Tag Archives: Boeing

Boeing vs. Airbus: CEO compensation (2015)

Last year, I wrote a couple of post titled “Boeing vs. Airbus: CEO compensation (2014)” (and 2013) in which I compared the compensation of both CEOs. Yesterday, I saw that those posts received a larger than usual amount of visits which reminded me that now, at the end of the year 2016, we can find the same information for the 2015 fiscal year. Thus, this follow on post.

As both Boeing and Airbus are public companies, the information about their CEOs compensation is public and can be found in the annual report and proxy statement from each one. I will just copy the information below for comparison and future reference.

Airbus Group CEO, Tom Enders’ 2015 compensation (financial statements here, PDF, 1.7 MB, page 58).

Airbus Group’s Tom Enders 2015 compensation.

Airbus Group’s Tom Enders 2015 compensation.

In the case of Boeing, 2015 was particular in the sense that Jim McNerney was the CEO for the first half of the year and since July 1st the position is held by Dennis A. Muilenburg. Find in the table below the figures for both (proxy statement here, PDF, 3.7 MB, page 30):

Boeing’s Jim McNerney and Dennis Muilenburg 2015 compensation.

Boeing’s Jim McNerney and Dennis Muilenburg 2015 compensation.

It is interesting to note that while the base salary is nearly the same (1.4 m€ vs 1.6 m$, which after taking into account current exchange rate is almost equivalent) the incentive schemes at Boeing end up with a total remuneration about the double of that in Airbus Group.

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Airbus vs. Boeing, comparison of market forecasts (2016)

Last week, on the first day of Farnborough air show, Airbus released the new figures of the 2016-35 Airbus’ Global Market Forecast (GMF, PDF 2.6 MB). This is good news, as it did so at the same time as Boeing released its Current Market Outlook (see a post here about it) and before it used to do so in September.

In previous years, I have published comparisons (1) of both Airbus’ and Boeing’s forecasts (Current Market Outlook, CMO, PDF 4.1 MB). You can find below the update of such comparison with the latest released figures from both companies.

Comparison of Airbus GMF and Boeing CMO 2016-2035.

Comparison of Airbus GMF and Boeing CMO 2016-2035.

Some comments about the comparison:

  • Boeing sees demand for 12% more passenger aircraft (excluding regional a/c) with a 10% more value (excluding freighters). The gap is higher than in 2015 (similar to 2013 and previous years).
  • In relation to last year studies, Airbus has increased demand by ~650 aircraft whereas Boeing has increased by 1,670.
  • Boeing continues to play down A380 niche potential (66% less a/c than Airbus’ GMF).
  • Both companies’ forecast for the twin aisle segment is nearly identical: ~7,600-7,700 aircraft (Airbus sees demand for about a 100 less aircraft than Boeing, mainly due to Boeing increased figures in relation to 2015). The mix between small and intermediate twins varies, ~300-400 units up and down. However, Boeing’s wide-bodies mix is not to be taken as engraved in stone, see the erratic trend in the last years here.
  • On the other hand, Boeing forecasts about 4,600 single-aisle more than Airbus (the gap has widened in 800 units this year). Boeing doesn’t provide the split between more or less than 175 pax capacity airplanes since its 2015 CMO, this year Airbus hasn’t included it either.
  • In relation to traffic, measured in terms of RPKs (“revenue passenger kilometer”), that is, the number of paying passenger by the distance they are transported, they see a similar future: Airbus forecasts for 2035 ~16.0 RPKs (in trillion, 4.5% annual growth from today) while Boeing forecasts 17.01 RPKs (4.8% annual growth).

The main changes from last year’s forecasts are:

  • Both manufacturers have increased their passenger aircraft forecast in between ~650-1,670 a/c.
  • Both manufacturers have increased the volume (trn$) of the market in these 20 years, by about 300-400 bn$.

Some lines to retain from this type of forecasts:

  • Passenger world traffic (RPK) will continue to grow about 4.5% per year (4.8% according to Boeing). This is, doubling every ~15 years.
  • Today there are about 18,019 passenger aircraft around the world (according to Airbus; 18,190 in Boeing’s CMO), this number is about 700 a/c more than the year before (4% increase) and will more than double over the next 20 years to 37,708 a/c in 2035 (39,750 as seen by Boeing, excluding regional jets).
  • Most deliveries will go to Asia-Pacific, 41% or 13,239 passenger aircraft (according to Airbus).
  • Domestic travel in China will be the largest traffic flow in 2035 with over 1,600 bn RPK (according to Airbus (x 3.7 times more than today’s traffic), or 1,897 bn RPK according to Boeing), or 11% of the World’s traffic.
  • About 12,830 aircraft will be retired to be replaced by more eco-efficient types.
Passenger traffic growth vs. global GPD growth.

Passenger traffic growth vs. global GPD growth.

As I do every year, I strongly recommend both documents (GMF and CMO) which provide a wealth of information of market dynamics. This year, Airbus included as well an excel file with its data, find it here [XLS, 0.3 MB]

(1) Find here the posts with similar comparisons I made with the forecasts of previous years: 2015, 2014, 2013, 2012, 2011, 2010.

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Review of Boeing Current Market Outlook 2016

Last week, on the first day of Farnborough air show, Boeing Commercial published its yearly update of the Current Market Outlook (CMO) for the next 20 years of commercial aircraft market (2016-2035).

I have just compared the figures for passenger aircraft of the last two years’ CMOs:

CMO 2016 vs 2015 comparison

CMO 2016 vs. 2015 comparison.

Some comments to it:

  • You can see that the total number of new aircraft delivered has slightly increased from 37,130 to 38,690, a 4.2%, which is consistent with the 4.8% traffic increase (1) that Boeing predicts (2).
  • The volume (Bn$) increases by a larger percentage, 7.2% (380Bn$) up to 5.66 Trn$… this is due mainly to the increase in (3):
    • single-aisle aircraft expected sales in volume (8%, +230M$) and aircraft (+1,410), and
    • small wide-body segment with 220 more aircraft (+5%) and an increase in volume of 80 Bn$ (+7%).
  • Three years ago, I wrote about a sudden change between CMO 2013 and CMO 2012 of the mix in wide-bodies; in this respect, CMO 2015 is consistent with last year’s one, showing simply an  increase in demand for both sub-segments.
  • It is interesting to note how Boeing continues to downplay the large aircraft segment at the moment when a A380 is discussed, however this year’s figures are increased in relation to CMO 2014 in terms of both aircraft and volume.

This year study’s figures and presentation focus again on single-aisle (737 MAX 8, “Medium-size aircraft are at heart of single-aisle market“) and small wide-bodies (787, “opening new markets”), the products to be pushed by the sales force.

Find below the nice infographic [PDF, 464 KB] that the guys from Boeing have put up together:

Boeing Commercial Aviation Market Forecast 2016-2035 infographic.

Boeing Commercial Aviation Market Forecast 2016-2035 infographic.

As always, I recommend going through the CMO, as you can learn a lot about the business: from global numbers, to growth, traffic figures, fleet distributions, forecasts, etc… You may find the presentation [PDF, 4.7 MB], a file [XLS, 0.6 MB] with all the data or the full CMO report [PDF, 4.1 MB].

This year again, together with the CMO, Boeing provides two interesting papers from a couple of years ago: Key Findings on Airplane Economic Life [PDF, 0.3MB, dating from August 2013] and A Discussion of the Capacity Supply -Demand Balance within the Global Commercial Air Transport Industry [PDF, 0.6MB, dating from August 2013].

(1) Traffic increased measured in RPKS (revenue passenger kilometers) in billions.

(2) These two ratios, 4.2% fleet demand and 4.8% traffic growth, point to an implicit increase in the average size of the aircraft in fleet and / or a higher utilization of the aircraft (higher availability).

(3) These two segments (single-aisle and small wide-body) saw as well the largest increases in number of aircraft and volumes in the CMO of 2015 in relation to 2014.

(4) Find the reviews I wrote comparing 2015 CMO with 2014 CMO2014 CMO with 2013 CMO and 2013 CMO with 2012 CMO.

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A380: 747 production rate throughout history

Back in 2013, I wrote a post comparing the orders of the Airbus A380 compared to those of the Boeing 747 Jumbo taking different references for the comparison. As I explained then, the idea for the post was triggered by a conversation with my friend Jose. A year later, in 2014 I wrote an update of that comparison (here).

This post is yet again triggered by another point raised by Jose (1) in another conversation a few months ago, when Airbus announced that it has reached the unit break even point for the A380 programme in 2015 with 27 deliveries. In that news it was already mentioned that the company sought to lower the number of aircraft for breaking even on any given year. The point became more relevant since Airbus confirmed, this week at Farnborough air show, that it would slow down its production pace to a monthly rate of 1 aircraft per month from 2018.

In our conversation, Jose looked at how the Boeing 747 production rate had evolved throughout history. Taking the figures from the 747 article in the Wikipedia (here), you can see the results in the graphic below. The bars show yearly deliveries. The lines the monthly production rate and its 3-year rolling average. I took this average to smooth the curve even if it is very similar to the year-by-year data (1).

747 rate

Some comments on the 747 production rates (taken from its yearly deliveries):

  • The average monthly production rate since its first delivery back in 1969 has been: 2.7 airplanes per month (above 2.25 for A380 in 2015).
  • During the first about 30-35 years (till ~2002-3) the rate fluctuated between 2 and 5 deliveries per month.
  • Since 2003 the rate has averaged 1.3.
  • For the first 10 years of the 747 programme (as the A380 is just about to complete that first decade of deliveries), its production rate averaged 2.9 aircraft per month.
  • Even if not reflected in the graphic, for information, Boeing has announced that it would decrease production rate down to 0.5 airplanes per month (6 a year) from September 2016.

Time will tell if the rate for the A380 is sustainable and whether its market rebounds.

(1) I took 3 years to make the rolling average as the fact of confirming in 2016 a delivery rate decrease to be effective from 2018 may give an idea of lead times.

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The Age of Aerospace (documentary)

The age of aerospaceIn the past days, the first episodes of the documentary “The Age of Aerospace” were released. The documentary consists of a series of 5 episodes each one lasting about 45 minutes and divided in a few chapters. The series, produced by The Documentary Group, covers much of the history of aerospace with a special focus on The Boeing Company, which celebrates 100 years in this 2016.

The series is progressively released in Science Channel, Discovery Channel and American Heroes Channel. It can also be watched via streaming at the website created for the documentary, here.

So far, I have watched the first four episodes, find some notes and comments below:

1 – What Can’t We Do?

The episode covers the initial years of flight: the creation of Boeing, the hiring of Wong Tsu (its first aeronautical engineer, fresh from MIT), the air mail expansion, the creation of United Aircraft and Transport Corporation (including Boeing, Hamilton, Pratt & Whitney, Sikorsky, United Air Lines… among others), its split after the Air Mail scandal and the investigation led by senator Black, the early retirement of William Boeing, the Boeing 247, the Clipper, the B-17 Flying Fortress.

2 – Miracle Planes.

This episode covers how WWII gave new life to Boeing. From having been wiped out in the commercial aviation by Douglas and having lost to Douglas the contest for a new bomber with the B-17, due to a crash of the prototype, to a new emergence due to Roosevelt’s call for mass production of defense assets: including the success of the Flying Fortress with over 12,000 units produced in 10 years (“some days you would see 8 to 12 coming out”). Black Thursday with the lost of dozens of B-17s and the finding of the need for fighter coverage; the North American P-51 Mustang (Göring: “When I saw Mustangs over Berlin, I knew the war was lost.”). The Big Week in early 1944 and D-Day. The need for a longer range bomber for the pacific, the B-29 Superfortress.

3 – Shrinking the Earth.

This episode covers the jet age, from the operation LUSTY (LUftwaffe Secret TechnologY), the revamp of the swept wing technology originated by Adolf Busemann, the Boeing B-47, the taking over as president of Boeing by Bill Allen, to its inclusion in commercial aviation: the Comet, the prototype Dash-80 (including Tex Johnson‘s unexpected promotional double barrel roll flight), the Boeing 707 (Pan Am’s Juan Trippe: “Tomorrow you will see in the press that I have invented the jet age“), and 747 (Boeing’s Joe Sutter to Trippe: “You are sitting on a 747 in this conference room“).

4 – In the Vastness of Space.

This episode covers the  Space race. From the first warnings of Soviet Union breaking of frontiers to the launch of the Apollo program, the accident of the Apollo 1, its investigation and the need for more supply chain oversight and systems integration, the successes of the Apollo 8 (orbit around the moon), the Apollo 11 (landing in the moon), the Space Shuttle, International Space Station…

5 – The Dreamliner.

(Yet to be released in streaming) [Updated on March 29, 2016]

This episode covers the launch and development of the Boeing 787, the Dreamliner, a “game changer”. The launch of new programmes put manufacturers future at a stake, and after Airbus’ launched the A380 in 2000, Boeing had to define its next move. It first intended to launch the Sonic cruiser, but the 9/11 attacks changed the landscape and Boeing’s bet changed from speed to the economics of flight. Boeing challenged the hub-and-spoke strategy and launched a middle-sized aircraft that could connect middle cities far away from each other more economically. The documentary covers as well other innovations introduced in this programme: extensive use of composite materials, design of large components outsourced to risk sharing partners (check out the images of the giant Mitshubishi’s autoclave), the development of the 747 Dreamlifter to transport sections between partners… It covers as well the development issues (sections not fitting, quality, rivets…), the 3-year delay, the first flight at the end of 2009, the first delviery to ANA and the issue with the Lithium-ion batteries which caused the fleet of 787 in-service to be grounded by the FAA in 2013 for four months (a first in Boeing’s history). This last chapter conveys quite well the size of the undertake that is the launching of a brand new airplane.

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I will conclude this review post recommending the documentary and leaving its 3-minute trailer:

 

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Boeing 787 orders, cancellations, deliveries & backlog through 2015

Quick post with the updated figures and graphic of orders, cancellations, deliveries and backlog of the 787 programme at the end of 2015.

There were no major operational hick-ups in 2015, but commercially it saw 28 cancellations for 99 gross orders, thus, 71 net orders. This, together with the increased ramp up which enabled 135 deliveries, make that the book to bill of the programme stood at 0.53, far from a desired >1. Therefore, the backlog at year-end continued to decrease down to 779 aircraft (1).

An image is worth a thousands words:

 

787 orders, cancellations, deliveries and backlog through 2015.

787 orders, cancellations, deliveries and backlog through 2015.

(1) That level is lower than 2007 year-end backlog. The highest at previous year-ends was 916 in 2013.

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Twin-aisle aircraft deliveries 20-year forecast (update 2015)

In a previous post I shared a graphic with the “Commercial wide-body airplanes’ deliveries per year, 1969-2015” (see below). I then commented:

“Looking backwards it’s clear that 2015 was a peak in wide-bodies deliveries. Looking forward it may have been a short-term peak, but looking further ahead it is not so clear.”

Commercial wide-body airplanes' deliveries per year, 1969-2015.

Commercial wide-body airplanes’ deliveries per year, 1969-2015.

Last November, I published a post, “Airbus vs. Boeing, comparison of market forecasts (2015)“, with the following table that compares Airbus’ Global Market Forecast and Boeing’s Current Market Outlook:

Comparison of Airbus GMF and Boeing CMO 2015-2034.

Comparison of Airbus GMF and Boeing CMO 2015-2034.

If we focus on the twin-aisle segment, we see that both companies are very closely forecasting between 7,500 and 7,600 passenger aircraft deliveries (with less than 90 aircraft of difference, a 1.2% deviation). The forecast for the freighters is not shown in the table but it is also very similar for the segment, between 718 (Airbus’ view) and 800 (Boeing’s) freighter aircraft. In combination, each company foresees between  8,290 (Boeing view) and 8,297 (Airbus’) airplanes’ deliveries in the segment. Remarkably similar and definitely converged from years ago.

In the very large aircraft segment both forecasts do not converge. But since the figures of deliveries are an order of magnitude lower, I will focus on what they define as “twin-aisle” segment.

Let’s put forward again the question: was 2015 a peak year in terms of twin-aisle deliveries?

Quick math: if we take those ~8,300 aircraft to be delivered in the next 20 years, we arrive at an average of 415 aircraft per year. That figure excludes the very large aircraft. In 2015, there were 367 deliveries of twin-aisles (excluding A380 and 747):

  • A330: 103
  • A350XWB: 14
  • 767: 16
  • 777: 98
  • 787: 135
  • IL-96: 1

Thus, in 2015 we would have been far from the peak. If we simply linearized those 8,300 deliveries from 2015 levels up to 2034, we would get the following profile:

Twin-aisle deliveries historic and 20-year forecast.

Twin-aisle deliveries historic and 20-year forecast.

The reader may correctly think that market forecast figures are not engraved in stone and are rather optimistic. Fair enough.

Both forecast have been rather accurate in the past forecasting traffic growth. Not necessarily in forecasting the number of aircraft in each specific segment. See the post, “Aircraft market forecasts accuracy (update 2014)“,  in which I analyzed Boeing CMO forecast of 1999 with the actual fleet at the end of 2013. See the result below:

Comparison of aircraft fleet at year-end 2013: 1999 forecast vs. actual (sources: Boeing CMO 1999 and 2014).

Comparison of aircraft fleet at year-end 2013: 1999 forecast vs. actual (sources: Boeing CMO 1999 and 2014).

Thus, in 2013 there were 27% less twin-aisle aircraft than what had been predicted in 1999.

If 2015 market forecasts were off the mark in the same proportion (27%), that would mean that instead of 8,300 airplane deliveries in the next 20 years we would see about 6,050… meaning ~300 airplanes per year in the 20-year span.

In that case, we might have seen the peak.

Let’s take a look at current backlogs at the end of 2015:

  • Airbus: 1,112 a/c
    • A330 family: 350 a/c
    • A350: 762 a/c
  • Boeing: 1,383 a/c
    • 767: 80 a/c
    • 777 family: 524 a/c
    • 787: 779 a/c

Thus, at the end of 2015 the combined backlog (firm) stood at ~2,500 airplanes. That is a 30% of the 8,300 forecast, and a 41% of the 6,050 aircraft (i.e. forecast reduced in 27%).

The sceptic reader could still have doubts of the quality of the backlog (i.e., some customers may go through troubled waters and cancel orders).

Last year, I published a post, “Boeing 787 orders, cancellations, deliveries & backlog through 2014“, in which I showed the orders and cancellations of the 787 programme since its launch. See the summary graphic below:

787 orders, cancellations, deliveries and backlog through 2014.

787 orders, cancellations, deliveries and backlog through 2014.

The 787 programme experienced serious delays and industrial issues from 2009 to 2013 in the midst of the worst financial and economic crisis since the Great Depression of the 1930s. Through 2014, the programme had suffered 247 cancellations out of 1,318 gross orders, that is almost 19% of cancellations.

I believe that 19% can be considered an upper ceiling of how much of the current 2015 twin-aisle backlog (~2,500 a/c) could be considered as dubious. Thus, at least about 2,000 firm orders could be seen as rather secured.

Let’s see at the question (was 2015 a peak year?) from a different perspective: in the immediate coming years, what are the announced production rates?

Thus, according to the announced production rates and targets, in 2016 we should see about 380 twin-aisle combined deliveries, higher than the 367 we saw in 2015.

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