Refutes Assertion That Rates May Drop “To 21/Month”
Overbooking Means Customers Have Flexibility In Deliveries
No Cancelled Orders For 737′s So Far In 2009
787 Suffers Third Major Order Cancellation This Year
Boeing moved quickly to dispel rumours that production of its erstwhile 737 family will drop to just 21 airplanes a month, based on comments made to GKN Aerospace CEO Marcus Bryson who visited numerous suppliers in the US.
In last months first quarter earnings call, Boeing CEO Jim McNerney had said that the company was already prepared for a softening of demand and that over-committing offset current and anticipated 737 production rates going forward, adding that more 737 orders were moving “out” than “forward”, suggesting customer deferrals of around 12-18 months.
Boeing spokesman Jim Proulx told FleetBuzz Editorial.com that “we continue to monitor our production rates to make sure we can deliver the airplanes our customers have ordered in a timely fashion. We have made no decision to change our production rates on the 737.“
Image courtesy of Boeing
FleetBuzz Editorial.com predicts that any cuts to 737 production will be closer to 26 or 27 airplanes a month or around 15% less than current rates.
Arran Aerospace’s MD/analyst Doug McVitie was quick to condemn the speculation of the 737 rate cut while slamming those who ignore the inflated monthly figures Airbus produces for the A320 family.
“Why don’t these tea-leaf-believers just play the Lottery instead of playing aerospace crystal balls?” he said.
Boeing also noted a third cancellation of 25 787 Dreamliners this year. Dubai based lessor LCAL and Russia’s S7 airlines have already dropped orders for the 787 this year although LCAL still holds a firm order for just a handful of the type. It is not immediately clear who this customer is who has cancelled orders for the 787.
“Boeing and a customer who wishes to remain unidentified have reached an agreement to cancel this customer’s order of 25 787s. It would be inappropriate for Boeing to comment further on the details of our agreement with this customer,” a Boeing spokesman told FleetBuzz Editorial.com.
The current 787 backlog stands at 861 firm orders.
How the hell is using the word “Lord” stupid name calling?
Sure, used in jest but it seems like your inability to back up your own claims you have no sense of humor either.
Next indeed.
To suggest that Airbus will go and buy market share at a loss to themselves is just not correct
Who said that they did? I cant see that in the comments.
Boeing Investor,
Just because you create a new post doesn’t mean all posts before it go away.
Now how about addressing the issue.
Leelaw,
I had missed the ordering dates so I did a bit more research and found this interesting paragraph.
SIA’s A330-300 lease deal is related to the planned A350 order and Chew says the carrier has flexibility with the lease terms of the 19 new Rolls-Royce Trent 700-powered twinjets from Airbus, which he says will provide “interim lift” before A350 deliveries begin.
http://www.flightglobal.com/articles/2006/12/20/211260/sia-brings-pre-christmas-cheer-to-airbus-firming-nine-a380-options-leasing-19-a330s-and-placing.html
Chew calling them interim lift before the A350 arrives should settle it.
Leelaw, SQ have a fleet of 45 777-200/200ERs, but 15 77Es are derated so they are sort of like the 777. SQ nearly ordered the A330 in 1995, but reportedly, Boeing made SQ an (unbelievable) offer they couldn’t refuse, and the rest is history
So, these are the FACTS:
(i) SQ favours a young fleet for fuel efficiency and lower maintenance costs, and therefore, replacement is taking precedence over certain other considerations. In 2006, SQ’s 772s and early 77Es (derated) were, according to SQ’s fleet renewal policy, ready to be replaced from 2009 and onwards. The A333 is only slightly smaller than the 772 (passenger capacity), and is a perfect replacement aircraft. In fact, SQ’s toughest competitors in SEA have been flying the A333 on similar routes where SQ didn’t have any choice but to fly the heavier triple sevens.
(ii) In recent years, the A333 has “stolen” the sales from the 772 and derated 77E. The A333 is significantly lighter and while the initial versions were about as restricted on range as the initial 772, later models with TOW increases have pushed beyond. In fact, the A333 has much better CASM than the 772 and 77E (derated) for intra-Asian flights, and as for circumstantial evidence, the A333′s CASM may in fact be roughly competitive with that of early 788′s.
(iii) The current, and significantly improved A333 is in high demand. There’s no reason for Airbus “to give these aircraft away” to SQ, who BTW was the launch customer, and “suffered” the least delay in deliveries compared to the other customers.
(iv) SQ’s first 10 A388s are being leased as well. There’s circumstantial evidence that the terms for the A388-lease and the A333-lease are roughly equivalent, and that the “compensation” was part of the whole “package”. Also, SQ has preferred to pay cash for their new aircraft, but it remains to be seen whether or not SQ will prefer leasing in the future. Both the 787s and A350s could be sold to a leasor at first delivery, and then be leased back to SQ for 8-10 years.
Now, looking at your response, it seems pretty clear that you’re not “in the loop”, and that you’re basing your claims on what you’ve “heard”. As for me supposedly “not adhering to such a strict standard of evidentiary foundation when advancing all manner of speculation about Boeing”; please point out where I’ve “speculated” about Boeing in a similar manner to yourself regarding the SQ A333 leasing deal. I’ll readily admit that I’ve speculated on both Airbus’ and Boeing’s possible product developments, but I do believe that my speculation has usually been based on data that’s readily available.
Finally, these things aren’t that important, are they? I’m not that important either, and likewise, I don’t take myself too seriously.
Sorry Falcon,
IMO, despite what Mr. Chew said for public consumption, the more salient point is that Chew could have walked away from the “panel-liner” altogether if he so chose and still had his lease deal. The facts seem to dispositvely prove that the lease deal was not ostensibly contingent upon ordering the A350. It was surely the right thing to do, but not a legal obligation.
“The current, and significantly improved A333 is in high demand. There’s no reason for Airbus “to give these aircraft away” to SQ, who BTW was the launch customer, and “suffered” the least delay in deliveries compared to the other customers.”
This begs the question why Airbus was ostensibly forced to act as the lessor of last resort. If accumulating a fleet of 19 A330s commencing in 2009 makes compelling financial sense you’d think SALE (and/or other lessors), which IIRC was still an affiliate company of SIA back in ’06, would have jumped on such a potentially lucrative deal. The far more likely scenario is that even Airbus would be extemely lucky to just breakeven on the deal given the way the transaction was structured, so they were forced to take the unprecedented step of acting as the financier of six-year operating leases.
“..these things aren’t that important, are they?”
Maybe not to nattering busboys, but folks in the leasing business and syndicate investors in A330s found this transaction to be of some significance.
Finally someone unveiled who was behind the recent 787 cancellation.
http://www.atwonline.com/news/story.html?storyID=16576
Quote: “The Royal Bank of Scotland’s RBS Aviation Capital subsidiary is the customer that canceled its order for 25 787s, Airbus Executive VP-Programs Tom Williams confirmed to ATWOnline in Hamburg.”
The circumstantial evidence is very strong that in the compensation deal reached between Airbus and SQ, because of late A380 deliveries, Airbus agreed to annul the original contract for 10 A380 frames, in such a way that Airbus Financial Services (AFS) would lease these 10 first frames directly back to SQ. Also, as part of the deal, SQ would lease 19 A333s from AFS while buying outright 9 additional A380 frames.
“Singapore Airlines first announced its intention to become an A380 customer in September 2000, with an order for 10 A380s and options on a further 15. That firm order was increased to 19 in July 2006. At catalogue prices, the commitment to the 19 firm orders, including engines and spares, is in the order of US$5.7 billion.
http://www.singaporeair.com/mediacentre/pacontent/news/NE_5207.jsp
So, it’s on record that originally, SQ ordered 10 firm A388s. Perhaps, SQ felt that the initial A388s were assets with unknown residual value and were looking for a leasing-deal instead. It’s ironic though that the initial A388s performed better in service than foreseen in December 2006 (i.e. aerodynamics performance trumphed over added structural weight).
In January 2008, Airbus Financial Services sold three SQ A380s to Doric Asset Finance:
“Airbus Financial Services has sold three Singapore Airlines A380s to Doric Asset Finance at a base purchase price of $198.6 million each.”
The financings are a boost for Airbus, given that the A380 is a new aircraft asset with unknown residual value, and the aircraft are among the first examples off the line.
http://www.flightglobal.com/articles/2008/01/14/220757/airbus-sells-three-a380s-on-lease-to-singapore-airlines.html
So clearly, SQ had at some point been “released” from their initial A380 contract regarding the 10 firm airframes. The logical explanation is that they were released from that contract in December 2006 when they signed three new contracts:
(i) SQ’s lease of MSN-003/005/006/008/010/012/019/021/034/045.
(ii) SQ buying outright 9 additional A380 frames.
(iii) SQ leasing 19 A333s from AFS.
Since AFS is selling the 10 A388s and 19 A333 to several lessors, one would have to find out the asking price for these frames in hope to substantiate any claims that the A333s were “giveaways”. Interestingly, the first A380s were apparently sold for USD 198.6 million each, which is substantially more than what has typically been projected for “launch” customers by that programmes detractors, and I’ve seen no evidence that AWAS has paid less for their A333s than what is typical for such transactions, or, put in other words, Airbus is showing no sign of desperation regarding the sales of A388s and A333s to SQ.
Dublin based lessor, AWAS, delivered the first of six A330-300 aircraft to Singapore Airlines today.
http://www.awas.com/Portals/0/Singapore%20Delivery%20Jan%2021%202009.pdf
Quote from Leelaw: “The far more likely scenario is that even Airbus would be extemely lucky to just breakeven on the deal given the way the transaction was structured, so they were forced to take the unprecedented step of acting as the financier of six-year operating leases.”
As explained above, your assertion is false!
Leelaw,
“Airbus would be extemely lucky to just breakeven”
– Don’t know how you arrived at that conclusion.
The lease deals are difficult to work out but saying that Airbus will be lucky to make any money, without showing any evidence, isn’t progressing the argument. Airbus isn’t a lessor in this case. So far SIA received and are operating 6 A333s, 3 had been delivered to AWAS and 3 to LCI. Those 6 are shown on the April Orders spreadsheet. SIA are due to get 2 more in May. These 2 are also showing LCI as the customer (on top of the 3 delivered). In the mean time SIA is shown as the customer for 13 remaining frames of the 19 ordered. My guess is that SIA is selling those frames to the leasing companies as they get delivered for the best lease rates and prices, particularly because they are using the A333s as the interim lift anyway. Anyway, dealing with SIA is quite difficult, as they are very demanding and tough negotiators. Boeing also did some strange deals with them, remember the buy back of the A340s? I doubt they made a huge profit with them but managed to place a good 777 batch with them and later sold more including 77W.
Busboys:
SIA’s press releases and regulatory filings (as well as Airbus press releases) at the time they entered into the lease agreement inidcated that Airbus was the lessor. The much vaunted “spreadsheet” has however indentified SIA as the “purchaser” from day one as well. The fact that Airbus has arranged to downstream these leases to third party lessors is no surpise as Airbus is not in the business of investing in operating leases, nevertheless, the notion that six-year operating leases are being downstreamed in the current economic environment at anything approaching robust prices is fanciful. The pathological need of some busboys to rationalization every last thing related to Airbus so that it is always cast in a positive light is bizaare and boring.
Leelaw you must understand, it’s the Airbus über alles syndrome quite common with Airbusiens. De facto, anything Airbus says is taken as pure 100% board certified 24K gold. Anything Boeing says is shite. Just ask them. Airbus never does anything wrong, incorrect, or even marginally questionable. To attempt to argue otherwise is illogical.
Heil Gallois. Carry on.
Erik Bloodaxe, on the contrary, everything Airbus does is bad. They are losing money left, right and centre, give planes away for free and on top of that their planes are shite. This garbage had always been held dear by the true Boeing fan club. It is surprising you failed to notice it.
Leelaw, I had said that the planes had and are being delivered (as in sold) to the two lessors AWAS and LCI. Airbus is getting money for them. You, on the other hand, offered no evidence of “Airbus would be extremely lucky to just break even” other than to again play the usual “Airbus must be losing money card” because I don’t understand how it works.
“every last thing related to Airbus so that it is always cast in a positive light is bizaare and boring”
– that’s funny as all I had noticed related to Airbus or in any thread not even related to Airbus (but it gets dragged in anyway, here is a perfect example) as being negative and closely related to the usual themes I listed above. That is also both bizarre and boring.
Actually, A330-300 leasing values have been on the rise for the last couple of years partly thanks to the lack of 787s. In the current environment, “downstreaming” six-year operating leases for the A333s just might be a good business opportunity.
In the May 2009 edition of Aerospace America, a “transformed” Richard Aboulafia (i.e. He’s stopped laughing at the CSeries) is saying that many of the A330 sales have gone to leasing customers, who are enjoying relatively high A330 lease rates compared with a weak broader market.
http://www.aiaa.org/aerospace/images/articleimages/pdf/18%20-%20Industry%20Insights_MAY2009.pdf
These 787 problems have basically been a windfall for Airbus. They have resulted in badly needed revenue and the breathing room to create a competative response. Since the 787 delays were first announced, Airbus has enjoyed record A330 demand. A total of 142 net orders were recorded in 2008, on top of 198 in 2007. The latter represent the highest order level yet achieved by any Airbus twin-aisle jet. Many of these have gone to leasing customers, who are enjoying relatively high A330 lease rates compared with a weak broader market. It is very likely that some of Boeing’s penalty payments related to 787 delays are going directly to A330 leases, indirectly benefitting Airbus.
Finally, why the need to respond pathologically in an abusive, rude and petulant manner?
Leelaw,
The facts seem to dispositvely prove that the lease deal was not ostensibly contingent upon ordering the A350.
Could not disagree more.
As it stood end of 2006 SQ expected to receive the last of the 19 x A380 by early 2011. They expected to receive the last of the 19 x A330 by end of 2010 so only a short time before the last A380. They expected to start receiving A350 in 2013 (mid 2006 it was 2012)
Those numbers make zero sense as being compensation for A380 delays. They overlap a bit with the A350 but not too bad.
Add to that the comment from Chew who had no reason to say A350 unless it was true. If he didn’t want to say A380 it would have been plenty enough to just say he expected to need additional capacity in that period. What would be his gain in lying about that?
I think there are several reasons for the confusion with the major being. A) Deals announced together and the A350 deal being delayed. B) Everyone expecting SQ to get A380 delay compensation C) The unusual length of the leasing contract. D) Seeing leases made direct with Airbus. E) Unfortunately a big one. A lot of people want them to be for the A380.
There may also be a big difference in how we define “give away”. You might mean anything below normal price span. To me it means no payment or only symbolic payments. I have no doubt Airbus structured the deal so that it covers their expenses and a bit more. I also have no doubt it is well below their normal margins.
“why the need to respond pathologically in an abusive, rude and petulant manner”
I don’t appreciate your haughty and dismissive tone so I responded in kind.
I’ll ask my earlier question again since it hasn’t been answered: why the necessity for Airbus to act as lead “lessor/financier” in a transaction for new-build aircraft fundamentally structured as a six-year operating lease? Is their prior precedent or a subsequent instance where new-build aircraft were financed by Airbus in an identical manner? Examples of financing via capital leases don’t count, they are completely different animals.
“There may also be a big difference in how we define “give away”. You might mean anything below normal price span. To me it means no payment or only symbolic payments. I have no doubt Airbus structured the deal so that it covers their expenses and a bit more. I also have no doubt it is well below their normal margins.”
Semanitcs are often a problem. I did ask in an earlier reply: “When is a “discount” [I'll now add sweetener and loss leader thereto] so unprecedented and huge that it’s tantamount to a “giveaway”?
“I don’t appreciate your haughty and dismissive tone so I responded in kind.”
I played the ball, not the man, while you did the opposite, simple as that.
“why the necessity for Airbus to act as lead “lessor/financier” in a transaction for new-build aircraft fundamentally structured as a six-year operating lease?”
Already answered. Likely joint lease agreement for first 10 A388s and 19 A333s (at no “giweaway prices) which is how SQ was “compensated” for the delayed A380s. Good deal for SQ because of their (i) requirements for fleet renewal, and that they at the time, didn’t plan to keep the A333s longer than for 12000 cycles/72 months thereby having to avoid the mandatory structural D-Check for the aircraft while in their fleet, and before taking delivery of the A359s that’s set to replace the A333s in SQ’s fleet, and finally (ii), the uncertainty of the residual values of the first batch of A380s. Also, this deal seems to have been a satisfactory one for Airbus (i.e. little difficulty in “offloading” the aircraft at genuine market rates due to the relatively high A330 lease rates throughout the latter part of this decade, as well as the commercial importance of Airbus WBs supplanting the majority of Boeing WBs in SQ’s fleet over the near term.
It’s interesting to note that you didn’t comment on the fact that Airbus currently is enjoying relatively high A330 lease rates compared with a weak broader market and that in this context, the six-year operating lease is likely not a “major” problem financially for either Airbus or any of the lessors involved.
” little difficulty in “offloading” the aircraft at genuine market rates”
Where’s the dispositive evidence supporting this statement?
“the six-year operating lease is likely not a “major” problem financially for either Airbus or any of the lessors involved.”
Again, where is the dispositive evidence supporting this conclusory statement?
I find it interesting that you seem to embrace the “Great Satan” Aboulafia’s musings about the A330. Do you also concur with his pronoucement in the same article that the A380 is “largely irrelevant?”
Like you, I’m not “in the loop”, and demanding “dispositive” evidence in a blog as if one were in a court is absurd.
As for Aboulafia, his views on the A330′s relatively high lease rates are based on easily established facts, while on the A380, his “musings” are based on his personal opinion.
Hmmm…seems to me you demand such evidence from others posting here who make conclusory statements similar to your’s above with which you take exception on a regular basis. Perhaps merely a cheap rhetorical trick rather than a firmly held conviction on your part?
Additionally, I find it hilarious that the doctrinaire pro-Airbus apologists/flaks/spin doctors are such “cafeteria catholics” where the “Great Satan” Aboulafia is concerned. They denounce him as a pro-Boeing stooge for his views on the A380 with zero credibility, to be reviled, shunned, and uniformly ignored. Yet when Mr. Aboulafia’s musings bolster they own often Pollyanish notions about Airbus they are quick to rehabilitate and quote him.
Actually, in these supposedly “conclusory” statements you’ll find included a level of uncertainty, and words such as likely, and an analysis of what might logically have happened (i.e. December 2006). This is quite different than relying on rumours from the leasing circle grapevine where information is open to change and interpretation as it moves through the “network”, and false information regarding A330 leasing rates for the latter part of this decade.
“….pro-Airbus apologists/flaks/spin doctors are such “cafeteria catholics”
Having seen your primary argument refuted (i.e. ” the notion that six-year operating leases are being downstreamed in the current economic environment at anything approaching robust prices is fanciful”) based on the actual A330 leasing rates; once again you play the man, and not the ball. Why do you have to continue responding in such an abusive, rude and petulant manner?
Since when do conclusory statements with minimal evidentiary foundation qualify as a refutal?. When you want to set yourself up as judge, jury, and executioner, a self-appointed final arbiter of cloture of debate, while also adopting a very smug, haughty, and didactic manner of colloquy, then you are obligated to present far more compelling evidence, indeed dispositive evidence, to bolster your arguments/conclusions/judgements when they’re presented in such an authoritative fashion.
Though suggesting that someone is an apologist, flak, and/or spin doctor is indeed a harsh judgement, it’s hardly abusive behavior, and certainly not petulant conduct if it’s an honest opinion developed after having read countless postings of the person concerned. I’d suggest growing a thicker skin and stop whining about being “abused” if you wish to pontificate here authoritatively.
That first paragraph is a bizarre tirade in legalistic overkill … you know, covering all bases.
Leelaw, perhaps you might appear courteous in real life, but rude online. Almost like having a dual personality, which one is genuine?
Sometimes the “legalistic” approach is the best way to get to the nub of the matter. If I’m indeed gulity of “overkill” you should be able to easily “refute” my “bizarre tirade.” This blog must be a frustrating environment indeed for a shameless OEM flak to operate in. You can’t complain to, jawbone, and lobby feckless, lazy and mostly sympathetic moderators to silence those who question your propaganda like you can on A.net.
Mr. Ahmad doesn’t seem to have any interest in either mollycoddling hypersensitive fanboys and tranparent OEM flaks or the necessity of defending Mother Airbus against all perceived enemies, foreign and domestic..
Posters can’t hide here in total anonymity like on the Seattle P-I Blog and spout jingoistic blather, employ bullying tactitcs, take cheap shots at will at the “Boeing Bete Noire,” and/or deriding everything American without any risk of losing credibility. Poor thing, you’re reduced to whining about legalism and rudeness while your own faux persona of urbane sophistication is stripped away to reveal a truly hardcore partisan, completely intolerant of and seemingly threatened by opposing viewpoints.
it’s great to see the way these blogs usually stay on topic.
737 production rate musings and 787 order loss news turns into barely civil tirades of personal judgement…
leelaw, is it weird to agree with someone (Aboulafia) on some points and disagree on others. And yes, I am jury, judge and executioner when it comes to my opinions.
demanding “dispositive” proof on a blog is like demanding to win the lottery – it may happen, but should in no way be expected (and is to me hilarious to behold)
just because jo once read a dictionary and practice(d) law and can thus spout archaic words and legal jingo doesn’t make your opinions more valid. Your apparent need to retreat to such tactics in fact reduces my personal opinion of you. it is very much like the “jingoistic blather, employ bullying tactitcs, take cheap shots” practice you accuse (only) the “pro-Airbus apologists/flaks/spin doctors ” of. In my view, I’ve seen plenty evidence of stupidity, nationalism and cat-calling from both sides.
Ikkeman:
I truly regret disappointing you, though I don’t often agree with you, I consider you an independent thinker, respectable debater, open to consider the arguments of others, and free of doctrinaire partisan agendas. In this case I resorted to the legalistic terminology because it best describes and explains the nature of my beef with the person in question. My basic point is that if you want to adopt a dismissive, smug, and haughty tone towards those with whom you engage in colloquy, then it’s only good form that your “superior/definitive” opinions be supported with dispositive rather than merely suggestive or tangential evidence. If you want to declare that you’ve refuted someone else’s argument, then your own argument better be airtight, again supported by dispositive rather than tangential and/or suggestive evidence. Perhaps we’ll have to agree to disagree on this one.
@ Ikkeman
As for your point about Aboulafia, if someone goes to the extreme of declaring a supposedly independent analyst to be a stooge/shill/hopelessly biased in favor of a particular OEM (which isn’t at all hyperbole in this instance), then I do indeed find it “weird” that you’d want to cite his commentary for any purpose whatsoever.