Airbus and Mobile: Implications and analysis

Before getting to the meat of things, a couple of key stories:

Mobile Press-Register, June 30. Details of the plan.

Wall Street Journal: Boeing complains.

It’s now one of the worst-kept industrial secrets: Airbus will announce at 10am CDT July 2 that it will construct a $600m A320 Family Final Assembly Line (FAL) in Mobile (AL).

This is a major strategic and tactical move in the intense, often bitter competition between Airbus and Boeing.

Even before the plans became official, Boeing issued a pissy slam, harking back to the World Trade Organization dispute, rather than stating that it is in a position to compete against Airbus and its A320 with what Boeing otherwise routinely characterizes a better airplane with the best workers in the world.

Perhaps the pissy statement was chosen because in many respects, Airbus has mouse-trapped Boeing—and there is very little the company can do about it.

Before explaining, here are some facts to keep in mind. Click on the graphic to enlarge.

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787 enables ANA to begin Seattle route–after an interim 777 solution

Japan’s All Nippon Airlines, the launch customer of the Boeing 787, said yesterday that the new, high-tech airplane is the enabler that prompted it to schedule its first service from Tokyo to Seattle.

Never mind that initial service begins in August with the Boeing 777-300ER and the 787 service won’t begin until October (ironically, with a 787 that will be delivered in August).

The seeming contradiction is explained by an initial summer-time surge in passenger demand that makes the 777 a viable start. Seattle is a highly seasonal market and the smaller-capacity and more fuel efficient 787 is what makes the 787 the preferred choice, ANA said during a celebratory event yesterday.

ANA will need all the advantages it can get from the 787’s lower fuel burn. The airline will be challenging giants Delta Air Lines and United Airlines on the routes. Delta operates the Airbus A330-300, a highly efficient airplane, and United uses the 777-200ER. Each has a good feeder system to Seattle and each has a good hub in Tokyo.

ANA, which like United, is a member of the Star Alliance, terminates its service in Seattle but it has a much better hub than UAL and DAL in Tokyo. It’s counting on the beyond-Tokyo strength to support its route. The daily traffic is 1,000 passengers but only 200 are between Seattle and Tokyo.

ANA’s 787s now is service are the heavy-spec ones with Rolls-Royce engines that initially have not been up to spec. Even so, the 787s are 21% more fuel efficient than ANA’s Boeing 767-300ERs, the airline said. ANA did not offer a comparison vs its 777s.

Odds and Ends: Airbus to Mobile; No “doubts” about A350

Airbus to Mobile: The New York Times reports that Airbus is gearing up to announce plans to build the A320 in Mobile (AL). We reported this prospect during our reporting from the Airbus Innovation Days last month. Bloomberg has this take.

A350: No doubts at Airbus. But the margins are probably gone to first flight and EIS. Airbus is sticking to its schedule of EIS by mid-2014; we think it will slip into early 2015.

Update, June 28, 10am PDT:

We can confirm that as of this moment, EADS/Airbus has not made the decision to establish a final assembly site in Mobile. We think we have a reasonably clear understanding of the situation that leads us to believe an affirmative decision is near. It is our belief that any FAL will follow along the lines that were discussed for the KC-30/45 FAL: build the parts within the current supply chain and ship to Mobile for final assembly. This follows the well-established FAL model for Hamburg, Toulouse and Tianjin.

We received some speculation that this FAL might be fore the A330 P2F conversation. We don’t see a business case for this. Our focus is entirely on the A320 family and the intense competition with the 737 family. Note we do not distinguish between ceo/NG and neo/MAX.

Albaugh retires, replaced by Ray Conner

Update: 8:00am PDT June 27: The Seattle Times has a detailed story, including indications why Albaugh chose to retire.

Original Post:

In shocking news, Boeing announced that Jim Albaugh is stepping down as CEO of Boeing Commercial Airplanes and retiring Oct. 1.

Albaugh is just 62. He had been a candidate for CEO of The Boeing Co. when Harry Stonecipher was fired, a job that went to Jim McNerney. McNerney later tapped Albaugh, who was CEO of what was then known as Boeing Integrated Defense Services, to head Boeing Commercial Airplanes when BCA CEO Scott Carson was largely forced out following yet another delay in the 787 program.

Conner was widely assumed to be one of two candidates–Pat Shanahan was the other–to succeed Albaugh, who was assumed to be the CEO of BCA until retirement at age 65–three years from now.

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Farnborough Air Show preview


This is really expected to be a boring show from the perspective of orders. Airbus has been downplaying expectations following last year’s Paris Air Show blow-out of more than 1,200 A320neo orders. How can you match that? The answer is, Airbus can’t.

Boeing will certainly firm up hundreds of 737 MAX commitments, so this will be Boeing’s show. And there is the buzz that Boeing is partnering with Lockheed Martin and NASA (oh, another government subsidy?) to produce a 2,500 mph SST, with details supposed to come at the Air Show. Then there is the leak that the 787 will fly there, the first time in 28 years Boeing has an aerial flying display.

We’ve talked with several journalists and industry personnel who are skipping the Air Show this year. So are we, and we’ve been at the Farnborough and Paris air shows since 2008. We just don’t expect enough news this year that we can’t get from the press releases.

So here are our expectations for the show:

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787 fuel burn, GEnx and how it relates to LEAP-1B

787 fuel burn: Aviation Week has this story about the early fuel burn results for the Boeing 787 beating expectations (which admittedly were tamped down because of the program difficulties). Some of this has been reported before. What caught our eye was the detail about the GEnx engine. Why? Because the CFM LEAP-1B derives much of its technology from the GEnx, including the higher temperatures fleetingly referenced in the AvWeek piece.

CFM is relying on high temperatures to achieve the fuel burn required by Boeing’s 737 MAX. This is hotly debated (pun intended) between CFM and Pratt & Whitney in the competition between the LEAP and the PW GTF.

CFM advocates that its hotter-running engine, equipped with advanced technology ceramics and other advanced materials, gives it the advantage over PW’s Geared Turbo Fan technology. PW argues that the hotter CFM engine will require more maintenance. Engineers that we ask generally agree that the hotter temperature approach will be a challenge for long-term maintenance but fall back on CFM’s sterling reputation of reliability as a measure of comfort. At the same time, these same engineers–who have no connection to either CFM or PW–like the GTF technology but want to see it proved in service.

Steven Udvar-Hazy said it best. It will be five to seven years after the engines are in service before the industry knows the reliability and performance of either engine’s advanced technology.

Odds and Ends: MAX EIS dates; McNerney on business climate; A320 Tianjin plant only breaks even

MAX EIS dates: Aviation Week has this story that lists the planned MAX EIS dates: 737-8, 2017 (we previously reported 4Q2017); 737-9 in 2018 and 737-7 in 2019. AvWeek also reported the bypass ratio for the LEAP-1B is 8.5:1.

Eulogy for the 747-400: Bloomberg has this interesting piece about the current status of the Boeing 747-400.

McNerney on US business climate: Boeing CEO Jim McNerney has these comments on the US business climate.

Airbus Tianjin plant only breaks even: so says this report in Aviation Week.

US Air’s 1549 A320 now in museum: It’s a tribute to the flight crew and to aviation safety.

De-risking CSeries–but margin is gone

Note to Readers: In May, we attended the Pratt & Whitney media day, followed by the Airbus Innovation Days the same month and then the Boeing Pre-Farnborough Press Briefings over two days. This week we attended the Bombardier Farnborough Briefing. Boeing’s briefings are embargoed to July 5. We’re still digesting the PW event to tie information to news in the near future. Bombardier released its 20 year forecast, but we plan to tie that to information that was discussed at the embargoed Boeing briefings.

Bombardier made news with its statement that CSeries is on time. We dug a little deeper, however, and confirmed what had been hinted by Bombardier officials much earlier: that there is no margin left between now and the planned first flight by year-end.

At the same time, we received a run-down on some specific component areas that have been highlighted by analysts as risk areas. Here we go:

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