Odds and Ends: Why aircraft are late; catching up to Boeing

Why Aircraft Are Late: Boeing 747-8, 787, Airbus A380, A400M, A350, Mitsubishi MRJ, Comac ARJ-21, Sukhoi Superjet and probably Comac C919, Bombardier CSeries and Irkut MS-21–all late. It’s the new normal. Ernie Arvai at AirInsight takes a look at why.

Catching Boeing: Airbus may well have trailed Boeing through the Farnborough Air Show in terms of orders, but it may also be on the way toward catching up. The big PAL order for 54 aircraft was announced this week. A 100-airplane order out of China is due to be announced shortly. Another 100 airplane order from AirAsia appears to be pending. Year-to-date, Boeing has 701 net orders and Airbus has 270 net orders. These three orders still leaves Airbus well short of Boeing, and Boeing has more 737 MAX commitments to convert this year. We expect Boeing to finish the year in first place. It will be interesting to see how close Airbus can come.

NEO firm order wrap: Aviation Week has this detailed recap of NEO firm orders. We expect some of the A320neos to be converted to A321neos as time goes on, just as we expect 737-8 MAX orders to be swapped with 737-9 MAX positions.

24 Comments on “Odds and Ends: Why aircraft are late; catching up to Boeing

  1. I have the feeling catching up to Boeing on this year order total might be lowish on A’s priority list. A350, financial crises, Mobile, A400m EIS, A330 strategy, freezing A320 family specs, carbon trading, China, catching some B customers, did I say A350? .. Busy times.

  2. Ernie missed the boat on his piece, IMHO. He inexplcably overlooks major causes of delay for the 787 (empty roll out, side of body, flight test fire), while highlighting / mischaracterizing issues which had absolutely no impact on program schedule (fuselage missmatch). In addition, Ernie fails to mention the changes in certification requirements, technologies, and levels of systems integration, which are the major reasons new aircraft now take 8 years to bring to market, rather than 4. To conclude plywood mockups will help de-risk programs from the real reasons programs stub their toes so often today is truly naive.

    Overall, a pretty poor job of analyzing things which are all well undersood and well documented in the public domain.

    • The points you present take time but they don’t directly cause delays.
      None of the visible 787 stutters can be attributed to those items.
      The delays all point to prounced model / reality missmatches.

      I actually think Mr. Arvai did give the wrong examples too:
      He presented the failure points and not the underlying causations.
      ( that returns you to my third sentence. )

    • When did Boeing figure out that it takes 8 years to bring a new aircraft to market. Certainly, they hadn’t figured it out when on December 16, 2003, they made the ATO (authority to offer) announcement. Nor had they seemingly figured it out by April 26, 2004, when the board of directors approved the formal launch of the 7E7 with EIS planned for May 2008. What about July 8, 2007 when that empty but painted hull saw the light of day. How many individuals from within the company, on that day, were starting to realise that the 787 was not going to be a 4 year project (from launch). I’d be curious to know when the Boeing people finally did figure it out, that the 787 was going to be a roughly 8 year undertaking from ATO to EIS. 😉

      Didn’t Boeing now that the certification requirements for the 7E7 would be “different” from that of the 777? Didn’t they know that it’s not very clever to BOTH change the set-up of your production infrastructure significantly AND to radically change the way you make your next product AND to do it in a shorter time-period than the last all-new product that was developed. Are we talking about not only a clueless board back there in 2003 having no insight into what was required in systems integration, but also of an overconfident R&D organization whithin the Boeing company with little time for contrarians?

      • Yeah all bright peope work at Airbus, only the potheads reamin at Boeing..

      • OV-99,

        I would have thought this was pretty widely known by now, but this will help you understand the dynamic internal to Boeing at the time the 787 (7E7) program was defined and launched:

        The 787 program was launched under the leadership of Harry Stonecipher, who only very reluctantly permitted BCA to proceed with a new airplane program. Harry was much more interested in keeping capital expenditures low and RONA high, which biased him toward derivative aircraft. When the 7E7 was proposed, it was soundly rejected at the BoD level, as being too costly and the development timeline too long. BCA was giving the BoD a pretty realistic view of what it would take to develop an all-new carbon fiber aircraft with an all-new systems architecture, and the BoD could not stomach it. The only way Harry and the board were going to launch the 7E7 program was if cost came way down, the schedule shortened and the all-important (to Harry) RONA improved. This forced BCA to introduce some very high risk elements into the 787 development plan. Namely, a broad global supply chain and extraordinary compression of the development schedule.

        The majority of us on the program at the time watched the proposed program changing in these ways and knew we were signing up for something which was next to impossible to achieve. The technical challenges were too great, the partners too inexperienced and the schedule too short, but this was the plan the BoD approved, so this is what we tried to execute.

        In short, many of us knew all along a new airplane program would take 8 years, but Stonceipher and the BoD would not accept it. They believed it could be done faster and forced us to adopt that plan. Under the current leadership and BoD, we see a knee-jerk reaction in the other direction; the 737 MAX program is VERY conservatively defined and scheduled.

  3. Outsourcing coming back to bite the greedy in the a** 🙂 I for one dont like all this transfer of know how and employment from west to other places. Greed will never lead to sound decisions, ever! In the end west will be the 3d world and the rest of the globe will turn its back on us.

  4. I don’t get the need to catch up to Boeing really. I think Airbus themselves and everyone else have already accepted that Boeing will win this year’s order race seeing as it was impossible for the MAX not to gain orders and the NEO to have a repeat of last year.

  5. Not so sure Byran !
    Airbus may receive two to three hundred A320 orders in the following weeks, in Berlin …
    PAL (Done), CHINA, Air Asia, and some unknown today !

    And AA orders are still not in the books …
    Keep an eye open with Pegasus, and Turkish, very disputed , an may be Easy Jet too !
    Just speaking of the hotter !
    Still waiting for the EU, AF/KLM, BA, IB, and AL!

    May be Airbus will be on par this year !

  6. Re: A320 NEO order wrap up;

    I agree many of the 1300 A320 NEO orders are basicly slots that will likely be converted to A321s in the coming years. E.g QF, intra Asia / China, leisure and transcon carriers.

    Looking back in my view the recent reengine bonanza was really initiated by an imaginairy aircraft that isn’t even launched, the CS500. It took Airbus and Boeing engineers / marketeers just hours to see this aircraft shine through after Bombardiers released basic specs of the platform. Weights, wings and range all are dimensioned for it. (the CS100 is very heavy..)

    It won’t have the range, cargo capasity and 200 seat growth potential, but it can do 140-150 seats two class or 170 single class up to 2000NM at superior operating costs. And that’s were more then 90% of global Narrowbody operations happen to be.

    Bombardier doesn’t have the muscle Airbus and Boeing have, but the Chinese C919 is aimed larger and the ARJ21 potential is limited. If Chinese AVIC and financers say ” lets go”, they proved they can move mountains and the market could look different in the next 20 yrs..

  7. I still believe the heavy reliance on massive outsourcing to countries and companies where a large portion of the engineers have very little to no experience working on aircraft is one of the largest reasons for these programs having such problems. That certain people at the OEM’s believe stress and design engineers can be easily replaced with cheaper labour without a large drop in quality, effectiveness and effeciency is not doubted. That they still have not come to realize that this is indeed not the case is what is more disturbing.

  8. That “NEO firm order wrap” mentioned by Scott Hamilton is outdated already:
    Airbus just has managed to secure a high volume order in China. During the visit of German chancellor Angela Merkel, a firm order was signed, but it fell a bit short of expectations.
    Chinese lessor named ‘ICBC Leasing’ finalized an order for 50 A320 aircraft. This was later confirmed by the spokes-person of that company.
    At list prices, this would correspond to an order valued at $4.0 billion. But Chinese news agency Xinhua reported the real order value to be “only” $3.5 billion.
    In advance of Merkel’s journey to China, expectations were for as much as 100 aircraft, which could be ordered.
    But Airbus’ Asian streak of luck doesn’t end there, as CEO Aireen Omar of Air Asia, a Malaysian airline, has just confirmed towards Bloomberg their commitment to buy 100 additional Airbus aircraft during the ILA airshow, taking place September 11 to16 in Berlin.

  9. en590swe :
    Yeah all bright peope work at Airbus, only the potheads reamin at Boeing..

    Then the alternative is Boeing knew about the full duration in advance and missled their
    customers ( and everyone else ).
    The NSA balloon certainly was something like that but Boeing never offered a hard commitment there.
    My impression was that any specific delay had a close second sibling running.i.e. any visible issue fixed would have just exposed another less visible problem.

  10. Uwe :
    Then the alternative is Boeing knew about the full duration in advance and missled their customers ( and everyone else ).

    Narrow minds always see the world in terms of absolutes. Black or white, with no alternatives to what their limited imaginations can construct. In reality, precious little of this world works that way and there is usually far more middle ground than poles. The truth about the scheduleing and Boeing’s belief in the 787 program is most certainly one of those cases where neither of the polarized options you offer represent the reality of what went on inside Boeing.

    • Certainly, as a standalone statement that would have been disingenious.
      But it is the perfect counterpoint to Mr Swe statement and posted in that context.

      Now onwards to the greys:
      Is there any learning effect visible in this context or will we see overamplification
      leading to rectangular wave behaviour?
      IMHO what we see here is the incompatibility of myopic shareholder quarterly results
      infatuation and an industry that thinks and works in a multi year to decades timescale.

  11. Awhile back someone linked to Javier’s financial analysis of the investment required for the 787. While one can debate the numbers he plugged in (and even he readily admits that they are subject to uncertainty), his model is very sound. There have been several analysis on the L1011 in the 70’s since there was much public data available as the result of the bankruptcy. They follow similar logic that shows it is extremely hard to consider investing in commercial airplane development. The list of former airframe manufacturer’s is good evidence of this.

    The model shows that the only way one can expect a reasonable rate of return for a new commercial airplane is to have some combination of: faster development time, lower development costs, or some source of low cost financing (read goverment subsidies for development costs or investors expecting low rates of return). The expectations that companies expecting double digit rates of returns in the 80’s and 90’s are probably having a reality check now and perhaps investors are willing to accept single digit rates of return on real goods.

    So to convince shareholders to drop the billions of dollars of money with no expectation for any return for years, one has to be very optimistic. Some may call this greed, but I challenge these to see if they would expect low single digit returns on high risk for their own investments.

    The problem with this is how to make the answer needed to satisfy the captial markets jive with the technical realites. One can reasonably assume that many within Boeing, perhaps even the ones that promised it realized that it was (highly?) improbable to acheive, but once the bullet is fired, the program had to continue. Where do the people who committed to the shareholders work now? The good news is that all the people who make a program successful have been employed which wouldn’t have happened if a pessimistic (realistic?) assesment was made and the shareholders rejected the launch of the 787. Ironically, the world is better off for having a new airplane, even if it was painfully acheived.

  12. The Capital Market is essentially nonproductive.
    Any “profits” there appear as “cost” for those that are productive.

    The high profits in that sector stemmed from in all essence “Ponzi Schemes”.

    Profit expectations today simply are unrealistic.

  13. We can agree that profit expectations were too high in the last decade or two. I think that in the current world economic environment expectations are more realistic and accept lower rates of returns for safe investments. Many are satisfied with just not losing all their capital.

    As to the Capital Market comment: who pays for people to do “productive” development of new products? If no one was expecting to get a paycheck while a product is in development (incuding the people supplying material, equipment, and services) then I guess there is no need for capital markets. Of course we can always ask for money from taxpayers who don’t expect a profit – preferably from some foreign goverment!

    • productive as in creating “value added value”.
      lending money may be neccessary but in itself does not produce anything.
      quite the reverse. Lending money has cost associated.

  14. OV-099 :
    Didn’t Boeing now that the certification requirements for the 7E7 would be “different” from that of the 777? Didn’t they know that it’s not very clever to BOTH change the set-up of your production infrastructure significantly AND to radically change the way you make your next product AND to do it in a shorter time-period than the last all-new product that was developed. Are we talking about not only a clueless board back there in 2003 having no insight into what was required in systems integration, but also of an overconfident R&D organization whithin the Boeing company with little time for contrarians?

    CM :
    The majority of us on the program at the time watched the proposed program changing in these ways and knew we were signing up for something which was next to impossible to achieve. The technical challenges were too great, the partners too inexperienced and the schedule too short, but this was the plan the BoD approved, so this is what we tried to execute.

    What OV says above is exactly the way I saw the situation at the time (7 or 8 years ago). I thought at the time, and still think today, that it was unbelievably arrogant and completely out of touch with reality to propose an all-composite + all-electric + all-outsourced + all-in-a-record-time aircraft program.

    What OV says above can be verified in numerous articles published by Flightglobal and Aviation Week, among others. On the other hand what CM says cannot be verified.

    • CM’s explanation ( an absolute first from an active insider in this respect ) fits in with
      what I have seen in larger corporations at work. More pronounced with “US style”
      flavored managements.
      But I have mostly seen it in connection with looting a company ( Opel, Liesegang, Grohe ).

      On the other hand we have seen the “plausible deniability” method used in the US political arene in heavy rotation ( and now partly exposed as the fraud it presented ).

      Without overpromising in all aspects, underpricing the product and judicious help from UDH and other oppinion formers the Dreamliner would not have garnered the sales numbers we saw.
      Rerunning history in a realistic setting the market of sold airliners in that class would look significantly different.

      Thus it is a question of “cui bono”.

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