislation but should hit the dimmer switch with addendum provisions, which would eliminate some or most of the unintended consequences found within the lending nature of the current Export-Import Banking structure. If an airline has a financial disability in its goal for growth and wants to back from the US Export-Import (EXIM) Bank, then it should not be allowed preferential status when it comes to head to head competition with American Based Airlines. 

Domestic airlines, who use a standard financing are at a distinct disadvantage while flying in the same markets of EXIM sponsored airlines. In other words, an adjusted finance rate should be applied at each travel point when this condition exists. As the EXIM's loans are affecting competing American based airlines, and those same competing airlines are at a disadvantage in any market, where EXIM is the financial engine.

Example: "If you take the EXIM loan and it is applied against "United Airline Routes and equipment", where that same competing foreign EXIM airline is from another country, its EXIM loan rate will be adjusted per flight, as "balanced through a trade premium assessed to the EXIM equipment competing with the United Airlines in this case.". If the foreign EXIM airline flies from its home base to any location in the world a premium wouldn't apply on that financed aircraft. This concept should level the airline playing field. A Correction is made, "Don't unfairly compete".