The debate over using DOT Form 41in comparing A320 and 737 costs

Long time readers know that we don’t think much of the veracity of data filed with the US Department of Transportation under Form 41, detailing maintenance and fuel costs. We know from a consultant who helped an airline create its methodology for filing the data that the airline “fudges” the methodology to distort the data for competitive reasons.

Boeing has cited Form 41 data for years in making its comparisons between the 737 and the Airbus A320. A key piece of information Boeing uses is the maintenance cost data, in which Boeing claims the 737 was up to 29% less costly to maintain than the A320. This comparison in particular drives Airbus crazy, and officials say the Form 41 data is “garbage.”

737 v A320 maintenance

Boeing also previously used a study from IATA from 2006-2009, but dropped that in this year’s comparisons at the pre-Paris Air Show briefings.

Boeing also relies on DOT 41 data for fuel comparisons.

737 v A320 fuel

Beverly Wyse, VP and general manager of the 737 NG program, emphasized the reliance on DOT data in the comparisons.

“You don’t just have to believe us,” she said during the briefings. “We know that out there in the market ‘Airbus says,’ ‘Boeing says,’ and it’s hard to find the truth, so wherever we can we’re trying to use independent sources to substantiate the information that we are providing you. This data actually comes from the US department of Transportation Form 41. Depending on the model, and the configuration of the aircraft, the Dash 800 compared to an A320 or the A321 compared to the 900ER, you’ll see between 5% and 8% better fuel efficiency for the 737.”

Wyse credited the 737′s rival with good dispatch reliability, a rare Boeing compliment of the A320. But she claimed the 737 was nonetheless better.

“The A320 and 737 both have incredible reliability. Anything with 99 point something reliability is something to be proud of. The simpler design of the 737 contributes to 20% lower maintenance costs resulting in 67 fewer days out of service,” she says.

Given the reliance on DOT Form 41 data and our open doubts about using this data, we followed up with a series of questions to Boeing. Here is the exchange.

Boeing cites DOT 41 data in claiming the 737NG costs 20%-24% less on maintenance than the A320. First, DOT 41 data is crap. The airlines manipulate the data to mask what their true costs are from competitors. So how does Boeing purport to un-crap it?

DOT F41 data is a good source because it has rigorous reporting processes, contains constant costs in U.S. dollars, and includes reported data by operators who maintain both aircraft fleets, insuring consistent accounting practices.  But it is not the only source of data for our claims.   That goes toward your second question…

Secondly, Bev in one-on-one said, well, Boeing compares maintenance schedules between the 737 and the A320. Which is it? DOT 41 or company manuals?

The Maintenance Schedules or Check Intervals (that is the interval between performing various levels of Checks, typically classifieds as A, C and D-Checks) are obtained from our company manuals and for the A320, from industry publications and conferences. Specific A320 check intervals are periodically announced in Airbus press releases, journals and conference papers. It may be noted that F41 data provides a look at historic data while the Maintenance Planning Document (MPD) provides the check intervals for the future occurrence of check events. The continuous improvements that occur in the Boeing MPD usually result in even lower maintenance costs to airlines than being currently reported in F41 data. Our focus is to enable the airlines to continuously reduce their operating costs including maintenance costs through better product and services.

Third, I know from my own sourcing from within Boeing that to get to 24%, Boeing has compared new 737s to the oldest A320s using the earliest engines. When new-to-new is compared, the delta is 4% in favor of Boeing. Bev responds to this that this is a fleet-wide analysis.

Bev is absolutely correct; we use fleet-wide data in our comparison. There are many differences in the fleets of different airlines, like airplane age and the average stage length (Fhrs/Trip). Both affect maintenance costs. To enable true comparison, maintenance cost is normalized for a common airplane age. Since A320 is usually an older airplane the normalization process actually reduces the A320 costs to bring it to say a level of 737NG airplane age (say 8 years). Without normalization for age, the cost difference would be an additional 4 to 5% to the advantage of 737NG, but we diligently apply our processes while showing the relative cost and remove this fleet age based difference .  Similarly, costs are normalized for stage length and some other factors. All these normalizing processes are approved by the IATA Maintenance Cost Task Force of which both Boeing and Airbus are also members and uniformly used by most of the industry. We compare costs and do modeling in our tools on basis of the normalized costs.

In summary: All maintenance costs are compared on basis of like airplane age. Our multi level data analysis is for “as reported data”, normalized data and data from airlines operating both airplane types. In each case, the airframe costs for the 737NG are lower and on an average 20 percent lower. 

Fourth point: If this is a fleet-wide analysis, how is this possibly fair? The NG didn’t enter service until 10 years after the A320, so maintenance on aging aircraft skews everything.

Maintenance cost data is normalized to the same age level for instances where the airplane ages are different. This is done for each airline and then grouped together. The analysis ensured we were comparing like-aged aircraft not the entire fleet. By that comparison, the 737 has about 20% (+/-) lower airframe maintenance cost than the A320. But consider that there also are a number of other factors …

Five facts that drive lower maintenance cost for the 737:

1. Newer simple value added design

2. Lighter weight, smaller size;

3. Fewer systems

4. Fewer installed components

5. Longer intervals; fewer maintenance visits

Airlines believe and give us credit for our maintenance story. 

If there were truly a 20%-24% maintenance delta, why would anyone buy the A320? It doesn’t all come down to price, you know. The A320ceo evenly splits the market with the 738 but the A321ceo outsells the 739 by a wide margin and the neo widely outsells the MAX.

Maintenance and its cost is only one of the criteria by which airlines judge airplanes, and a relatively small one at that. Airframe Maintenance is usually 4 to 5 percent of cash operating cost. However, maintenance and reliability plays an important role in the operational experience for an airline. Price is an important factor in airline decisions, but you are correct that it doesn’t all come down to that. As you’re aware, for example, there can be political issues, or even funding issues.  As for the division of the single-aisle market, we are very aware of the inroads Airbus has made in its relatively short existence and are very much motivated by that.  Arguably, that’s another reason some airlines opt for one plane or another. So, too, is the ability to deliver an airplane when an airline wants or needs it. The on-time reliability of one model or the other can be a factor (while both companies produce reliable airplanes, Boeing’s 737s have better on-time statistics).  Too, some airlines prefer to stick with airplanes compatible with their installed fleet to reduce maintenance, training and scheduling costs. The choice is very complex.

I note, too, that this year Bev dropped citing the 2006-2009 IATA maintenance data. How come?

IATA data is used extensively within our own internal analysis. However, we acknowledge that there are some issues with IATA data. IATA airlines do not report data consistently over a long period. They may drop out entirely, miss reporting in some years and new airlines may join for a period. The Form 41 (US DoT) data is mandatory to report and usually aligns with the airline’s Annual Reports reported costs. In addition, variation in currency exchange rates becomes come into the picture. Airlines report in their own currency and that is converted to U.S. dollars. Inconsistency of reporting and the additional currency variable frequently clouds the data.

Bev says, though, that what tipped its use in the end in these slides, however, was that the data we had at the time was old.

We asked Airbus for a response to some of these questions. Engaged in the Air Show this week, we have yet to hear back.

737NG-to-MAX production Plans and comparing the 737 with the A320/321

Boeing is gearing up for the transition from the 737 Next Generation to the 737 MAX at its Renton plant in Washington State.

During pre-Paris Air Show briefings at Boeing last month, embargoed until today, Boeing officials detailed how they will transition the production facility in a continuous flow. When Boeing introduced the 737NG, sales of the 737 Classic were terminated. Boeing expects a two year transition period this time, meaning the NG will continue production 2019, two years after the 737-8 MAX first enters service.

The exception will be the P-8A assembly line, which is based on the 737NG and which is in the so-called “saw tooth” building to the west of the primary 737 assembly plant. The saw tooth building is seen at the far right of this Boeing illustration.

Renton 737-MAX Factory Renderings

The primary plant above shows the current NG assembly lines to the left and right. The line on the left produces 21 737s a month and the one on the right will be at this rate next year. The line in the center will initially be the MAX transition line, where the test aircraft will be assembled and the workforce learns the differences between assembling the NG and the MAX, which will have substantial differences compared with the NG.

Eventually, the MAX will fully integrate on the two NG lines.

At previous air show briefings, Beverly Wyse VP and GM of 737 Program, said the center line will have the capacity to match the assembly rates of the other two lines, or 21 per month, giving Renton the capacity to produce 63 737s a month.

At last month’s briefing, Wyse displayed this chart that suggests production rates will maintain at 42/mo from implementation next year.

737 Production

However, we know from our own market intelligence that Boeing is considering sharply higher rates by the end of the decade.

Wyse, in the recent briefing, said the workforce is a key advantage for Boeing with flow-through benefits for Boeing’s customers.

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Boeing 737 MAX update

Update: Aviation Week has this piece that has some good close-ups of artwork.

Boeing held a tele-conference updating the 737 MAX program. Beverly Wyse, VP and GM of the 737 Program are Michael Teal gave the briefing.

Beverly Wyse (BW)

Michael Teal (MT)

BW: 737 MAX has met firm design concept. Honeywell will provide an electronic bleed air system. Flight deck will have large displays from Rockwell Collins. MAX production will have future growth capability.

MT: We have in place a plan to preserve training commonality with large flight deck displays. We engage with regulators for training regulations and feel this will not be an issue.

Development team made significant progress to have aerodynamic design. We removed nose gear door bump from earlier iterations. We can get longer gear within the wheel well. LEAP 1B reached architectural freeze in September, freezing fan size and core size. Final design freeze will be in April 2013.

With the completion of firm concept, the completion of production design can move forward.

BW: It is important we maintain stability in our production plan. The 737 MAX transition allows us to maintain stability with NG rate increases and into the MAX.

Q&A:

BW: Third production line begins in 2015 with construction of first flight test aircraft. Eventually will use the third line for future rate increases beyond the planned 42 a month.

MT: Will only offer radial tires on nose gear, nose gear retracts further into the wheel well.

MT: 13% fuel reduction is a per-seat off the 737NG from today’s most efficient NG (19% better than original 1997 NG.) MAX will continue with the same maintenance cost as today’s NG.

MT: Goal is to have the same field performance as NG.

BW: 737-7 MAX: Many of our customers select a primary model but have substitution rights into other model. We see the -7 as being part of a family of aircraft where airlines can use -7 on thinner routes. It also serves missions in high-hot regions, such as in Tibetan plateau. We see the -7 serving these critical missions. I would no say “no question” that we will build it, but customers have asked about it and it is in our family today.

MT: Flight test plans for -8 will have four test planes. Expect to have two flight test airplanes for the -9 and -7.

BW: Part of the reason for more flight test airplanes is to proceed as fast as possible.

MT: Can’t give you at this time an exact count of the amount of change of MAX vs NG. This is part of the design process between now and the middle of next year.

MT: This airplane is an amended type certification, do not see re-certification.

[Editor: UBS Securities issued a new research note even as the teleconference was proceeding, with this comment:

[Systems changes represent onset of scope creep: This morning BA announced that it had achieved “Firm Concept” on 737 MAX including new bleed air system from HON, new tail cone, new winglets, and surprise move to upgrade 737 NG displays from HON with 787 large format displays from COL. BA’s move to incorporate updated systems beyond the engine represents a departure from its stated strategy of minimal design changes on 737 MAX.

[When MAX was announced, former CEO of BCA Jim Albaugh said he wanted minimal changes. The MAX has, for some time, appeared to be undergoing design creep, hence the questions about commonality and re-certification.]

BW: Right now we are saying 2017 EIS, [Southwest Airlines previously told us 4Q17, Jim Albaugh hoped to advance this schedule); as we move forward we will get more definitive about the schedule.

But what of the runway performance?

Dominic Gates of The Seattle Times has this story in which he has the following observation:

Wyse revealed that Boeing, through structural efficiencies, has also beefed up the allowed maximum take-off weights for the three MAX variants.

Each is 5,000 to 7,000 lbs heavier than the maximum take-off weights of the current 737s.

That means each 737 MAX model, even though heavier than the corresponding current model of the 737NG, can either carry a heavier payload or carry more fuel and so fly farther.

This is good. But we’re hearing from airlines that runway performance may be worse than the 737NG. The airplane is heavier but the wing is the same and the engine thrust is still somewhat of a mystery. CFM International, maker of the LEAP-1B that will power the MAX, lists thrust on its website of 20,000-28,000 lbs without identifying the sub-types and thrust to which the engines will be applied.

These thrust ratings are similar to those now on the NG, rather than being increased to compensate for the increased weight.

One airline tells us that runway performance for the -8 MAX and -9 MAX is longer than the -800 and -900. (The airline is not considering the -7 MAX and doesn’t have the -700.) This, the airline tells us, makes the airplanes problematic at some airports it serves.

This illustrates the dilemma Boeing and CFM have with the physically-constrained 737. CFM could build any engine it wants that would get the job done. It has, after all, two LEAP engines in development for the COMAC C919 and the Airbus A320neo. But the 737 presents special challenges and CFM is constrained unless Boeing lifts the entire airplane with new main gear. But this would mean a new wing box and associated structural changes, adding significantly to the cost. And Boeing won’t to this.

There’s still a lot about MAX we don’t know. And many customers are also waiting for the information.

No plateau on 737NG: Boeing

“There is no plateau in interest on the 737NG,” says Boeing’s Beverly Wyse, VP and GM of the stalwart program.

“Even though there are a lot of challenges in the industry, the growth, particularly in the single aisle market in emerging markets and Low Cost Carriers, continues to give us a lot of confidence the demand is out there. Even with the struggles in Europe, there seems to be a little tension between replacement demand and growth demand. We don’t see any pullback in the demand on the 737 at our current production rates or a weakness in demand as we transition to the MAX.”

Wyse gave this assessment during a briefing to the media in advance of the Farnborough Air Show. The briefings were embargoed until July 5.

“Basically we are full all the way through to the middle of 2016. We do have some capacity left in 2016 and 2017 prior to the introduction of the MAX,” she said. “We do have some NGs out in 2018 but that capacity is filling up. We still have customers coming in for NG and MAX four or five or six years out.”

She predicted there will be a two-three year transition period of NG and MAX overlap, though she prefers two years. Wyse acknowledged that the 737-based BBJ and P-8A Poseidon could further extend production of the NG even if passenger models are discontinued.

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Aircraft demand: Comparing the Big Four OEMs

(Note: The Market Outlook information was released July 3; this piece contains information that was embargoed to July 5.)

Boeing updated its 20 year forecast, from 2012-2031, upping the total market demand about 600 airplanes.

In its annual release just before a major international air show, in this case Farnborough, Randy Tinseth, VP Marketing, said the latest numbers forecast a requirement of 34,000 through 2031 with a value of $4.5 trillion.

This breaks down:

Boeing Current Market Outlook, 2012-2031

Category

Number/Share

Value ($ Billions)/Share

Very Large Aircraft (>400 seats)

740/2%

260/6%

Twin Aisle (201-400 seats)

7,950/24%

2,070/46%

Single Aisle (91-200 seats)

23,240/68%

2,040/46%

Regional Jets (70-90 seats)

2,020/6%

80/2%

This is more optimistic than the 20 year forecast by Airbus. The most recent Airbus forecast—2011-2030—forecast only 26,921 aircraft, more than 7,000 fewer than Boeing—but Airbus does not forecast regional jets nor below 100 seats.

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Boeing envisions third parallel line for 737 Max

Here are the stories we did for FlightGlobal on Boeing’s hitting Rate 35 for the 737.

Boeing may assemble the re-engined 737 Max in the same facility as it builds the 737 NG family of aircraft in Renton, Washington.

Beverly Wyse, 737 programme vice-president and general manager, said a potential third line for the Max would be placed in Renton with the two existing lines by relocating engine, empennage and line work staging areas positioned between Line 1 and a mezzanine that runs the length of the building.

Commercial production at Renton is split between two lines in the 4-481 building. Line 1, the wider of the two lines, would likely play host to Line 3 for the 737 Max.

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Boeing celebrates going to “Rate 35″ on 737

Boeing celebrated the transition to producing 35 737s per month, from 31.5, at a huge employee pep rally today (Jan. 10) at its Renton (WA) plant, where the assembly is done.

With the country-rock band Chance McKinney & Crosswire blasting away, the event was festooned with blue-and-white balloons, cupcakes with blue or white frosting, green T-shirts embossed with “Boeing 737 MAX” and a sometimes cheesy, scripted cheer-leading effect from employees, the event marked not only a milestone for the 737 but for Boeing Commercial Airplanes. No aircraft has been produced in such numbers by Boeing.

And more is to come. The production rate is to increase in 2013 to 38 per months and to 42 the following year.

Beverly Wyse, VP and GM of the 737 Program, told the 10,000 Renton employees that the rate could climb to 60 per month someday.

All this means more jobs for Renton and Puget Sound (the greater Seattle area). Renton will be adding 600-700 more jobs in the each of the next two years for the NG production rate increases, Wyse says. It is too early to know how many more jobs will come with a third line for MAX, which doesn’t have a first-flight time until 2016 and an entry-into-service in 4Q13.

Meanwhile, Boeing is processing through weekly orientation days 100-200 every Friday for Puget Sound employment, says Tommy Wilson, Business Relationship guru for IAM 751 at Renton.

We did two stories on the celebration for Flightglobal. Under our agreement with Flight, we have to wait 24 hours after Flight’s publication before we can post those here.

Separately, Aspire Aviation published this long piece, looking at the 787 program and ramp up.

737 program chief talked about Renton production site

With the rhubarb that emerged from the Boeing 2Q earnings call over where the 737RE production will be, and the contradictory messages to come from Boeing Commercial Airplanes (BCA) in Seattle and Boeing Corporate in Chicago, we thought it might be useful (and certainly interesting) to return to the Boeing pre-Paris Air Show press briefing by Beverly Wyse, the Vice President and General Manager, 737 Program.

During the briefing, the question of potential 737 production rates came up. Boeing has announced a rate of 42/mo from 2014 and even then there was discussion of taking rates to 50/mo. Since the Air Show, BCA CEO Jim Albaugh said the company is studying a rate of 60/mo. It was within this context that the question over production was asked.

Wyse’s comments at the press briefing are noteworthy on a couple of points.

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