Odds and Ends: IAM moves on Boeing SC; A330 sales; 787 delays and the cost to Boeing

IAM and Boeing: We knew it was only a matter of time: the IAM is gearing up for a new representation drive at Boeing’s Charleston (SC) plant. Needless to say, Boeing takes a dim view.

A330 Sales: Centre for Asia-Pacific Aviation has this thought-piece on the durability of Airbus A330 sales even as the Boeing 787 recovers.

787 Delays: Richard Aboulafia has this article in Forbes (once you click past the annoying advertising page that first pops up) detailing his analysis of the impact of 787 delays on Boeing strategy. He says these delays have been a boost to Airbus and the A350-1000 (Loren Thompson would say it’s because of illegal subsidies to Airbus [we have to stop meeting like this]).

Making up ground: Aspire Aviation has a comprehensive report about how Boeing has to make up ground on all fronts.

25 Comments on “Odds and Ends: IAM moves on Boeing SC; A330 sales; 787 delays and the cost to Boeing

  1. I personally find unions to be somewhat reactionary, but they can act as useful interlocutors for management in big diffuse organizations like Boeing. Now that Boeing has found out the hard way that they can’t contract out everything, they may actually prefer to talk somebody than not talk to anybody…

  2. The A330’s sales success is in my opinion mostly due to very good pricing. Although list prices may be similar, Boeing needs to maintain higher prices to bring the B787 business case a little bit out of the woods. “Conventional” aircraft like the A330 are much cheaper to build. Engines are also plentiful and again engine manufacturers can offer better prices as the engine programs have amortized their initial investments.

    When an airline seeks medium range aircraft (less than 5000nm), probably cannot utilize the aircraft at utmost rate (time shift, market demand), the lower cost of ownership compensates the higher cost of operation.

    • Airbus Very Atractive Pricing has been used to explain Airbus succes for as long as I can remember. It’s a kind of Pavlov reaction. Because what if its not price.. brrr.

      IMO if you needed proven, efficient 300 seaters during the last 7 years for delivery within 3 years, you basicly had no alternative but the 777-200ER that weighs 20t more and the 767-400 that is optimized for different useage.

      Urgent fleet requirements and no real alternatives are usually no good tools to press a supplier to give very good discounts. Its the availability and demand thing, please correct me if I’m wrong.

      • Agreed. The A330 was the only game in town that could be delivered fairly quick compared to the much delayed 787. Boeing lost many sales due to the 5 year delay EIS.
        Its not that the A330 was neither a bad or great aircraft, but it was available when the competition was not and I am sure Airbus was discounting heavily to gain market share and parts sales are very profitable.
        If Boeing can increase the monthly output on the 787 and get the 787-9 out in good numbers, they should regain the widebody market share and add the 787-10, they will do well, but only if they execute without slip ups.

  3. The Aspire piece says that the 777X wing work will go to the heavies after all. If this is so, one has to wonder when Boeing will ever find the situation right to do an in house wing again.

    Are ANA and JAL really worth giving up all control of the most important part of your business? I wonder how well Mcnerney and company will find they are able to squeeze those particular suppliers.

    • Why does everyone think that the wing is going to Japan solely to keep the JAL and ANA business? Their orders are not big enough to be the sole justification even if there was a relationship. If that is the case, half of the 777X would be build in the Middle East.

      I suspect a more likely reason to have the wing manufactured in Japan is to re-use the heavies as risk sharing partners and reduce capital investments at the Boeing side. The heavies are one of the few suppliers who can bear the investment costs associated with such a wing. Some of McNerney’s comments indicate that they want to squeeze even more out of the suppliers than with the 787.

  4. Boeing has been very aggressive with pricing too, it is not all just Airbus and the A-330. A-330 production is sold out for a number of years, as is the B-787, unless either or both OEMs increase production.

    China has not ‘ordered’ 18 new A-330s, they are on an MOU, and these 18 are part of the 45 aircraft previously ordered, not in addition to that order. China, and the rest of the world know the EU’s ETS is far from solved, it was delayed for one year, and we are almost half way through that year, China, and the world knows this (as does Airbus).

    The B-767-300ER, B-767-400ER, and B-777-200ER can all still be ordered, and the B-767 line has plenty of available slots, as it can relatively easily increase production to 3-4 airplanes per month, not counting the KC-46A (which add another 1.25-1.5 per month). What is not mentioned is not only are these 3 Boeing aircraft direct competitors to the A-330, but so is the B-787-8/-9 and the A-350-800/-900. The 200-300 seat field is very crowded. An A-330 model not mentioned at all is the A-332F, which has been out sold since it’s introduction by nearly 2:1 by the B-767-300ERF.

    At list prices, the Boeings has lower pricing (except the B-777-200ER when compared to the A-330-300), for 2012. Yes, we all know airlines don’t pay list prices, but list prices are the starting point for talking about the actual prices paid.

    http://www.boeing.com/boeing/commercial/prices/index.page

    http://www.airbus.com/presscentre/corporate-information/key-documents/?eID=dam_frontend_push&docID=14849

    • KC, The 767-400ER was not one of Boeing’s better ideas. Only 38 were built: 21 to Delta, 16 to Continental [now United] plus one VIP. There are just too many differences [777 flight deck and window panels, raked wingtips, etc] vs the 300ER for Boeing to restart the line to make any more. The HGW [387 or 395,000 llbs MTOW] 767-200ER was an OK seller in its day, but it is also off the table. When it comes to passenger 767’s, the -300ER is the only game in town.

      The A330-200F has its own niche but in terms of payload-range it is sandwiched between the 767-300F and 777F.
      According to Wikipedia:
      “As of December 2012, Airbus had delivered 17 [A330-200F’s] with 35 unfilled orders”.
      “As of March 2013, 767-300F deliveries stand at 79 with 51 current unfilled orders”
      “As of February 2013, 74 [777F’s] had been delivered to eleven different customers, with 53 unfilled orders”.

      What about the 777-200ER? Maybe, but no one seems to want them any more. Too bad.
      The 777-200LR? Probably also done. Also too bad, but the world wants the -300ER’s payload much more than the -200LR’s range.

      • The 400ER was plain STUPID. It was a reasonable idea to begin with, that in the end was mandated to be a really DUMB idea. The senior management at the time (Stonecipher) had no interest in spending ANY money on any new products. It was starved of resources, intentionally. Customers told Boeing to give it the same range as the 300ER, but Stonecipher and his gang of fools didn’t want to spend the money on it. You have to remember that this was the same time that all the pundits were saying Boeing would cease to exist in the commercial airplane market with in a decade. The 767-400 was one of the prime bits of evidence given.

      • The 400 has a 4′-5″ ground clearance under the engine versus 3′-7″ for the 300. Like the A320, the 400 had the potential for a larger fan engine.

        • Howard :
          The 400ER was plain STUPID. It was a reasonable idea to begin with, that in the end was mandated to be a really DUMB idea. The senior management at the time (Stonecipher) had no interest in spending ANY money on any new products. It was starved of resources, intentionally. Customers told Boeing to give it the same range as the 300ER, but Stonecipher and his gang of fools didn’t want to spend the money on it. You have to remember that this was the same time that all the pundits were saying Boeing would cease to exist in the commercial airplane market with in a decade. The 767-400 was one of the prime bits of evidence given.

          Boeing still offers the B-767-400ER. They had a program for a longer range version, the B-767-400ERX, that did get 3 orders (Kenya Airways?), but ended up cancelling the program around 2002.

          BTW, marmap301, the one delivered B-767-400ER-VIP (eventually sold to Bahrain in 2009) was actually ordered by the US Air Force as the E-10A-MC2A. But the Air Force canceled that program in 2007. Had the E-10A entered production, it would have replaced the USAF E-3, E-8, RC-135, and USN EP-3 aircraft by combining all those missions into one airframe. The USAF and Navy would have needed between 55 and 85 E-10As.

    • Since January, 2004, only one 767-400ER has been ordered by a VIP customer in December of 2008. All the rest of the 767 orders in that period have been for either the 767-300F, tankers, or the -300ER. All but 3 of the 300ER orders are from 787 customers.
      Removing the freighter and tanker orders leaves a total of 75 that have been ordered in the last decade, 45 of which have been ordered since August of 2008.

  5. steve :
    Agreed. The A330 was the only game in town that could be delivered fairly quick compared to the much delayed 787. Boeing lost many sales due to the 5 year delay EIS.
    Its not that the A330 was neither a bad or great aircraft, but it was available when the competition was not and I am sure Airbus was discounting heavily to gain market share and parts sales are very profitable.
    If Boeing can increase the monthly output on the 787 and get the 787-9 out in good numbers, they should regain the widebody market share and add the 787-10, they will do well, but only if they execute without slip ups.

    The A330 succes isn’t about availability only, thats not fair. It is great aircraft, ask the airlines. Excellent CASM and payload range, cockpit commonality, just right passenger/cargo dimensions and engine choice play a role. The 787 looks very similar for a reason.

    It was the CASM benchmark aircraft before the A380 came into service. I used to link these graphs.
    http://i191.photobucket.com/albums/z160/keesje_pics/MorganStanleyDeanWittervalueBriefin.jpg
    http://i191.photobucket.com/albums/z160/keesje_pics/Widebody_Eclat_CASM_comparison.jpg

    It has been Boeings #1 WB headache for the last 15-20 years and still refuses to die..
    http://www.flickr.com/photos/30949611@N03/5457893923/

    • I would summarize the A330 as “good enough that airlines don’t have to wait for the 787”. The A330 is the best it’s ever been. Last year was its best sales year ever and this year is looking good too.

      But I am afraid it is mainly about availability. Airlines are desperate to get certain airplanes out of their fleets – particularly A340s and 747s – because they are losing money flying them. They cannot afford to wait the best part of ten years for 787 and A350 replacements, so they are going for A330s and 777-300ERs instead. But these planes will struggle once Boeing and Airbus have improved availability, as well as the new planes themselves.

      The A358-800 was intended as the A330 replacement but it’s not getting traction. My guess is that Airbus will announce a new strategy for light twin aisles ca 2016, about two years after the A350 enters service – just as Boeing is doing now for the 777.

  6. There seems to be a bit of a disconnect between the Aspire and CAPA articles. Aspire claims the 787-10 will be able to command a premium price whereas CAPA mentions a Reuters article where Richard Anderson of Delta stated, “that Boeing would have to lower the price of the 787-10X, a double stretch of the baseline 787-8, if it wants the aircraft to take sales away from the A330.”
    Who is right? The analyst, with a slight love of Boeing (although I must admit that his latest article is one of the most balanced I have ever seen from him), or the airline exec?

    I am also somewhat confused about the 787-10 wing. When the 787 first came out, any talk of a 787-10 included the admission that it would require a new wing. Now it seems that Boeing will actually do it with the existing wing. Is this because they axed the 787-3 and hence were able to optimise the base 787 wing for larger aircraft?

    • Northwest A330 / Anderson introduced their 2 class, packet (>85% load factors, full cargo belly) hub to hub, high frequency, TransAtlantic A333 services more then a decade ago. Against TATL A340s 777s, 767s, 747s of BA, DL, UA, LH, AF it soon proved unbeatable in term of economics. Anderson still is very “if it works, don’t fix it”..

      “The analyst, with a slight love of Boeing (although I must admit that his latest article is one of the most balanced I have ever seen from him)”
      Successful analysts like Richard and Scott air their opinions but now and then generously admit things developed different then they expected and provide fresh new outlooks using new insights. Maintaining their credibility contrary to some other folks mentioned in these comments.

      The 787-9 was designed with an optimized bigger wing. After deep trouble with the 787-8 wing, Boeing decided it was smarter to get the train moving using the fixed -8 wing then face a new challenge. The marketing message was the -8 wing was better then expected / good enough for the -9 (and now -10).. http://www.flightglobal.com/news/articles/boeing-ups-787-weights-shrinks-9-wing-336055/

      I won’t be surprized if Boeing is forced to beef up the 787-10 range, MTOW,wing, landing gear in the coming 1-2 year. At MTOW with reserves, temperatures and winds the787-10 is not flying between Asia and Europe/US.

  7. A great deal of information provided by Aspire Aviation is good, but it seems to me from recent articles that the website was a bit loss of neutral, so I’m some kind of doubting its rationality and even the data handling. It said once the efficiency of -1000 is a little bit better than the -9X while the advantage of -9X is its market orientation and this time it overturned its own conclusion.

    • I think it comes down to how many extra seats airlines are going to place per row, given the extra half seat of width of the 777 versus the A350.

      I reckon the 777-9X will have 4% extra cabin length versus the A350-1000. It will have greater trip fuel costs. I have seen 10% quoted, and a figure of this sort of is implied in Aspire’s analysis. Let’s go with this for illustration – it shows the dynamics of the calculation. An insignificant (4%) increase in capacity for a significant (10%) increase in fuel cost of the 777-9X against the A350-1000 is not attractive, unless you put in an extra seat in the rows.

      Some airlines will; some won’t. High density airlines are more likely to do so than premium airlines. (Like ANA and JAL incidentally, which is possibly why they are rumored to be considering the A350 despite their previous loyalty to Boeing)

      Fewer than half of 777 operators currently have 10 across seating. The trend is increasingly towards 10 across and this trend will be boosted by the small increase in cabin width in the 777X model. Even so, I think several airlines, like the two I mentioned, have no interest in 10 across seating.

      You can boost economy seating by 11% by going from 9 to 10 across. Planes like the 777 and A350 on long routes tend to dedicate half their cabin space to economy so the overall boost in seats is (11% / 2 + 4% from the extra cabin length) = 10% or the same as the additional fuel cost. A wash, in other words.

      Could airlines get another seat in each business class row? Premium airlines are moving increasingly to a four across slanted aisle access business class arrangement. There would be no difference between the two planes. High density operators tend to have seven across side by side business class seats on the 777. I suspect they wouldn’t drop a seat if they go for the A350.

      There are other factors, obviously. Fuel cost isn’t the total cost and the planes will have different capabilities on payload. For some airlines, the 777-9X numbers will stack up very well. But I suspect for most airlines the 777-9X does not have a compelling advantage over the A350-1000. And for several, the A350-1000 will be clearly ahead.

      • Very appreciate your long reply, it’s my first time to speak here.
        ╰(*°▽°*)╯I wonder where exactly is the implication of the fuel cost of 9X is 10% higher than the 350-1000 in Aspire’s analysis? Sorry the article is too long and I didn’t read it very carefully. Your idea about the extra seat is very interesting and I think the 4% extra cabin length you mentioned is used to calculate the extra seat but it doesn’t present directly the standard capacity?

  8. Aspire does a nice job of collating previously reported info and summarizing. They also often have nuggets of new info, albeit sometimes incomplete or incorrect later on. In any event the door info on the 737 max is new. Not sure how door mods equals more seats tho? The range on the 9x seems low compared to Clarkes wish list also. Otherwise a good sum up of both manufacturers. Pretty fair I think…

    • I’m assuming that the additional pax capacity mandates another pair of emergency exits.

  9. It seems fresh A330 orders from Qatar, SriLankan and Oman in Paris.

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