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The Coming Commercial Aerospace Market Squeeze

October 6, 2009

Analysis of:Report: Upstarts will slash Airbus and Boeing Market Share | blog.seattlepi.com

The 100-200 seat aircraft market is currently shared by Airbus, Boeing and Embraer, with Boeing and Airbus taking 88% of the market.  10 new models from 5 new competitors are currently on the drawing board, all aiming to take share from Boeing and Airbus.Chinese and Russian manufacturers will focus on both home and export markets for the first time, and can certainly take a significant share in their home markets.Change in the industry capacity will negatively impact margins from 2015 onward. 

Will New AIG CEO be Creative in ILFC Sale?

August 30, 2009

Analysis of:ILFC CEO in talks to buy part of company - report | www.forbes.com

1. AIG is in discussions with ILFC management regarding a purchase of portion of the company2. This would enable AIG to maximize its return from ILFC, which given current credit markets, will have difficulty in being sold because of its debt load3. A restructured ILFC could once again become a key competitor4. The management team, who built the operating leasing sector, will remain influential players in the industry

Who Will be the Next Major US Airline to Fail?

August 27, 2009

Analysis of:Airlines May Have a Bumpy Ride in Fall and Winter | www.chicagotribune.com

1. Airlines take a long time to die - an average of about 15 years from initial troubles to final liquidation - witness the struggles of PanAm, Eastern, TWA2. Today's environment may push the next carrier over the edge, as cash positions at several major carriers are quite weak, and losses in a traditionally strong quarter don't bode well for the coming traditionally weak quarters3. United, US Airways and American are the three carriers at risk for another round of bankruptcies in late 2009 

Boeing Sets 787 Schedule and Writes Off $2.5 Billion

August 27, 2009

Analysis of:Boeing to Fly Dreamliner by Year-End | online.wsj.com

1. Boeing indicated that the 787 would complete its first flight by the end of 2009.2. Boeing wrote off $2.5 billion in additional development costs for the 787 program, indicating that the first 3 flight test aircraft are no longer marketable3. While Boeing expects the program to be profitable, the initial deliveries will be at no margin, and the break even point for the program is moving outward.4. Industry reaction has been harsh.5. Some industry analysts have taken a "wait and see" attitude

Supply Chain Gearing Up for Airbus A350XWB Production

August 26, 2009

Analysis of:Autoclave For Production Of New Airbus A350 XWB Arrives In Nordenham | www.aero-news.net

1. Premium Aerotech in Nordenham received its 84 foot long, 24 foot high autoclave to be used in A350XWB production. 2. This single supplier plans to invest $515 million between 2009 and 2011 for production of the A350XWB 3. The aerospace supply chain anticipates that Airbus will solve its funding issues and proceed with the A350XWB, and are gearing up with the necessary infrastructure to build the aircraft. 4. The A350XWB, with 493 orders to date, has already achieved market success.

Airbus Well Positioned to Gain Strategic Advantage

August 20, 2009

Analysis of:Boeing "Squandered" Chance to Cripple Airbus - Report Says | blog.seattlepi.com

• Boeing squandered its chance to deliver a crippling blow to Airbus• Over the last decade, Airbus has pulled even with, and now surpassed Boeing in deliveries and backlog• Airbus is now poised, if can deliver the A350 by 2013, to capture market leadership in the "leapfrog" game of commercial aviation.

Another A350XWB Milestone has been Met

August 11, 2009

Analysis of:Milestone: Airbus finishes second fuselage test section on A350 | blog.seattlepi.com

1.The A350XWB is progressing on schedule2. A key milestone, a second fuselage test section, has been completed3. With 493 orders, the A350XWB is rapidly gaining success, similar to the 7874. This test, involving 11 facilities, well before production is scheduled, enables Airbus to work out supply issues prior to production, a lesson Boeing has learned after multiple 787 delays.

The Implications of Southwest's Bid for Frontier

July 31, 2009

Analysis of:Southwest Makes Bid to Buy Frontier Airlines | www.chicagotribune.com

In the linked podcast, three GLG Analysts discuss the implications of news coverage of Southwest's Bid for Frontier and the additional information gleaned from the Southwest media conference call that elaborated on their bid this afternoon.     Please listen at http://iagblog.podOmatic.com/entry/2009-07-30T13_43_32-07_00

Is Another 787 Delay On the Way?

July 22, 2009

Analysis of:BOEING 787 MAY NOT FLY THIS YEAR | seattletimes.nwsource.com

1. The technical issues with the Boeing 787 Dreamliner appear more significant than previously thought from preliminary reports. 2. This will likely cause another major delay in the 787 program, potentially 6 months or more and delaying first flight into 2010. 3. Additional delays will cause difficulties for customers with aircraft on order, and significant additional compensation expense for Boeing.

The A350 Will be Funded

July 8, 2009

Analysis of:UK Makes Financing Offer for Airbus A350 | news.airwise.com

The EU cannot afford to have Airbus fail.Continued state support will continue, but evolve in form.Airbus will obtain the $15.4 Billion US required to develop the A350

A More Difficult Path for Airline Alliances

June 30, 2009

Analysis of:United-Continental Plan Opposed | online.wsj.com

Antitrust immunity for airline alliance partners will become more difficult with DOJ and Obama administration opposition These arrangements and alliances have been quite profitable, especially for Delta (and NW) who have existing relationships with Air France-KLM Just as alliances are getting stronger, the US and EU appear ready to throw cold water on future growth

The Financial Demise of United Airlines is Near

June 26, 2009

Analysis of:ASTA vows to Combat United's Anti-Agent Policy | www.travelagentcentral.com

United is attempting to push financial risk to its travel agents in an unprecedented manner that will likely cost them significant bookings This is likely an indication of extreme financial difficulties and a likely imminent change in holdback provisions with their credit card company Such actions are typically a precursor to a Chapter 11 Conclusion: United may be closer to the brink that previously understood

The Qantas Cancellation - Are there More to Follow

June 26, 2009

Analysis of:Qantas Cancels Orders for 15 Boeing 787s | www.google.com

The latest delay to the 787 has resulted in a cancellation from a major carrier If others follow, the luster of the 787 program will begin to wane as Boeing struggles to get the program on a firm schedule This could result in significant losses for Boeing, and gains for the Airbus A350, particularly for cancellations of the larger -9 model, as Qantas did

Will failures in "Bet the Company" Programs at Boeing and Airbus Result in a Cash Crisis?

June 25, 2009

Analysis of:Boeing and Airbus Dream On as Big Birds Fail to Fly | www.ft.com

Will the airframe manufacturers run out of cash given the high costs of their delayed aircraft programs? Do aircraft manufacturers need to drastically reduce production rates for narrow body aircraft in light of the current recession? Will the lack of cash flow delay replacement models of narrow body aircraft from 2017 to 2020 or beyond, and what impact will it have on the supply chain?

Boeing's Once Rock Solid Credibility is Rapidly Fading

June 23, 2009

Analysis of:Boeing Again Delays Dreamliner Test Flight | online.wsj.com

Will customers lose confidence in Boeing's ability to deliver the 787, after five separate program delays, and cancel orders? Boeing will face increasing costs, both to fix the new problems and in terms of compensation to airlines for additional delays. Just four days ago, Boeing was assuring investors that the first flight for the 787 was on track for later this month - has Boeing lost its credibility in the industry? Each delay for the 787 bodes well for the competing Airbus A350XWB, which is an alternative to the 787.

Airbus pulls ahead on orders - How Significant Is It?

June 22, 2009

Analysis of:Airbus Had a Great Show | blackprogram.blogspot.com

Airbus strong week at the Paris Air Show has generated a significant backlog of new orders - with commitments for 127 aircraft versus 2 for Boeing.  Does this reflect a fundamental change in the market attractiveness of the products of both companies in the marketplace? Does it reflect traditional "saving announcements" for Paris by Airbus? Does it reflect heavy discounting by Airbus? How do the two manufacturers compare across their product lines?

Airbus Innovation Update - The View from Toulouse and Hamburg

June 15, 2009

Analysis of:Airbus Updates the Market | www.arabiansupplychain.com

Airbus believe their product line is superior to Boeing and that the company, with a record backlog, is well positioned vis-a-vis Boeing.   The recession has impacted Airbus, and like Boeing, they have become more reliant on export financing to support customers. Airbus believe their re-designed A350 XWB will stack up well against the Boeing 787 and 777 With record orders and deliveries, Airbus is well positioned to maintain an industry leadership position, especially when the A350XWB enters service Airbus admits that its problems are short-term, maintaining production in 2009 and 2010 given the economic downturn facing the industry and order cancellations plaguing both Boeing and Airbus.

A fact-based analysis of ILFC by three GLG aviation analysts

June 9, 2009

Analysis of:ILFC to order more jets as airlines replace older models | seattletimes.nwsource.com

AIG must sell ILFC, the world's leading aircraft leasing firm. Recent reports on the bidding process reveal that the Onex/Greenbriar team is current in the lead, and that the entity will not be split but sold as a whole.  In addition, Steve Udvar-Hazy, ILFC’s CEO, indicated that the company is currently in discussion with Boeing and Airbus regarding additional orders, indicating that a degree of “normalcy” is assumed for the future.

Have We Reached the Bottom in Business Aviation

March 17, 2009

Analysis of:Cessna VP Sees Brighter Days for Jets | www.kansas.com

Cessna has indicated that we may be nearing the bottom of the recession for business aviation.  This conclusion does not match the data from industry drivers, utilization statistics and aircraft available for sale. While able to obtain financing for customers, Cessna indicated that the financing market has tightened considerably.  Others, without an in-house finance unit, have not fared as well. Has the recent focus on executive salaries, bonuses and perks created a negative atmosphere for business aviation that will prevent a short-term recovery?  We believe the negative drumbeat, combined with proposed onerous regulations by TSA, will prolong the industry downturn.

The Large Deal is Off - but Small Deals that Could Roll-Up are Likely

March 16, 2009

Analysis of:EADS still eyeing smaller U.S. buys | www.reuters.com

EADS acquisition strategy turns smaller, to mid-market aerospace firms in the United States, rather than a large systems integrator. Politically, with a €5Bn Airbus support package from France, it would not look good to be "buying American". While this is a great opportunity to acquire strong companies at low market valuation, EADS cannot afford a large acquisition, but conditions are too tempting not to do something.  This could trigger further consolidation in the aerospace sector, with other OEM/System Integrators also considering acquisitions.

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