2009: Recovery for Boeing, Challenges at Airbus

Update, January 10:

Bloomberg News reports EADS says it will be three years after the A400M’s first test flight–which remains unscheduled–before Airbus will ship the airplane to customers. This is hardly good news.

Original Post:

Commercial Aviation enters 2009 with a high level of uncertainty. Boeing’s headlining 787 program and the lower profile but increasingly costly 747-8 development face critical milestones this year. Airbus’ A350 does, too. The global financial market meltdown last year hopes for recovery this year but the global economy is questionable.

These are just a few of the issues facing Airbus and Boeing this year.

Boeing continues to dominate the headlines with its troubled 787 program, so we’ll look at the US aerospace company first.

Year for Recovery

This has the makings for being a year of recovery in new airplane programs. No new joint BCA-IDS program is without significant issues and two of BCA’s three new airplane projects have significant delays.

The 787 program needs little review here; its issues are well known. The question is when the first flight and flight testing will begin.

Boeing says the first flight will be in the second quarter; Air Transport World first reported that April 20 is now the schedule for first flight and Flightblogger followed with its own reporting on a timeline leading to this date. Our own checks suggest that a new development and testing timeline for the critical software systems is aimed for a sooner-than-later second quarter first flight (the old timeline suggested a June-August timeline for first flight). Our checks also report, however, that April 20 is thought to be aggressive and our sources are unsure this date can be met.

What is important to emphasize here is that this date is an internal timeline and Boeing is only saying first flight will be in the second quarter. This means it could take place on June 30 and still meet the publicly stated goal.

At long last, we expect that the first flight and the flight testing will get underway this year. These are obviously critical milestones in the recovery of the 787 program and Boeing’s operations.

Delta Air Lines may cancel the 787 ordered by Northwest Airlines now that NWA is a subsidiary of Delta. NWA ordered 18, but Delta’s CEO Richard Anderson is unhappy with the delays and performance issues (the 787 is overweight and has a shorter range than originally advertised, though the extent of the latter is in dispute). Anderson likes the 777LR and it’s possible there could be a deal for more 777LRs to replace the 787-8s ordered by NWA.

A cancellation will be nothing but a minor embarrassment for Boeing—with 900 orders, losing 18 won’t matter much and it’s possible others will come forward to grab these in any event.

The 747-8I program is now acknowledged to have delays of 9-12 months. We were the first to report as long as a year ago delays in this program. Customers we talked to after Boeing formally announced the delays believe these could be closer to 15 months. What’s behind the delay? Boeing said diversion of engineering resources to the 787 program and designing a new wing are to blame. The former confirms what we reported long ago and touches on a point that media, aerospace analysts and others have largely missed: the broader impact of the 787 program difficulties on other parts of the company. We talk more about this in our companion column.

Boeing hopes to begin flight testing on the 747 in the fourth quarter.

By sheer luck, the delays may not matter much. Cargo traffic has plunged far more than passenger traffic in the current economic decline; the airlines may be happy not to get the 747 any time soon.

The 777F program is proceeding well, delayed only by the IAM strike. First delivery to Air France is now expected this month or next. FedEx delayed its 777F order due to a soft economy; other 777F customers are also talking about delays and some lessors that ordered the plane are talking about switching at least some of these to 777Ps to lease to airlines affected by delays in the 787 program.

The 737, 767 and 777P programs are running smoothly, affected only by the lingering affects of the IAM strike and the resolution of the nutplate issue.

As we reported in an article we wrote for Aviation and the Environment magazine, Boeing is considering a series of enhancements to the 737 that could be the fourth generation (we called it the “Re-Generation,” a play on the “Next Generation” name) as a step change between the current 737 and a completely new airplane, presumably made of composites. Decisions are targeted for this year with the potential for EIS in the 2013-15 timeframe. This might include re-engining the 737 with the Pratt & Whitney Geared Turbo Fan (GTF). Boeing is considering the new CFM International LEAP-X as well, but CFM is really designing this for an entirely new airplane.

Production on the 767 line will gear up this year toward a 2.5 monthly rate in 2010 from the current one-a-month. Boeing is providing the airplane to some disappointed 787 customers. The caveat: the current global economic and airline turndown may change this production rate plan, but that’s what it was when we last checked in the late fourth quarter.

The 777-300ER continues to be a winner; the -200ER is dead. The -200LR is a niche airplane.


Joint BCA-IDS programs

Boeing has real challenges in the new airplane programs being developed jointly between Boeing Commercial Airplanes and Integrated Defense Systems, the two principal units of The Boeing Co.

As we wrote on December 2, in addition to the well-publicized problems with the 787 and 747-8 programs, the Navy’s P-8A, Australia’s Wedgetail and, of course, the KC-767 International projects all have problems.

The P-8A, using the 737-800 platform (with the 737-900 wing), is overweight and its on-station time falls short of specifications. BCA and IDS are squabbling over how to fix the weight issues while Bloomberg News reported that the Navy may reduce the procurement by $940 million in order to pay for ships instead. The P-8A is on track to enter flight testing this year, delayed by the two month IAM strike late last year.

Boeing started 2009 with the news that India ordered eight P-8Is, a variant of the P-8A that will replace India’s aging Lockheed P-3 Orions. This is a deal that’s been hanging for years.

The Wedgetail, also a 737-based product, is running years late and has been subject to hundreds of millions of dollars in write-downs and penalties.

The KC-X Tanker will be re-competed this year. This contest, for 179 tankers valued at $40 billion (sticker price), is one of the largest Pentagon contracts to come along in years. The stakes are high, as we’ve frequently written. Aside from the contract itself, if Boeing wins, the likelihood that Airbus will build an assembly plant in Mobile (AL) for its A330 line is greatly diminished. Keeping Airbus from having a US plant is of great strategic importance to Boeing—as is keeping as many contracts as possible from Airbus parent EADS out of the US Defense Department. We think these strategic objectives are more important to Boeing than the tactical win of the tanker contract (though Boeing clearly wants the contract on its own merits).

Boeing’s KC-767AT (for Advanced Tanker) is a derivative of the troubled KC-767 International program, the one of Japan and Italy. The KC-767 Internationals are years late, with technical and design issues delaying the programs. For Italy, there was also the problem with partner Alenia, which was to convert 767 passenger aircraft into cargo planes, prior to installation of tanker-specific hardware. Alenia couldn’t get its act together, which led Boeing to decide to build the KC-767AT Air Force offering as an in-line production model at Everett (WA).

The 767AT is proposed to use the wings from the 767-300ER and the cockpit from the 767-400, along with a mix-and-match of other components from the three 767 lines. This led rival Northrop Grumman to dub the Boeing model the Frankentanker, an apt and funny description but one that is largely unfair because Boeing has a successful history of mixing-and-matching components within model types. Nonetheless, Northrop made its point with the Frankentanker: the 767AT is strictly a “paper” airplane (“computer,” in reality) compared with Northrop’s newly built KC-30 offering based on the Airbus A330-200. (See the Airbus section for more commentary on the KC-30.)

Other

While Boeing gets a third chance at the KC-X, it gets a second chance for the ARH light attack-reconnaissance helicopter. This contract was awarded to Bell Helicopter in 2005, selected over Boeing’s proposal based on the commercial MD-500 chopper. The Army canceled the Bell contract last fall due to severe cost overruns and a four-year delay in the program. A re-compete is expected to commence this year. At stake: 512 helicopters with a list-price contract value of more than $4 billion. Bell and Boeing are expected to face off again, with Boeing favored between the two (after all, Bell failed to perform). But Boeing’s nemesis, EADS, may also submit a product when the time comes.

Airbus: Eyes on the A350

Airbus has been running more smoothly in the past 12-18 months than Boeing, but that doesn’t mean there aren’t big challenges ahead. The A380 remains a program in transition; the A350, the company’s next big bet in airliners, is shrouded in skepticism; and the A400M military program is in disarray. Enhancements to the A320 family are coming on line and other improvements are in development.

Here is a rundown of issues at Airbus.

Progress on the A350 will be the key focus this year at Airbus. Company officials continue to insist they are on-target for a 2013 EIS for the A350-900 and design freeze is under control. Yet there are persistent questions whether the design freeze is where it should be and analyst already are predicting EIS will slip from 2013 to 2014 or even 2015. Aviation Week published a long article last week detailing the doubts and questions surrounding the program.

After the A380 delay debacle—two years—and watching the 787 miscues, as well as the problems with the A400M, Airbus officials are well aware that the A350 timeline remains under the microscope. But a design freeze milestone was achieved in December and Airbus officials insist they are on target for a 2013 EIS. Nonetheless, given Airbus assurances initially on the A380 and A400M programs and persistent Boeing assurances on the 787, skepticism will reign until the final countdown to EIS.

One significant difference between the A350 and 787 timelines is the period allotted for flight testing. Boeing originally planned a six month test program, using six airplanes 24/7. As the program delays piled up, Boeing extended the flight testing to nine months. Several aerospace analysts and even some suppliers think a year is more reasonable.

Airbus has inked in a 15 month period for flight testing on the A350. We asked the obvious question of Airbus: what does it know that Boeing doesn’t, or what does Boeing know that Airbus doesn’t, to explain the vast difference in the timelines.

An Airbus official didn’t answer specifically; he merely quoted those in the program as saying they believe they know what it will take to complete flight testing.

This leaves to the obvious conclusions: either Boeing is far more efficient than Airbus or Boeing is being widely optimistic. Given Boeing’s track record on projecting schedules for the 787, the latter seems to carry more weight. But we’ll see.

This will be the year to begin closely watching progress with the A350.

The A380 program is making progress but a note of caution remains. Airbus delivered its promised 12 airplanes last year, but downsized its delivery forecast for this year from 25 to 21. The 12 represent what became known as the Wave 1 aircraft, those that required hand-wiring due to the infamous disconnect between German and French software that caused wiring to be a couple of inches short in the monster airplane. The 2009 aircraft and beyond are called the Wave 2 planes, where hand wiring is no longer required.

Germans dispatched to the final A380 assembly site in Toulouse, France, to help with the Wave 1 airplanes are going home. It remains to be seen if production this year will be as smooth as hoped.

Airbus continues to deal with product improvements on the A380, principally to reduce weight.

The A400M, the European answer to replacing the venerable Lockheed C-130, is plagued with long delays and engine problems. Boeing likes to point to this program as an example of poor past performance on military programs when the US Air Force or US Department of Defense consider the A330-based KC-30 for the KC-X competition. This is an apples-to-oranges comparison, of course, but this program failure doesn’t help the Northrop/Airbus cause.

The engine finally entered flight testing late last year, ironically on a C-130 platform. This is the year Airbus has to get the A400M in flight testing and the program back on track.

The A320 Enhancements are meant to reduce weight, increase aerodynamics and produce a fuel efficiency gain of as much as 5%. Some of these features were incorporated last year, others will be added this year and many may be retrofitted. The most visible prospect is the potential addition of blended winglets designed by Aviation Partners of Seattle. These went into flight testing last month. Blended winglets alone increased fuel efficiency 3%-4% on 737s. Whether there will be a similar benefit on the A320, which had more efficient wings than the 737, remains to be seen. Testing should be completed this year.

Preliminary test results are said to be “positive.”

Airbus is testing the Pratt & Whitney GTF on an A340-600 platform, but officials say this is not with the prospect of re-engining the A320 in mind. Still, the test data will make its way to the A320 research team.

The A330 program has proved to have remarkable resiliency. Thought to be a dead duck with the development of the 787, followed by the A350, Airbus has seen some of its best sales for the A330P as delays in the 787 prompted some airlines to look for lift in the meantime. The A330P also gained sales as part of the compensation for delays in the A380 program.

Airbus got off to a roaring start with 77 orders for the A330-200F, but the declining economy stalled sales (as with the 777F and the 747-8F). A handful of A330F orders switch to the A330P, again related to the 787 delays. The softening economy has also made it difficult for some lessors to find homes for the A330F.

At the same time, some customers and potential customers are asking Airbus to consider a freighter based on the A330-300. Airbus is kicking the idea around, but no decisions are imminent.

Airbus hasn’t seen any wholesale shifting of orders for the A330F, either cancellations, deferrals or swapping to the A330P.

(In news released today [Jan. 6], Airbus announced it is deferring EIS for the entire A330F program one year to concentrate on the A330P demand, spurred by the 787 delays.

The A340 program is dead. It just hasn’t been buried yet.

The KC-X competition restarts this year. It’s unclear whether US Defense Secretary Robert Gates will merely resume where he left off in September when he punted the competition to the next SecDef—which turns out to be Gates himself, since President-Elect Barack Obama asked Gates to remain.

Gates has the option of resuming the competition from the point last September where his department proposed re-analyzing the Northrop/Airbus KC-30 and the Boeing KC-767AT with corrections to deficiencies found by the Government Accountability Office; or if an entirely new competition will be started from scratch.

Depending on what Gates decides will dictate whether Boeing re-offers the 767AT based on the 767-200 Long Range Freighter (which doesn’t exist, except in the computer) or a product based on the larger 767-400ER. In the original competition, the Air Force awarded the contract to Northrop because the KC-30’s larger size offered “more, more, more” than the KC-767AT. The 767-400ER is closer to size to the KC-30, but still is smaller.

Boeing wants to DOD to consider the competition on price; Northrop favors “best value.” Northrop’s price was $3 billion less than Boeing’s, but in the protest Boeing saw Northrop’s price (but not vice versa) and Northrop is concerned that Boeing now can underbid Northrop.

There is speculation that Northrop/Airbus might propose a KC-30 using the new, more fuel-efficient GEnx engine designed for the 787 and 747-8. This would mitigate some of the life-cycle cost advantage Boeing’s 767AT has on fuel burn. But an entirely new engine-airframe combination increases the risk assessment, and argues against doing so, in the view of some on the KC-30 side.

Boeing continues to use risk as an argument against the KC-30. Northrop and Airbus have never worked together to produce an airplane and the KC-30 is a new product. It’s running late in its development timeline for the first customer, Australia, though some of the delays are due to customer changes and requests. The first six KC-30s will be built in Europe using the traditional Airbus production method, before the plant in Mobile can be built for the balance of the production run—and 2-4 A330 freighters a month as well. Boeing effectively called this hop scotching production, even though the 767 is also produced at worldwide locations, but the 767 production method is tried-and-true and Mobile’s assembly plant doesn’t exist and certainly will have some learning curve.

Economies, Financing Capital

As we previously detailed, the financial market meltdown and global economic downturns are causes for concern this year. Industry officials hope that financial markets will loosen now that the books are closed on 2008. This remains to be seen. Airbus and Boeing officials said their companies are ready to provide about $1 billion in customer financing this year; we think they will likely face twice this amount.

Engine makers historically provided financing on a level of about 20% that of the airframe manufacturers, reflecting the value of the engines to the overall price of the airplane. This is likely to continue, though the financial pressures on GE, the parent of GE Aviation Engines and GE Commercial Aviation Services (the world’s largest lessor by unit number), may restrict historical funding levels.

It’s clear that 2009 will be a pivotal year on a number of levels for Airbus and Boeing.

5 Comments on “2009: Recovery for Boeing, Challenges at Airbus

  1. Nice analysis as usual Scott!

    As for the KC-30 and a FAL (Final Assembly Line) in Alabama, I would like to present a highly speculative analysis on my part 🙂

    If Airbus/EADS are to build an A330 FAL in Alabama for the freighter and the KC-30/45, one should note that there are considerable costs involved with duplicating FAL infrastructure. Up to this point, this has seemingly not been an issue because of the apparent urgency in presenting a credible proposal that was more palpable to the US Congress. However, by looking at the negative reactions last year when the USAF picked the KC-30 over the KC-767, NG /EADS should take a hard look on what other options are on the table.

    I’ve previously indicated that a GEnX engine option should be seriously looked at. However, I now tend to believe that such an undertaking might not be the correct strategic course of action.

    Things have changed, and among other things, the average 30+ months in delivery delays for most 787 customers have opened up an opportunity for Airbus to go after Boeing strategically and offer a long term competitor to the 787-8 (A330-800 XWB??). How would they do that?

    1. Establish a new FAL for a “new” A330 XWB with GEnX engines (as well as a derivative of the RR Trent-1000 engines incorporating a scaled Trent-xwb core) in Alabama. This aircraft is essentially an A350 with an A330-wing

    2. This hypothetical A330 XWB aircraft would retain the basic, but slightly redesigned A330 wing bolted on to a new composite A380-type centre wing box, integrated with a new section 15 (A350-XWB-) type-centre-fuselage frame section manufactured by Spirit AeroSystems in Kinston, North Carolina. In contrast to the A350, the new centre wing box would be sent to Kinston from Nantes, France, and section 15 on the A330 XWB would be fully completed in Kinston before being shipped to Alabama.

    3. Likewise, the final assembly of the (lightly)redesigned A330 wing should be relocated from Broughton, Wales to Kinston, North Carolina. Interestingly, the front spar in the A350 wing will be built in Kinston. Broughton will still have plenty of work on assembling wings for the A350/A380 and A32X and A320NG.

    4. NG/EADS offering A330-800F XWB (length: 55,6 m; or 8 fuselage frames shorter than the A350-800) as the vehicle of choice for the KC-45, while also offering the basic KC-30 as the prototype for the first 4 aircraft. When R&D is completed, NG/EADS will retain these aircraft and could offer them (with DoD approval) to new or existing KC-30 customers. Regardless of the fuselage, it’s the wing of the A330 that has truly established the A330-200 as a formidable tanker aircraft.

    Conclusion: However good the KC-30 is, there seems to be plenty of detractors in the US who will do “anything” to derail any US procurement of the aircraft. Establishing an A330-XWB FAL in Alabama in addition to centre-fuselage/wing assembly lines in Kinston, North Carolina would significantly increase US content of the NG/EADS contender for the tanker aircraft. In addition to US-built sub-systems, such a tanker should approach or equal the US content of the KC-767, with the difference being that the latter aircraft would include far more legacy systems and technologies.

  2. HI Scott,

    Small correction or clarification. Not all Wave 1 aircraft have been delivered. There are still 7 aircraft from Wave 1 to be delivered (MSN017, 018, 019, 021, 023, 042 & 025). Not to mention that MSN 007 & 009 (flight test) will be retrofitted to production standard and then also delivered. I do not know when that is scheduled but I am pretty certain that it will be a rather large job.

    Cheers,
    John

  3. Hi JayPee

    MSN-018 and MSN-024 are never going to be built. They were to fly with Malaysia Airlines (MH). According to the latest delevery schedule revision, MH will receive their first A380 in 2011 and the MSN-number will be higher than 070 🙂

    MSN-017 was going to be delivered in Q1, but according to Mr. Clarke at Emirates, they won’t get it before April.

    Delivery of Wave 1 aircraft

    MSN-019 for SQ in Q1
    MSN-021 for SQ in Q2
    MSN-017 for EK in Q2
    MSN-023 for EK in Q2
    MSN-025 for EK in Q3 -> Leased from ILFC.

    MSN-007 and 009 are apparently both occupying two bays in the final assembly facility for the A380 in Toulouse for removal of flight test equipment and cabin (MSN-007). They will both enter into service with EK in 2010. MSN-002 and MSN-004, both Wave 1, will only be modified after MSN-007 and MSN-009 have been transferred to Finkenwerder.

  4. MSN 18 has been renumbered as 45, Sections 13 & 18 of MSN 24 will become part of MSN 51 while Section 15 will become part of MSN 45. All of these aircraft will be delivered to Singapore. Since some options installations had already been installed on these sections, there would be some rework for them but I did not want to go into such detail.

    The fact remains that they were still designed and partially built as Wave 1 aircraft and much of the bracketry installed will have to be reworked to match Wave 2 standards.

    The point was merely to list all of the outstanding Wave 1 aircraft that have not been delivered.

Leave a Reply

Your email address will not be published.