US Airline Stocks On the Rise
Major US Airlines see collective sector recovery in revenue and profitability, and their stocks are on a robust rising trajectory. United Airlines (UAL) leads the pack for airline stocks, taking off at the market opening on Oct. 16 and ending the day by soaring 12%. The operator reported a third-quarter earnings beat alongside a $1.5 billion share buyback plan. Shares of American Airlines (AAL), Southwest Airlines (LUV), and Delta Air Lines (DAL) also jumped significantly.
GE stock price tumbled after the third-quarter earning release. The stock has more than doubled its price since the beginning of the year.
The Matter of GE's Split
Boeing pre-warned
GE has broken into three businesses that are now independently listed on the New York Stock Exchange. The old GE has finally dismantled and now it's survived as GE Aerospace (despite the healthcare and Vernova businesses still carry the GE caption in their names).
Boeing is pre-warned as Boeing cannot and should not be broken up. Unlike GE which consisted of a hodgepodge of unrelated businesses Boeing is an integration business. However American capitalism or some CEO's hapless strategy would make breakup of Boeing a business case. It has to be clearly understood that GE was not turned around, rather it has been divesting its businesses bits by bits and now it becomes a smaller company called GE Aerospace. It has proven that GE CEO(s) may not be a suitable fit for Boeing. The two companies in fact have very different cultures. A word for the current Boeing board - look for the next CEO in the world. Boeing's brand needs to survive and sustain.
Finding C919 an International Suitor
COMAC's Modus Operandi has to change
After a highly-anticipated tour of C919 in Southeast Asia for landing an order, it came home empty-handed with no suitor. COMAC must be deeply disappointed and probably even frustrated.
COMAC knew it would not be easy to break the duopoly stronghold held by Boeing and Airbus, but it thought it was good timing for landing international orders, a time when Boeing is experiencing quality backlashes from its customers. It's true but there are many other factors in play.
The lesson learned for COMAC is that it has to change its modus operandi in marketing and the way it engages with the international community. Aloofness, secrecy, and perhaps just pure lack of knowledge and experience will lead it to nowhere. COMAC needs talents who know international marketing. Some seasoned sales professionals who can market the airplane and explain the nuances to the airlines executives. COMAC needs English capability too as it is the default language for aviation.
That said, C919 will continue to be a thorn for Boeing and Airbus even it is not an immediate threat.
Boeing's Right Move - Buyback Spirit
The announcement of Boeing's potential purchase of Spirit Aerosystems was not a surprise. The topic has been an on-going debate inside Boeing for both Executives and employees alike. Spirit Aerosystems used to be Boeing's Wichita operation. It designs and builds the majority of 737 aerostructures, previously for Next Generations and now for MAX. Just like Boeing's quality management slipping into abyss, Spirit's poor quality and workmanship have also deteriorated and dropped to a point of no return. The possibility of relying on the company correcting its course only has dwindled over the years. When Pat Shanahan was installed as Chief Executive for Spirit, Boeing put in the seed - an embryonic move seemingly signified that a buyback could be on the horizon. Pat Shanahan was a previous Boeing Executive. His signature achievement was to execute the 787 program given its many challenges in the early stage of production. He left Boeing and experienced a stint of serving the US government. Trump once named him Deputy Secretary of Defense. Shanahan was not built as a politician but an aerospace program manager. The CEO job at Spirit would be the right place for him. He was brought back to work for Boeing again, only from outside. However for Boeing this was still a mission unaccomplished. The mistake made by selling Wichita in 2005 has to be fully corrected. It's like a child who wrongly cast out of the family has to be taken back. Boeing got to complete the full circle and acquire Spirit. To permanently fix the quality issues around MAX Boeing now is resolved to take it back. This is a right move for Boeing. It is also good news for Spirit and the US aerospace industry as a whole. With the child coming home we hope to see no dramas coming out of MAX.
Intentional Nosedive - MU5735
On Tuesday May 18, Wall Street Journal reported that flight data indicates someone in the cockpit intentionally crashed MU5735 on March 21 in Wuzhou, Guangxi province that killed all 132 people on board. According to the report, data from a black box recovered in the crash suggests inputs to the flight control software pushed the plane into the fatal dive, which led to the accident.
Though this preliminary finding has not been published by the Chinese media, a few reports previously released in China indicate that China Eastern could have gathered a similar internal conclusion and has taken steps to rectify the situation. Sky Vision reported that on March 22, the second day of the crash, China Eastern took measures to strengthen its cockpit crew's qualification. A so-called "redundancy" mandate was put in place. On April 25, a Chinese article revealed a pilot was fired by China Eastern's Wuhan subsidiary due to his "extreme thoughts, impetuous temper, revengeful behaviors, and suicidal tendency" etc. There are other articles indicating such house-cleaning measures ensued a low morale of China Eastern pilots, especially among "young pilots".
Right after the crash, China Eastern parked its 737-800 fleet, the aircraft type of MU5737. Chinese media also insinuated that an unsafe aircraft could have caused the accident. Such media manipulation fueled nationalism and caused a slew of blasts on the inferior quality of Boeing aircraft. China's aviation authority CAAC, who are leading the investigation, has not flagged any mechanical or flight control problems with the plane involved in the crash. On April 17 less than a month of the crash China Eastern resumed operation of its 737-800 fleet.
CAAC published Six Important Conclusions for MU5735
Important but nothing essential
Civil Aviation Administration of China (CAAC) published six important conclusions for the fight MU5735 of March 21, 2022 which crashed in Wuzhou, Guangxi province and killed all 132 people on board. They are:
1, Qualifications of personnel met requirements;
2, Certificates (did not mention which certificate) were valid, maintenance and release for flight were normal;
3, No dangerous item on board;
4, Flight route and weather were normal;
5, Communication was normal before plane deviated from the regular route;
6, Recovery of the data from the Black Boxes as well as analysis are still underway.
The above "conclusions" offer little valuable information to pinpoint the cause of the crash. However it is worth noting that the first bullet point about crew's qualification meeting requirements is not equivalent to saying that "operation" of the flight meets requirements. In other words, qualification is not enough. What counts is what the crew did to operate the flight.
It was also confirmed by other reports that the black box (CVR) sent to NTSB in Washington DC was only for data downloading. CAAC would do the analysis itself. NTSB sent a specialist to Beijing for assistance.
CVR of MU5735 Sent to the US for Data Downloading
CAAC did the right thing to illicit help from American expertise
According to Reuters reported on April 1, the National Transportation Safety Board (NTSB) has confirmed that it received the cockpit voice recorder (CVR) of China Eastern Airlines flight MU5735 at its laboratory in Washington DC. It will help download and decode the data which could potentially provide details of communication in between the three pilots.
Prior to this, the two black boxes of MU5735 had been sent to a laboratory of China's Civil Aviation Administration (CAAC) in Beijing. As for the integrity of the data and how long it could take to decode and analyze, CAAC made no further comments.
The NTSB further announced that they had dispatched a three-person's investigation team to China on CAAC's invitation.
China Eastern Airlines is committed to a preliminary investigation report within 30 days of the crash which happened on March 21, 2022 and killed all 132 people on board.
What We Know and Do Not Know about MU5735 Crash
This flight was most likely a pilot training flight
China Eastern Airlines flight MU5735 crashed in the forest of Wuzhou in Guangxi Province on March 21, 2022 killing all 132 people on board including 124 passages and 9 flight crews. The Chinese authority has announced that two "black boxes" have been recovered. Decoding, analyzing the data until drawing a conclusion can take a long time. Causes of many plane crashes did not get announced to the general public.
There has been some key information in relate to this flight that China Eastern has not fully disclosed, particularly facets about the pilots. What we know is that this flight had 3 pilots on board. We do not know their names and ages but we know their respective flight hours: captain 6,709 hours, first officer 31,769 hours and second first officer 556 hours. (Note that 737's cockpit is designed for sitting two pilots). This combination of flight hours appears odd as the captain's flight hours were much smaller than the first officer's. China Eastern also further mentioned that the captain was hired into his position in January 2018.
What is interesting was that on March 22, the following day after the crash China Eastern announced to strengthen cockpit qualification for some of its aircraft types. This announcement did not particularly specifies 737NG but said to "enhance cockpit safety (redundancy), strengthen captain qualification for (training flight's) team leading". The new requirement mandates that (training flight) has to be led by a captain who also has "instructor" qualification. It further demands that first officer as well has to be an instructor. In China Eastern's verbatim the three-person cockpit qualification has to be: Captain Instructor + (first officer) Instructor + (trainee) first officer.
This announcement made no reference to the MU5735 crash however given the timing it came out and the cockpit combination it refers to, we can gather that MU5735 was very likely a pilot training flight. The second officer on the flight was with 556 hours so he appears to be the trainee.
Another key factor to look at is the time of the crash. The plane was cruising at 31,000ft altitude at a steady speed. It was supposed to be landing in Guanzhou at 14:57. The plane crashed at 14:25. That was about 30 minutes before landing. According to CAAC rules, cabin service stops at 40 minutes before landing. At that moment an announcement is made informing passengers to prepare for landing. 30 minutes before landing is about the time when pilots begin to descend.
Presumably the crash was not caused by terrorism or suicide, what could have happened to this training flight in a cockpit that was supposed to sit two pilots but with three at a time when it was about to descend?
FAA Wants Pilot to Fly An Aircraft
FAA seeks to cut pilot reliance on automation in wake of 737 MAX crashes
According to Bloomberg, the Federal Aviation Administration (FAA) has proposed revisions to airline pilot training that would avoid excessive reliance on autopilot and make pilots more capable of handling the latest generation of automated jets in response to the Boeing 737 MAX crashes in 2018-2019.
The FAA said it is issuing draft guidance and recommended practices, and that it is important that flight crews "should always be aware of the aircraft's flight path so they can intervene if necessary," even when an airline is on autopilot. The advisory "provides a single framework for operations and training programs, which will help pilots develop and maintain manual flight operations skills and avoid becoming overly reliant on automation."
Fly-by-wire was first introduced by Airbus on the A320. Boeing has more embraced the concept of "pilot-flies-the-aircraft".
Boeing Injects $450M More to Wisk
Boeing just announced it will invest another $450M in its Wisk AAM (Advanced Air Mobility) joint venture with Google co-founder Larry Page to develop autonomous, all-electric and passenger-carrying aircraft for passenger hops in and around cities.
On Wisk website, the company disclosed that "paired with previous funding, this new investment further reinforces Wisk’s strong position as a privately backed company and will significantly advance the company’s Go-to-Market and near-term expansion plans, including the launch of scale manufacturing". In a separate post, Wisk says its Engineering team is working on the 6th generation aircraft which will be Wisk first product and a candidate for certification.
In May 2021 China's Guangzhou-based company EHang unveiled a new type of long-range VT-30 model for inter-city transportation. The look of its prototype carries resemblance to Wisk's Cora. EHang has developed an all-electric, eVTOL EH216 model which is already in parcel service and has just received a pro-order of 50 units from Japan.
737 MAX Return to Sky in China
737 MAX will return to commercial operation at the end of January
Hainan Airline is the first operator who was seen to sent the 737 MAX back to sky in China. On January 9, Hainan Airlines' B-207T made a flight from Taiyuan Wusu Airport to Haikou. The flight was not a commercial operation.
The news is monumental to Boeing. Not only can the parked 737 MAX gradually return to service, Chinese Airlines can also start taking deliveries of their placed orders. Traditional Boeing customers, such as Xiamen and China Southern Airlines can continue placing orders on their preferred Boeing models, rather switching to their competitor.
China is a crucial customer to Boeing. It represents one fourth of the MAX orders. In addition China is heavily participated in building the 737 MAX. Many AVIC entities and COMAC produce key sections of the plane. As Boeing ramping-up rates for its single aisle program, Chinese suppliers are the beneficiaries of this production increase. Despite aeropolitics and the complicated trade relations between China and the US, China will continue to engage with Boeing and support its 737 MAX program. A major aircraft purchase order could also be announced sometime in 2022.
Can China Succeed in Attracting International Talents
China's push for attracting Western talents in aerospace has brought little results in innovation
China may tail the preferred workplace list for many Western professionals in aerospace, however there are people who have enjoyed working in the country and still feel happy to stay. Willingness to stay does not necessarily mean satisfaction at work. Working in a Chinese company also does warrant the same productivity as if they were employed by a Western enterprise. Most recently China's President Xi calls for "exhaust(ing) all means" to attract intelligent and innovative professionals from aboard. In fact "foreign experts" recruitment has started in 2009 when the C919 program started. Sky Vision tells you why these "Foreign Experts" in China have not brought the desired results in innovation as the government had wished. What need to do differently?
Insights about China's Airplane Programs
From COMAC, C919, CR929 to China's other airplane programs, from Boeing, Airbus to other OEM's activities in China, from China's ambition and goals to its reality and capability, Sky Vision possesses unique insight and special knowledge in these particular topics.
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