Reflections of a whirl-wind week in the news cycle

This is one of those moments where jet-lag induced sleep patterns give us a moment to catch our breath.

What a week it’s been in the news cycle. We came to Europe on routine business and from the moment we stepped off the plane in Amsterdam for a connecting flight, our Blackberry was filled with emails about the ANA 787 incident. Less than 24 hours later, the 787s were grounded, the SPEEA contract negotiations were reaching a climax and Airbus was holding its annual review press conference.

And our trip is only half over.

787 Updates

The Wall Street Journal has an excellent article focusing on the battery approval by the FAA and its reliance on Boeing in granting approval. Subscription is required. The article speaks to the very point we made in our previous post about the FAA’s reliance on OEMs and suppliers generally and for the 787 specifically. Unaddressed in The Journal article is our point about the FAA review of the entire 787 program and the continued reliance on Boeing and suppliers for research. This remains an unanswered question.

The Seattle Times has this article that reports some of the same ground as The Journal, outlining Boeing’s fevered effort to get the airplanes in the air soon.  The Times reports the grounding extends even to the 787s awaiting test flights in advance of deliveries.

The International Herald Tribune has this story about the lithium battery and this detailed story about the grounding, including discussion of the fire control of the 787 electronics bay. Finally, IHT has this technical discussion of lithium ion batteries.

Our own inquiry suggests Boeing hopes to have the airplanes airborne within days.There is a definitive proposal before the FAA.

Boeing designed triple and quadruple redundancy to prevent conditions that would cause a fire or leakage, we are told. The systems themselves are believed to have not failed, but the investigation is incomplete. This suggests that the fault may well be with the batteries themselves, as The Seattle Times and Bloomberg News have now reported. It remains unclear if there are simply defective battery issues or if there is a systemic battery production issue or there are other issues.

Reuters has this story with quotes from the battery maker. Noteworthy is the company response that the battery is but part of a system. The person says the probe involves the entire system, not just the battery. The article also has the cost per day to ANA for the grounding.

At Airbus, the mood was stoic. Sensitive to perceptions over the intense, often bitter rivalry with Boeing and the knowledge that what happens to Boeing could in similar form happen to Airbus (see A380 problems), nobody at Airbus was anything but empathetic. CEO Fabrice Breigier expressed sincere hope for Boeing’s plight and efforts to return the 787 to service, and this reflected universal sentiment.

Reporters naturally asked about the use of lithium batteries on the A350 and reaction to their use on the 787.

Airbus officials, without any hint of criticism over Boeing’s choice of an all-electric airplane, simply explained the differing philosophies that led to Airbus’ conclusion to retain more tradition methods of powering the A350: hydraulics and pneumatics. The benefits of all-electric didn’t offset the risks and costs enough to go this route, officials said. The result is that the A350 actually draws less power from batteries than the A330 because of design efficiencies, they said. Further, the Auxiliary Power Unit on the A350 is started by two batteries splitting the load versus one battery on the 787 carrying all the load.

SPEEA-Boeing

See our post on this topic. Not a lot more to add.

The Everett Herald has this story.

Airbus annual press conference

Setting aside the drama of the 787, this was pretty routine stuff. Airbus trailed Boeing last year in deliveries and orders, as expected, but it still bested its own forecast for orders by 50%. Had 2011 not been boosted by the plethora of A320neo orders, booking 900 gross orders last year would have been viewed favorably by anyone. But the year-over-year comparison showed a 43% decline and the ever-eubillent John Leahy was driven crazy by media headlines pointing out this YOY decline. In an after-conference press gaggle, he ribbed Reuters’ Tim Hepher in a good natured manner over the Reuters focus on YOY stats, but his frustration was evident for all to see.

Boeing’s 2012 orders were boosted by its comeback with the 737 MAX. Now that the surge of orders for both companies is over, it will be interesting to see how a normalized year shapes up. Airbus has a sales goal of 700. Boeing will likely be asked about its sales goal during the year-end earnings call at the end of this month.

Totally off topic

The new American Airlines logo is creative. The tail treatment sucks. Maybe US Airway will fix that. Leave it to AA management to screw up the rebrand.

In the What-is-he-thinking category, Lance Armstrong shudda kept his mouth shut.

Our thoughts on the Boeing-SPEEA “Best and Final” offers

For a few short moments we thought there were offers close enough to be reasonable middle ground to head off a strike between Boeing and its engineers’ union, SPEEA.

We’re looking at this from afar, figuratively and literally–we’re 5,000 miles from Seattle on our European, multi-stop trip. We don’t have access to the so-called “red line” contract proposals and, frankly, don’t have the time to read them even if we did. So to a large degree we’re reacting to press releases.

With these caveats, here’s our take:

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SPEEA negotiators recommend member rejection of Boeing contract offer

So much for being encouraged.  SPEEA’s press release:

Boeing rejects SPEEA offer, escalating conflict

SEATTLE – In a move that escalates its mounting problems, The Boeing Company today (Jan. 17) rejected union offers to extend existing contracts and instead gave its “last best and final” offers to the Society of Professional Engineering Employees in Aerospace (SPEEA), IFPTE Local 2001.

Boeing’s actions reiterate the company’s growing disrespect for the engineers and technical workers who are essential to working issues and restoring confidence in the 787. While the company agreed to extend parts of the existing contracts, the offers put retirement benefits for all 23,000 engineers and technical workers, including retiree medical, at risk. In addition, Boeing’s corporate negotiator said the company will end the pension for future employees.

Although the offers contain improvements, both the Professional and Technical Negotiation Teams unanimously recommend rejection.

“We are profoundly disappointed the company is taking advantage of our good-will offers to push through unwarranted cuts, put existing retiree benefits at risk and eliminate the pension for future employees,” said Ryan Rule, Professional Negotiation Team member.

SPEEA members will vote on the company’s offers in the coming weeks.  Ballots are likely to include a request to grant the Professional and Technical Negotiation Teams authority to call a strike.

Boeing rejected SPEEA’s offer after stating publicly that the company does not need SPEEA members for the FAA investigation or working the 787 issues. Last week, Mike Delaney, vice president of engineering for Boeing Commercial Airplanes, said managers and engineers from other areas of the company could do the work. Aerospace industry analysts scoffed at this assertion because the 787 engineering work is performed by SPEEA engineers and technical workers.

The company’s offers continue annual salary raise pools of 5 percent and maintain existing medical benefits. Boeing did agree to extend same-sex survivor pension benefits.

SPEEA members rejected Boeing’s initial offer by 96 percent on Oct. 1, 2012. Today’s actions come after nearly a year of negotiations. In recent weeks, SPEEA members have been preparing in earnest for a major strike that could idle Boeing factories and send engineering and technical experts to the picket line.

SPEEA represented engineers and technical workers are essential to solving the mounting issues with the 787, including assisting the Federal Aviation Administration’s (FAA) investigation and restoring confidence in the 787.

“Boeing corporate created the 787 problems by ignoring the warnings of the Boeing technical community,” said Joel Funfar, Technical Negotiation Team member. “Now, they propose to double down on their failed outsourcing strategy by outsourcing the engineering work required to solve the problems caused by previous rounds of outsourcing.”

Negotiations, taking place at the SeaTac Hilton Hotel with the assistance of the Federal Mediation and Conciliation Service (FMCS), are ended.

This negotiation process was tainted by numerous actions that are in violation of the National Labor Relations Act. Boeing has regularly tried to prevent members from discussing their working conditions with others and with SPEEA. The company engaged in unlawful surveillance of protected activity, confiscated pictures of members engaged in protected activity and has refused to provide information relevant to the negotiations. 

SPEEA and Boeing started meeting in April to negotiate new contracts for 15,550 engineers and 7,400 technical workers. In October, engineers rejected Boeing’s initial offer by 95.5 percent. Technical workers rejected the company’s offer by 97 percent.  Existing contracts expired Nov. 25. Since negotiations resumed Jan. 9 after a month-long FMCS-imposed recess, union members have increased preparations for a possible strike. A 40-day strike in 2000 by SPEEA stopped deliveries and caused major factory and service bottlenecks at Boeing plants around the country.

Boeing presents best and final offer in SPEEA contract talks

It’s in: Boeing’s Best and Final.

Boeing concedes on medical, it says, but still wants pension relief for new employees. Says it will roll forward the current contract. The press release sounds like it pretty much accepts the SPEEA proposal, except for future employees’ pension costs.

The devil is in the details; we’ll see what SPEEA thinks after its review, but from the press release this looks encouraging.

Here is Boeing’s message to employees:

Today, Boeing gave SPEEA its best-and-final contract offer, agreeing to the union’s approach to extend the terms of the previous contract for current employees. With the exception of proposals explicitly agreed upon by both parties, the provisions of the current agreement will roll forward as they apply to current employees. This four year contract would allow all of us to focus our time and energy on the immediate challenges facing the company.

Under this offer, both Profs and Techs would see salary pools of 5 percent annually for the duration of the contract. The average Prof would see $84,071 in additional pay and performance-based incentive payments (EIP) over the life of the agreement. The average Tech would see $64,515 in additional pay and incentive payments.

Health care plans would remain in place with no increase in employee contributions.

For new hires only, we offer an enhanced retirement savings plan that would replace the traditional pension. Pensions for current SPEEA-represented employees are unchanged except for an increase in the pension basic benefit. Moving new hires to an enhanced retirement savings plan will provide future employees with a market-leading retirement plan — while allowing Boeing to better manage retirement plan expenses, reduce financial risk and invest in areas critical to the success of our business.

Over the past nine months, our team has negotiated in good faith to provide a market-leading offer to our employees.

We encourage you to visit the negotiations website where you’ll find updated fact sheets with all the details of this offer, as well as an updated Pay & Benefits Estimator that shows what it means to you.

Airbus annual press conference: Passed 12,000 orders since inception, more than 9,000 single-aisle

We’re at the Airbus Annual Press Conference for the 2012 results, the first of several stops on our Europe trip. Participants are:

Fabrice Breigier, CEO (FB)

Gunter Butschek, COO (GB)

John Leahy, COO-Customers (JL)

Tom Williams, EVP Programs (TW)

Domingo Urena-Raso, Head of Airbus Military (DUR)

FB:

  • We have passed 12,000 orders, including 9,000 single-aisle. 17 new customers in 2012, of 89 served last year.
  • 739 A320 family orders in 2012. 58 A330s, 27 A350, 9 A380.
  • North America now 10% of backlog, Europe 14%, Middle East 9%, Asia-Pacific 35%, Africa 2%, Latin America 8%, lessors 20%.
  • 305 A320 CEOs orders in 2012. 687 since neo launch.
  • A320 sharklets above expectations at 4% vs 3.5% advertised.
  • A330 can do 95% of all 787 missions. Sold 800 since 787 launch.
  • A380 wing issue now behind us. New wing progressively incorporated in 2014. 97 aircraft in operation.
  • A350 program remains very challenging, focused on next big challenge is first flight.
  • Airbus Military: 32 orders (28 C295, 4 CN235).
  • A330 MRTT delivered to Australia, Saudi Arabia, UK; selected by India, France. Won every major procurement outside US since USAF selection.
  • First A400M delivery 2Q2013, will deliver four this year. 13 A400s in production.
  • Focus on speed, agility, flexibility, innovation. Our future depends on capacity to be innovative.

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It’s official: Boeing regains lead as No. 1 aircraft producer, sales king, but victory overshadowed by 787 crisis

On a day when Boeing would normally be celebrating its return as the world’s number one aircraft producer and retaking the order crown, the 787 crisis over shadow’s the Airbus 2012 Results review in which the European OEM concedes the lead for the first time in a decade.

Airbus today (European time) announced it delivered a record 588 aircraft to 89 customers in a single year, and took in 914 gross orders (833 net), achieving a 41% market share on the order contest. Boeing delivered slightly more than 600 aircraft last year and received just over 1,200 orders, driven by the 737 MAX.

Going into 2012, Airbus COO-Customers John Leahy conceded the turn-about. But he noted then that for 2011-2012 Airbus would likely retain the lead, and today he revealed that it did, reporting a two-year market share of 53%.

The A320neo retains a lop-sided market share of 62% at the end of 2012. Boeing edges Airbus in A320ceo v 737NG backlog with 51.5%. Other categories:

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Putting perspective on the 787

Update: The Wall Street Journal has a long article (subscription required) discussing the problem and the possibility the FAA could release the 787s for service if it approves interim steps designed by Boeing. It also has this illustration:

 

Original Post:

The grounding of the Boeing 787 by the US Federal Aviation Administration wasn’t entirely unexpected, based on discussions we had in the last 48 hours with people in the US and in Europe.

Although the FAA did not pull the Airworthiness Certificate of the airplane, the grounding had virtually the same effect.

Airlines throughout the world followed suit and some of the regulatory agencies followed the FAA lead.

We’ve been inundated with media calls asking about the ramifications. Here’s a synopsis of the questions and our responses.

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