Odds and Ends: 777 future may slip to 2020 decade

Update, Feb. 2: Flight Global has this very good analysis about the WTO fight between Airbus and Boeing.

Original Post:

In this issue of Odds and Ends, we talk about the 777, a CNN interview with Jim Albaugh and a variety of other things.

  1. The future of the 777 may slip to the next decade, according to information. Boeing believes the A350-1000 will become a new airplane rather than a derivative of the baseline A350, delaying entry-into-service until late this decade. Accordingly, a move to enhance or replace the 777 currently is being thought as a project for the early 2020 decade.
  2. Boeing seems increasingly likely to go with a replacement for the 737 with a 2019 EIS.
  3. Boeing Commercial Airplanes CEO Jim Albaugh gives a short video interview with CNN in which he returns to his recurring theme that Boeing “over-stretched” on the 787. He talks about some of the reasons, and he is candid about the shortfalls over its pushing technology, the shortage of engineers and other issues.
  4. The final ruling on the European case against Boeing’s illegal subsidies was due to be issued Jan. 31, but it has to be translated and won’t be made public for several months. This hasn’t stopped Airbus and Boeing from spinning already. See this AFP story from France. We’re as sick of this topic as we are of the KC-X saga.
  5. “While new entrants are building today’s airplanes, we’re building tomorrow’s airplanes.” This is from Albaugh in the same CNN interview.
  6. We can tell you that from conversations, relations with Boeing’s main labor unions, IAM and SPEEA, are improving from their low points from the IAM strike in 2008 and the selection in 2009 of Charleston (SC) as the site for the second 787 assembly line. This is not to say either side is yet satisfied–the contract negotiations in 2012 will be the real test–but relations are better. In this we give a lot of the credit to Albaugh, an engineer himself, who understands the needs of the labor force much better than we believe his predecessor Scott Carson did (he being a salesman and a financial expert) or Jim McNerney does (he being an MBA). Albaugh “speaks the language” and this helps.
  7. Momentum is building for the Pratt & Whitney Geared Turbo Fan; look for orders soon.
  8. Lori Ranson at FlightGobal has this interesting, long article about the CSeries vs the NEO. Very thought-provoking.
  9. Addison Schonland has this equally interesting podocast with Lufthansa’s Nico Buchholz about the CSeries, the thoughts behind the LH order for Swiss Airlines, capabilities and competitiveness with the NEO. This thoroughly debunks the loads of [stuff] promulgated by some who obviously have never talked with Buchholz about why Lufthansa ordered the plane, its evaluation process and why LH looks for a 2014 EIS.
  10. US Aerospace, the goofy little company that tried to get into the KC-X tanker competition with a Russian airplane that doesn’t exist, has told the US Securities and Exchange Commission that it will no longer file financial statements. Among the reasons: “The non-confidential nature of being a public company, and resulting limitations on the Company’s ability to conduct business.” And get this: US Aerospace wants to bid a Chinese helicopter to replace President Obama’s aging chopper fleet.
  11. Last Wednesday, Jan. 26, at noon we passed one million visits on this blog. Thanks to all visitors for your readership.

Personal Observation about Egypt:

As we watch events unfold in Egypt, which we have visited, we are reminded of parallels in China surrounding the protests at Tiananmen Square in June 1989. We had been to Beijing the preceding December, so we watched the protests and crackdown with enraptured interest. We are doing the same with Egypt.

We see parallels (though the protester violence in Egypt was absent in China). When the Army first rolled into Beijing, protesters were encouraged by the lack of action, just as they are now in Egypt. This is the calm before the storm, we believe.

We don’t think the Egyptian protests are going to have a happy outcome.

We visited Egypt in 2000 on a vacation and were fascinated by the culture and enjoyed the locals we met. We visited Cairo and are familiar with some of the locations we’ve seen on the news, including, of course, the Pyramids and the Museum where antiquities are displayed–and where some vandals damaged some of them. As with China, we found the peoples to want the same things peoples everywhere want: a good life, success, and friendly toward Americans. We wished we had had more time in Egypt than we did, and we want to go back.

The protesters in China were emboldened by the fall of Communism in Eastern Europe. Those in Egypt are emboldened by the fall of the government in Tunisia. The protesters failed in China and we don’t have high hopes for those in Egypt. It will all depend on which way the Army ultimately goes, just as it was the case in the Soviet Union when politicians attempted to overthrow Gorbachev but failed because the Army didn’t back them up. Boris Yeltsin later emerged to succeed Gorbachev and the Soviet Union dissolved.

You can bet China is watching the Egyptian situation intently, and the role of the Internet and the Social Media. There is a lot of unrest in China–far more than the uninformed observer might think–as mine disasters kill thousands a year, water is undrinkable, corruption takes place and conditions exist that make for unpopular uprisings. The Internet is transforming China in ways very similar to Egypt and Tunisia. In many ways, “Chinese capitalism” has outstripped the government’s ability to keep up. In Egypt, the circumstances are different in terms of economic development but the end result isn’t all that much different.

We have been fortunate to travel throughout the world, including the Hungary and East Germany (the latter both before and after the fall of the Iron Curtain), to China and Egypt, all of which have undergone political turmoil and dramatic change. We hope the Egyptian situation ends peacefully. We fear otherwise.

14 Comments on “Odds and Ends: 777 future may slip to 2020 decade

  1. About the ‘ better” relationships with injun-ears . .
    There seems to be a disconnect between grunts and management

    http://www.speea.org/

    Friday, Jan. 28, 2011 – NLRB hearing update

    Dispatch from NLRB hearing
    Boeing must stop denigrating FSRs and let us vote

    While Boeing highlights the professionalism of its FSRs when talking to employees, customers and industry leaders, the company has taken a very different position before the National Labor Relations Board at the hearing to consider our petition to join SPEEA.

    With the hearing now entering its tenth day, company testimony and evidence characterizes FSRs as little more than sales assistants who perform basic mathematical calculations and follow written instructions.

    “It’s time to allow field service representatives to move towards a vote,” said Ray Goforth, SPEEA executive director. “I call on The Boeing Company to enter into a stipulation today that its FSRs are professionals and to stop denigrating them as a litigation tactic.” goes on

  2. What interests stand behind “US Aerospace”. Is it just for discruptiveness ?

    Mr. Albaugh: He talks about some of the reasons, and he is candid about the shortfalls over its pushing technology, the shortage of engineers and other issues.

    Problems with pushing tech would have looked different. Boeing had(has?) no idea
    how to organise and superwise processes for a new design. It will be interesting to
    watch if the next project will reflect having achieved the required curriculum.

    In hindsight one gets the impression that advent of the GFC was a known to be imminent
    disruption and just going through the public motions for an all new gimmicks design would suffice.

    Current affairs in Tunisia and Egypt: Look up “Color Revolutions”. This is the second respective third wave imho. The same people seem to be involved.

    • “Problems with pushing tech would have looked different. Boeing had(has?) no idea
      how to organise and superwise processes for a new design. It will be interesting to
      watch if the next project will reflect having achieved the required curriculum.”

      For once we agree. I have said everywhere I can that I do not understand why BA is even considering doing a new 737 replacement in this decade because getting the 787 family (788, 789, 7810) out the door by 2016 is vital, there is no evidnece I know of to indicate they would do any better with a new 737 replacement than they did with the 787, and the new plane would put their 787 goals at risk by draining resources from the 787 program. The key it seems to me is, is it a reasonable estimate of future performance to say that BA can avoid repeating its 787 mistakes so that they can simultaneously finish up the 787 family, and not only deliver a new 737 replacement by 2019-20, but also promptly ramp up production, condidering both programs have before them substanial know unknowns in terms of challenges and costs?

      Scott, do you have any thought on this?

  3. Congratulations, Scott, on your blog getting a million visits. Just goes to show how interesting and vital it is. When I log on each day to read the latest post, I am very happy to add my own modest contribution to the total.

    In my view, the A319 is a dying product, as is the 737-700. The Neo won’t change that. Bombardier’s challenge is not just to make a better version of those planes, but to convince airlines to believe, again, that smaller can be beautiful. What’s left of the A319 market isn’t very attractive; Bombardier has to get would-be purchasers of the A320 to switch to the CSeries. The A320 Neo can be seen in that context.

    I don’t know a lot about Egypt, but I tend to agree with your analysis. Despite being a police state, the Chinese central government is more receptive to public opinion than many in the West believe and than the Egyptian Government appears to be. The problems in Chinese governance mainly occur at the county or township levels where the central writ doesn’t run strong.

  4. I agree on the A319/B73G: both being conceived in the late 80ies, early 90ies, but now they are increasingly unattractive. Orders speak a clear language on that. The A319 is even a little bit less attractive (lower seat count).

    I find the speculation about the A350-1000 a bit odd: sure, one can bet on Airbus failing its targets, but is that a viable business plan? What if Airbus doesn’t fail? Shouldn’t a strategy always be based on “medium worst case” scenarios, which is, the competitor is bringing the products to market at the time he originally envisioned? Then, if he doesn’t, you are even better off.

    One interesting point: Albaugh apparently is quite sure about the midterm fade of the A350-1000. Now, as the -1000 being the basic stretch, where did he get the information that it will be much harder than anticipated? For me it reads like he assumes the considerable headache they have with the B787-9 (which so far didn’t get front row in aviation news) will also hit the A350-1000. A reasonable bet, but still a bet on your competitors performance.

    • The A350-1000 hasn’t sold in great numbers so far. In fact Airbus has only sold 900’s since 2008. I’m guessing Boeing’s calculation is that the A350-1000 won’t sell enough in its current form to trouble the existing 777-300ER. OR, to create an airplane that knocks out the 777 would require lengthy development. They can live with that too.

      On the other hand they may have decided the 737 is simply more urgent and the 777 upgrade/replacement can wait, whatever happens. So they justify a decision taken for other reasons.

  5. During my 20+ years fighting Airbus as a Boeing salesman in Europe in the ’70s and ’80s, I was repeatedly confronted with the attitude within Boeing management, that “the next Airbus airplane will be their internal downfall!”
    Is it possible, that their present attitude towards A350–1000, is again influenced by wishful thinking, the–1000 being a serious threat to the 777, 747-8 and the 787–10?
    Keep up the good work Scott, very much enjoy your reports!

    • It is called FUD : Fear Uncertainly and Doubt : Microsofts domain of excellence.
      ( I _do_ see growing parallels between Boeing and Microsoft re their MoO )

      But do they really believe that on the “inside” ?

  6. Some days ago, the Financial Times (UK) published an interesting piece by Jeremy Lemer:

    Southwest Warns On Switch To Airbus
    ———————————–

    Southwest Airlines would consider buying Airbus aircraft for the first time if Boeing chooses not to develop a more fuel-efficient version of its leading single-aisle jet, the chief executive of the low-cost carrier has implied.

    The suggestion will raise the pressure on Boeing to upgrade its popular 737 family of aircraft with a new, more fuel-efficient engine, rather than put its efforts into creating an entirely new version of the jet that could take substantially longer to bring to market.

    If consummated the move would be a significant coup for EADS, the European conglomerate that owns Airbus. Southwest has a fleet of more than 500 aircraft but has stuck with a single type of Boeing jet for most of its history. A unified fleet helps it reduce maintenance and operating costs.

    Last year, Airbus said that it would go ahead with a re-engined version of its leading A320 family of aircraft, called the NEO. But the move has met with a mixed reception from airlines and aircraft leasing companies.

    For Boeing, the dilemma is whether to introduce an “interim” model or to skip the round entirely by developing a completely new single aisle aircraft.

    (continued …)

    Comment:
    A customer with a fleet of 500 aircraft is not peanuts.
    How will Boeing decide ?

  7. I know I am beginning to sound like a broken record, but which technologies would allow a narrow-body to achieve a 20-25% operating cost improvement, given that engines alone can maybe deliver 4-5% only? I guess extended maintenance intervals may deliver bigger savings on narrowbodies than widebodies, because they accumulate cycles quicker? How much could that account for? And then what else?

  8. BAck at you, Scott. Thank you for all the hard work you do to keep this thing going.

  9. As for the competitiveness of the 777-300ER vs. the A350 series, isn’t it so that the 77W will not only compete (/has competed) with the A350-1000, but also with the A350-900? If one is to believe Boeing PR which has been busy saying over the last decade that P2P is the” future”, and that “smaller” aircraft are better positioned to take advantage of this “new” paradigm, then surely the A350-900 is a good replacement for the 777-300ER. If, on the other hand P2P is only a side show, then wouldn’t the often touted “truism” that frequency trumps capacity hold water in this case as well?

    Now, as a comparison, one should keep in mind that the 747-8I has, in fact, been competing in RFPs with the A380-800, although the success rate for the Intercontinental has been rather dismal, partly due to the fact that the CASM of the A380-800 is apparently at least 10 percent lower than that of the 747-8I. Based on the fact that the A380-800 has a gross interior floor area 32 percent larger than that of the 747-8I (590 m2 vs. 447 m2), and based on the 747-8I being “present” in these RFPs, it’s not unreasonable to assume that the 777-300ER is in fact competing with the A350-900 in a number of RFPs due to the fact that the gross interior floor area of the 777-300ER is only about 18 percent larger than that of the A350-900 (330 m2 vs. 280 m2).

    Source (A388 vs. 748I floor area):

    http://www.ainonline.com/news/single-news-page/article/boeing-thinks-big-with-747-8-cabin-mod-20735/

    Interestingly, the initial cruise fuel consumption rate of the 777-300ER is roughly 7.7 tonnes per hour (metric) after having taken off at an MTOW of some 351,5 tonnes. The same initial cruise consumption figures for the 777-200ER (when it’s taking off at an MTOW of around 294 tonnes) varies depending on the engine type, but if one takes the mean value of the fuel consumption rates for the three available engines, it’s around 6,53 tonnes per hour. If the A350-900 burns 20 percent less fuel than the 777-200ER, the initial cruise fuel consumption of the A350-900 (when it’s taking off at MTOW) should be roughly 5.2 tonnes per hour. This would indicate that the initial cruise fuel consumption of the 777-300ER is around 48 percent greater (when taking off at MTOW) than that of the A350-900.

    These fuel consumption figures should indicate that the CASM of the A350-900 should be very competitive with that of the 777-300ER. If the CASM of a smaller airliner is close to, or equal to that of a larger airliner, it’s usually bad news for the latter. Perhaps, therefore, Boeing is more worried about the A350-900 than they will generally admit.

    • United is the only airline I know of that publicly chose the A359 over the -300ER and 748i to replace their 744s, referring to the -300ER “old tech.” But that occurred in 2008, when the business was in deep decline. All that has changed, and now airlines seem to be trending to the -300ER to replace 744s, which is exactly what BA designed it for, and for which the A359 is not really a competitor because it is 50 seats and tons or revenue cargo smaller. The key point is that BA do not need to do much with the -300ER until they decide to replace it because they think that the 350-1000 will not be a competitor.

      Boeing’s problem is with the 772ER, which the A333 and A359 have essentially killed. A while back, there was speculation whether BA would respond by building a new family of planes in the 300-400 seat category to replace both the 772 and 773. Now, it is clear that they will use the 789 and 7810 to bracket the A359 and try to get back into the 300 seat segment by marketing their commonality with the 788. Boeing have done well with this argument so far. If one counts AA’s so far non-order for 49 789s (which seems to be in some kind of endless purgatory), BA’s 789 orders alone are close to AB’s for the A359, and this is in adadition to BA’s 788 orders.

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