Airbus’ chief operating officer-customers, John Leahy, dismisses the idea that Boeing can add more seats to its 737 family to gain competitiveness over the A320 family.
In a press briefing in advance of the air show discussing the 737 MAX (not subject to embargo), a Boeing official revealed that the company is considering changes to the galley/aft lavatory design and the use of slim line seats to add 6-9 seats to the entire 737 NG family. These changes would migrate to the 737 MAX. Airbus previously announced similar changes to the A320, gaining three seats, and more recently to the A321—which also required the addition of exit doors—to boost capacity to 236 passengers in shoe-horn configuration.
But in an interview with Leahy, was skeptical about Boeing’s possibilities.
“That’s more problematic, we’ll see,” he said. “Is this the O’Leary option where they stand at the back of the airplane?” he quipped, referring to Ryanair CEO Michael O’Leary, who has proposed a standing seat configuration.
“I’d be very surprised if they did that,” Leahy said, getting back on point. “I don’t know if they could do that (6-9 seats) but remember, we have 236 seats in the A321, so why should I be concerned if they squeeze a few extra seats in? I’d be surprised if they can. I think [the 737-900ER] is at its exit limits right now. It’s also at its performance limits.
Leahy believes that the A320neo will maintain a 60% market share vs the 737 MAX.
“We’re outselling the MAX 2-1 with a 65% market share. We’re not talking about the first couple of hundred airplanes, we’re talking about the first couple of thousand that the neo will have 60% of the market and they’ll have 40%. We’ll give them 40% of the market. It looks right now that the [neo] market will go higher than that but we’ll stay there.”
typical JL, doing his job for Airbus , deriding the competition ; that said, he is indeed in the driver’s seat re Neo.Boeing is clearly in a catch up mode.
Not that Randy Tinseth doesn’t do the same.
Ostensibly, Leahy seems to be the more vocal of the 2. I also like how he calls the B787-10X the “B764” of the B787 program.
I notice a change of tone form Airbus, after a few months of not / hardly responding to McNerney and Tinseth jabs
Not only Leahy, but also Bregier, Enders and Williams. Apparently PR advised a tougher approach.
Sometimes, Boeing really asked for it, given their choice of words. Here’s a recent comment from Bregier.
“Turning to the A350, Brégier says the new widebody will have the same performance as the 777-300ER, but with 25% less fuel burn. “Somebody said we don’t have the guts or appetite to launch an aircraft from the ground up,” Brégier quipped, “I think this is a brand new aircraft, not like the 777X which is a derivative of an existing platform.”
Taking a final dig at his competitor, he points out that the A350 is mature with limited technology risks. “I have no appetite at all to launch a grounded aircraft.””
Regarding slim seats. Quote from
….Airlines are also introducing slimline seats and reducing seat pitch to add additional seats to narrow-body aircraft. Lufthansa has increased the capacity of its A320s by 8% through the use of thin-line seats from Recaro.
Similarly, Southwest in the US is introducing new thin line seats that allow an additional row of seats in their 737-700 aircraft (137 to 143 seats) with a one-inch reduction in pitch, a 4.3% increase in capacity….
That is what happens when you don’t seize the opportunity when it arises. Indeed a window of opportunity has opened when Airbus launched the neo. Boeing should have responded immediately with a technologically advanced replacement for the venerable 737. That window is now closed.
With a composite wing/empennage and an Al-Li fuselage Boeing could have come out with a a 150 seat capacity NSA-700, a 174 seat NSA-800 and a 204 seat NSA-900. With range to spare. And of course all equipped with the unequalled Pratt & Whitney GTF engine. There is no need to wait for paper engines.
This move would have kept the CSeries at bay and would have annihilated the neo business case.
Boeing still can do the NSA. What they are spending on the MAX is only a fraction of what they are proposing to spend on the 777x. Probably about a 1/4 or a 1/5. The investment in the MAX is small change and a good decision to hold position in the market until the NSA. The bad decision is to wait too long to launch the NSA and rely too heavily on the MAX. I see the NSA as a larger aircraft: 14.5′ round fuselage, 1-2-1 business and 2-2-2 coach, 165′ long, and 150′ wingspan.
2-2-2 coach carries too much deadspace to be efficient. A 150′ wingspan will put the type well above the upper limit of Code C in the ICAO ARC. Won’t be a good narrowbody replacement for most airports.
I think an optimized 200 seat aircraft will require a 40 or 42 meter wingspan. For example, if Airbus puts a new wing on the A321/A322, it may be in this range. I guess they could put a folding tip on there, or have airports build bigger gates, since the future of efficiency is moving towards larger wingspans.
I’m sure Boeing would love to develop a follow-on to the 737 if they had the money, but the 787 program will continue to be a cash burn for them for several more years. As a result, Boeing can’t justify launching a new plane until it gets it’s 787 program to stop bleeding money. Same thing goes with the 77x program – don’t look for any earth-shattering advances here, either. Boeing just doesn’t have the money. As a result, the a320 will diminish 737 sales and the a350 will slowly erode the 777’s profitability.
I think the 2011 Boeing NSA was a 2-3-2 economy, 2-2-2 premium, slightly oval, LD3-42 capable, high wing.
With the MAX, 787-10, and 777X, Boeing’s plate is quite full right now. In my opinion they should have skipped the MAX altogether and replace, not revamp, the 737 right away. At the same time continue to develop the 787 one model following the other: -8, -9, -10. And then proceed with the 777 modernization. Although I must admit that in the meantime the 777X has become more urgent than I initially thought. I now think that the programme should proceed without further delays because the A350-1000 is coming fast.
But where would the NSA fit today in the overall scheme of things? Start the NSA as soon as they are done with the MAX? It would appear as the logical thing to do. But it would also make the MAX look like a waste of time. But like Auguste Rodin once said: “Nothing is a waste of time if you use the experience wisely.”
That is not a New Small Airplane anymore. That is more like a New Midsize Airplane. Or NMA for short. 😉
2-3-2 is pretty much a 767.
I continue to strongly believe, that Boeing made a huge mistake by launching
the MAX instead of an all new a/p, if for no other reasons than that the A320
has a wider cabin and a taller landing-gear, which prevents larger and more
efficient engines, such as the GTF, from ever being installed!
But, I also have to admit that I do not have sufficient financial data, which may
well prove that continuing with the MAX, produced more profits than a new
a/p so far, especially in view of the huge 787 losses, already on Boeing’s plate!
Note: A 2-2-2 configured 6 across a/p, would have been one of the most foolish
a/p Boeing could EVER have launched, because you would lose as much as
you would gain, both in weight AND drag, in that configuration!
I’m still liking 2-2-2, and 1-2-1 business, it’s a good configuration. Is drag that big a deal? Look at the frontal area of the A380, it seems to burn less fuel than other aircraft per seat. The A320 has more frontal area and skin than a 737, is that really slowing it down by any measurable percentage? 2-2-2, 25% of the aircraft is aisle, which is not a lot more than the E-jet and A330 which are 20% aisle. Space is not as expensive as it is made out to be, weight is a bigger issue. Aisle seats are popular, 200 seat turnaround time is important. 2-2-2, it’s the final frontier, who will get there first, Boeing, Airbus, Embraer, or Bombardier?
In supersonics, drag is all about maximum cross section. Not so much in subsonics, where friction drag is greater a deal, and that is proportional to exposed surface. You essentially have to design a bigger barrel with a larger surface if you want a 2-2-2 cabin configuration. Thus, you have to cope with greater drag compared to 3-3 (and with higher structural mass, for that matter). So the trade is turnaround time and passenger comfort versus efficiency. One could guess what most airlines would go for.
2-2-2 is just a wishfull thinking of some anetters and people here. As said, in days when 777 with 10 seats is a reality and there is a talk about 11 seats for A380 the airline executives would scream a bloody murder at Boeing if they come up with 2-2-2. Just won’t happen.
The 707 was 14′-2″ deep, so I’ll compromise with a 14-2 circular fuse More overhead bin space for carry-on luggage is also value added interior volume use.
Like the 737, the 707 fuselage diameter was 12′ 4″.
On the boeing link you provided on pages 10 and 11, it shows the 707 as being 14′-2.5″ deep.
That figure is the fuselage height. That is from the top of the fuselage to the ground when the aircraft is on wheels. Maybe that is what you mean by “deep”. But the fuselage width remains 12′ 4″.
You are right, height it is. I would be curious if a circular section was superimposed on the 707 section, what the increase in perimeter would be?
Poor Boeing… No Money 😉
Quoting from one of the many financial articles out there (Seeking Alpha).
“Boeing’s sales in 2012 were strong at $81 billion, a year-over-year increase of 19%. Operating income also increased 8% from the prior year, which means Boeing has a strong cash position. The company increased its quarterly dividends recently from $0.44 to $0.485 per share. Perhaps most impressive, Boeing’s cash on hand is $17 billion while its long-term debt is only $9 billion.”
Observer, you have a point when you acknowledge that analysts are saying positive things about Boeing, but Boeing’s own numbers don’t support the story. Take a look at the Deferred Production Costs associated with the 787: http://www.boeing.com/companyoffices/financial/balsheet.html. Total Deferred Production Costs and other unamortized costs are over $20 Billion and climbing fast (Boeing doesn’t even include $1.7 Billion in Supplier Advances in their web page) – and that’s debt on top of whatever you referenced. Now…this pretty much precludes Boeing having the financial strength to launch a major aircraft development effort at this time – or any time in the next few years – don’t you think?
If I’m not mistaking, those deferred production costs are accounted for over the whole 787 program accounting block. Which Boeing most recently set at 1100 Aircraft. Increasing dividends and stock buybacks are Not something a cash poor company routinely does…
If they were to reduce their dividends, they would be able to invest more quickly. But I doubt BA’s board has any appetite for doing that!
Boeing was going for the NSA. SW, Delta openly balked. They didn’t want to wait after 2020. AA neither. Boeing kept dismissing the NEO saying even the 737NG was better.
In July ’11 American invited Albaugh, showed him a giant A320 MOU and gave him 3 weeks to come up with something. There wasn’t even a model at the signing.
I think Boeing does have the financial strength to launch a major aircraft development effort. Possibly even more than one, provided it is done in the right sequence. My previous view on this was that Boeing should first launch the NSA in response to the neo and CSeries. Then continue developing the 787-9 and mesh it with the 787-10 at the appropriate time. Then start thinking about the 777X.
But now Boeing has started the MAX development and put the NSA on the back burner. The 787-9 development is finished and the 787-10 is about to start. And there is also considerable pressure to get the 777X on track as soon as possible. That means Boeing’s plate is full. But its pockets are not exactly empty either. The thing with Boeing is that it has a strong cash flow coming from the 777 and 737 programmes. Not to forget the military contracts.
Of course the situation could change in the next five to ten years. The neo is doing extremely well and the CSeries is very promising. The A350 poses a real threat for both the 787 and the 777. And the military market is dwindling. There is a possibility that in the future Boeing could start running of cash. But for the moment it doe not seem to be the case despite the deferred costs. Whatever those amount to exactly.
That is why I am so strong on the NSA. Boeing should do it while it is awash with cash. Same thing for the 787-10 and 777X. But it cannot do them all at the same time. It must first finish the MAX and start the 787-10. With the 777X not too far behind. The proper sequence and the right beat are important elements to ensure the success of these concomitant projects. But I am not sure where the NSA would fit in this concatenation. The problem is that it is getting late for all the programmes AT THE SAME TIME! If things turn out in such a way that Boeing starts to run out of cash it wont be able to do the NSA in due time. And there is a sizeable risk associated with that.
One thing is for sure though, the shareholders will have to accept sacrifices in the near future in order to ensure that Boeing will continue to thrive in the more distant future.
What’s the business case for launching the 777x before the NSA? How many 777x to sell before breakeven, 500, maybe more? Both the 777x and the NSA are big money, versus the 787-10 or the MAX which are a few orders of magnitude less. 777x versus NSA, I think the 777x is a bigger gamble. I’m sure Emirates is good for 200, but who will buy the rest?
The business case for the 777X rests on the ongoing success of the 777. The latter had a slow start but picked up speed eventually when the proper adjustments were made. It is now Boeing’s biggest cash cow. But the A350-1000 is threatening its preeminent position. Boeing has no choice but to respond. Yes it is a huge investment. And yes it is a gamble. But in a gamble there is at least an element of uncertainty. With the status quo there is none: a slow death is a sure thing to come for the 777 if it is not extensively modernized soon.
The 777 is the right size for a steadily expanding market. And the margin on it is considerably higher than for the 737. I believe the 777X can hold its own against the A350-1000. And its largest variant will have no competition for the foreseeable future.
But I agree that the 777X is a bigger gamble than the NSA would be. In the case of the 737 replacement the risk rests on the shoulders of the competition. It would actually break their back.
If the 777X improvements come mostly from the new wing and engines, and *if* the development of the wing has been jobbed out to the Japanese, then maybe Boeing figures the 777X actually costs them little but margin — kind of like Airbus launch aid. If the plane is a success, it nets them less money but they hold serve and buy time to execute their strategy. But if the plane fails, it doesn’t cost them much. The trick is not to try to juice the offering’s market position with loss-making sales. On the 787, this strategy seems not to have worked out so well, but maybe they feel they have worked out the kinks.
If all goes according to plan and they can get the 781 and 779 to market without the bottom falling out on the Max, it seems like the money should be there for one clean sheet program launching early next decade. The problem with this plan, it seems to me, is that, the the eighteen year interval between the 787 launch and the next new plane will find the company with people at all levels of the company with no experience in new plane development. Worse still, there will be almost no one left in the company with personal experience in launching a successful new aircraft, since the initial 777 development will be over 30 years in the past at that point.
Add in all of the intentional institutional disruption wrought by the ceaseless war on talent in the name of cost control, and you have a company that, despite its illustrious history, just doesn’t seem likely to really have the chops to tackle an ambitious new plane development program.
Contrast this situation with Airbus, where a decade has never passed without a new plane launch or two. I’ve got to believe that no matter how much technical and process knowledge you are able to assign to the corporation, there is a huge advantage to having an engineering force which on average has been through one and a half new plane program cycles. It seems to me that these people will have learned the trick of keeping the effort on the fast track, while the under experienced and over reaching group will become expert only in recognizing and recovering from error. That’s a great skill when you need it, but doesn’t necessarily help you much in learning how not to get off track in the first place.
Maybe I lost my point in too many words there,so I’ll try a shorter version.
I fear it is easy from the executive suite to conclude that the company’s success comes primarily from capital and management decisions. These things can work across any time scale.
If you believe that the company’s capabilities really primarily exist in its team of employees, then strategies need to be executed on a human time scale. Careers last thirty years – maybe forty at most. The management team fifteen years from now needs to be significantly comprised of people entering the company today.
In view of that reality, a company can’t really afford to sit on its hands for ten to twenty years while it recovers its cash position. It needs to execute repeatedly on fairly short cycles to continue to build on what has been learned. The shorter the cycles, the more “surface area” the acquired knowledge has within the organization. Ignore these constraints, and you are likely to burn disproportionate resources re-learning the same lessons over and over again.
The U.S. aerospace sector knows this argument because they make it all of the time when arguing against program slowdowns in the defense sector. They just don’t seem to really believe it when it comes time to set their own priorities.
Matt, you point in the right direction imho.
A corporation as such holds nothing tangible and not much of any kind of brand.
All the value of a company is carried by the workforce. There is a minimum of
diversity you have to hold on to, to keep that value alive. You can shrink the workforce
( some areas more than others ) but it is perilous to loose your core capabilities
cadre. New developement requires a significantly different mindset than the people
that do project housekeeping tend to have.
Essentially you can swap out top management in fast rotation without loosing all that much
but you can not do that to your capabilities holders ( the technically competent ).
Unfortunately modern management principles seem to have turned this upside down.
The other problem, apart from cash reserves, is that BA is actually reducing the size of its engineering team already (as the company says there is less need for engineers). So it won’t be really quick thing to ramp up engineering activities on a new program.
Someone please stop these pointless marketing comments from both companies. (ｏ`皿′ｏ)ﾉ
Maybe if they add more seats they should also adopt doors that incorporate inflatable slides/rafts like modern airliners.
How much weight would they add, and is it a case of simply changing the doors, or does the surrounding frame have to be changed?
On paper? not much. IMHO this is at the moment only a little floater to make announced gains slightly more plausible and thus keep the doubters at bay.
If executed it is another step away from the original minimal change objective Boeing had.
Should this be an issue. Boeing continue to enjoy grandfather rights.
Just imagine the outcome of the Lion ditching a few weeks ago if it had occurred a little further from land in deep water.
Having to launch life rafts stored in overhead bins in the 21st century is appalling when better technonogy exists
Before anyone says that this is just squeezing in the passengers: I have flown the LH 737-500 with slimline seats and although 2 rows were added, they were much more comfortable from a passenger perspective.
And the fact that 737-500s have these seats, it show that it is nonsense for both Airbus and Boeing to claim as an improvement in future airliners. As long as evacuation and weight limits are not exceeded, you can do this to almost any plane including DC-9s and TU-154s.
How hard would it be for some Japanese companies to develop also a barrel for the fuselage? Outsourcing looks nice for the books but in the end more could be lost.
I expect the barrel fuselage 787 to be the first _and_ last of its kind. ( at least
for some time to come )
If the barrel design would show the advantages that PR associated with the method
we would see a blown up 787-SS as in “SuperSized” and not a technological fallback like the 777X.
Exactly how has the barrel design come up short? Boeing doing the 777X should not be taken as an indictment of barrel technology. If it was as bad as you say, then Boeing would not be considering the 787-10X.
” Boeing doing the 777X should not be taken as an indictment of barrel technology.”
Thanks for the guidance, Mike 😉
The 787 exists and doing the -10 stretch currently doesn’t have much in the way of alternatives. The 777-200 isn’t a good base for pimping. It complements the 767’s place.
but it has lost all its “duh obvious” decission quality. Even for Boeing. See the reactive way they go towards bringing this model forward ( or not ).
I just don’t think that Boeing will do a _new_ barrel based fuselage in the next 2..3 decades.
( The A(irbus) side of things will be similarly interesting to watch. Black Drugs: Brought into the picture by a very successfull 787 marketing campaign that seems to have had no contact to reality, what design details will be there to stay? )
Be careful Uwe, my guidance and 5 cents will get you a nickel.
All joking aside, you mention lack of alternatives, I think Boeing also lacks alternatives to the 777X in timeframes that allow a chance to maintain market share. This is one of the many consequences of not executing well on the 787. If the ball would have started rolling 4 years ago, perhaps we would be seeing something entirely different now.
imho bad execution and bad design decisions synergetically go hand in hand.
I would expect the “change needed” frames to be in their own class in respect to cost.
Then how do you measure learning curve? If you just go by cost, squeezing your suppliers could bring fantastic gains ( or just doing inventive bookkeeping by way of accounting for _future_ squeezes. The 787 is profitable from day one 😉
Boeings numbers never can/could be taken on face value.
“Boeings numbers never can/could be taken on face value.”
I have shown below the cost numbers on which I’m basing my statements. As far as I can tell, they come from Credit Suisse.
What else, other than cost, should the learning curve be based on? Cost is the most accurate measure of total labor time to produce something. This, of course, assumes that the labor rates for different communities have been taken into account.
We’ve all heard the comments about Boeing “squeezing” it’s suppliers. McNerney must have been saying this just to please the stockholders because, realistically, what can Boeing really do to force their main suppliers to reduce costs other than to give incentives by allowing them to share in the profit? These major suppliers are essentially sole source providers because what they do involves so much learning and specialized knowledge. It’s not like Boeing can threaten to change suppliers of major structural or systems components without severely disrupting production and therefore their cost. The only suppliers that Boeing can really “squeeze” are the ones competing to produce standardized widgets. These types of widgets are usually not the big lever-arm cost reducers.
I also do not think it was wise for McNerney to make the statement about the 787 being profitable from day one. While it may turn out to be true according to program block accounting principals which I find somewhat artificial, it also assumes things that are by no means free of considerable risk. However, technically these things could happen, and end up proving his statement to be truthful.
Does anybody know just how much Boeing itself is getting from each Dreamliner sale? If i remember the business case, they have a bunch of risk sharing partners who will each get a cut of the payment for each aircraft delivered. Granted this has been somewhat watered down with some of the buyouts and perhaps even with some of the bailouts but I would assume that Boeing is only ending up with only a fraction of what they get when they deliver a 777, or even a 737.
That was the pitch, less risk and less outlay but nobody considered less income as well.
Will that not have an impact on Boeing’s finances for years to come?
John Hart-Smith, a former Boeing engineer, had warned his company about outsourcing profits in a lengthy paper back in 2001.
My knee jerk answer is that Boeing is still getting nothing from each 787 sale right now, because they are still costing more to build than what they were sold for. It was reported that LN-100 cost about $160M to build compared to $400M for LN-8. However, I’ve also heard that the early models were sold for as little as $40M. While only a relative few sold for this rock bottom price, this gives an idea of how much pressure Boeing is under to reduce the 787 unit production cost.
So far, they have been on a 25% learning curve, which is better than the historical 777 average, but this will have to continue if they want the program to break even at the often talked about 1100 units. I personally don’t think the program will break even until about 1400 units, but I’m essentially only guessing.
You bring up a good point about the risk sharing. So far, it seems to be a raw deal for the partners since they are now sharing the bath Boeing is taking as opposed to having negotiated guaranteed profit into their supplier contracts as they did previously. But, you are right, if times ever get good for the program dollars wise, they’ll get their slice of the big boy pie, ostensibly one sized in proportion to their investment (risk). I too would like to know what those proportions are.
John Ostrower once reported that the first 400 frames sold for an average
of $76m ( exclusive engines! )
IMHO the learning curves of 787 and 777 can’t be compared easily
as the 787 production had a “languishing” period for about 2.5 years
that should have provided for significant learning experience and process improvements.
i.e. if they can’t manage to be better than the 777 was without that recourse
things would be going really bad. ( for which window in time is the 25% learning curve valid)
( similar to how the dispatch reliability is handled by having 1 frame +2 hot spares
ready for one dispatch event. )
Wait a minute…. didn’t big Mc declare that they are already profitable from the first delivered frame?
“On the profitability of the 787 Dreamliner, McNerney said the standard accounting approach in the airplane business allows the initial heavy investment to be spread over many years and hundreds of airplanes.
On that basis, he said, “we will be profitable on day one,” meaning now.”
Hmmm, it’s all in the numbers 🙂
Yes, McNerney is not lying IF Boeing’s assumptions hold true. The two biggest ones in my opinion are:
1) Boeing will achieve the 787 production cost reduction goals, achieving or bettering a 25% learning curve. No small order.
2) Boeing will actually sell 1100 787’s (includes -8’s and -9’s). I don’t think the 787-10 figured into the 1100 unit accounting block determination.
If Boeing can achieve these, then they will make a small profit over that accounting block, and be able to retro-actively declare minuscule profit on the first frame sold. Accounting is indeed grand.
“IF Boeing’s assumptions hold true”
But if they are making a profit from frame one, then they must! 🙂
“I don’t think the 787-10 figured into the 1100”
Which itself comes with a development price tag… Add to that the battery troubles, estimated at $1b. I also remember some time ago Steven UH (aka the Godfather) predicting it will break even at 1500 but nevertheless I do believe in the end it will be a profitable programme for Boeing, if not from the frames then from the after sales revenue. Where the break even threshold lies is academic.
What do you mean by after sales, frames sold beyond the accounting block of 1100 or “spin-off” programs such as the 787-10?
I think the break even point is fairly critical to the financial success of the legacy 787 program (-8 and -9). If Boeing cannot continue on it’s current learning curve, it may take many more frames to break even, if it happens at all.
If Boeing can play it’s cards right, the 787-10 could be a very profitable program. With the core technologies ironed out on the -8 and -9, and an experienced production system, the development and production costs could be much lower.
“after sale” ~= everything you sell to a customer after he has bought your planes.
(spares, maintainance, upgrades, .. but not things under warranty or fixing design mistakes )
“What do you mean by after sales”
I mean ancillary revenues from the aircraft in service: spares, support, training etc. My greater point is that even if we assume worst case scenario of just break even, the revenues of keeping 1500-2000 a/c in service are huge and never really considered within the scope of the programme.
“If Boeing cannot continue on it’s current learning curve, it may take many more frames to break even, if it happens at all”
Which is why I said that it is laregly academic as there are a lot of variables that go into it, impossible to predict.
“If Boeing can play it’s cards right, the 787-10 could be a very profitable program”
I am also of the opinion that it will be a profitable programme, mainly aimed at the operators who have the 787 already. In my view it falls short as a competitor to the A350-900.
“In my view it falls short as a competitor to the A350-900.”
Are you saying this because of the shorter range or narrower fuselage, or both.
The figures that I had seen suggest the MWE is going to be within 1.3% of each other but for that A359 is likely to outlift it in payload, outrange it and if necessary put 10 across in the cabin. I certainly do not agree with JL that the 7810 will be a marketing disaster. It will occupy its niche, particularly serving existing 787 customers, example SIA.
I turns out I was wrong in my calcs, but this does not change the fact that Boeing is making great progress in reducing the 787 unit production cost. Here is the data I’m working with so you can fit your own learning curves if you want:
LN-7 unit cost: $400M (earliest non-flight test plane delivered to ANA)
LN-66 unit cost: $220M
LN-75 unit cost: $200M
LN-100 unit cost: $160M
I got these numbers from Aspire, who quoted numbers from Credit Suisse reports.
First thing to note is the large data gap between LN-7 and LN-66. I have no idea how the cost behaved in between. The unit cost could have steadily decreased according to the classic exponential learning curve, or it could have remained relatively high and then suddenly decreased. A 17% learning curve would connect the two cost points, but I’m pretty sure that the cost profile will not be easily represented by a simple exponential curve due to the complex nature of the additional costs associated with change incorporation and rework. It is hard to learn how to be efficient while having to go back and replace fasteners and correct deficiencies when the amount of work on each frame differs. LN-66 was the first 787-8 to roll off the line that required no rework or change incorporation.
The amazing part of this cost data are the last 3 points, LN-66, LN-75, and LN-100, which show impressive cost reduction, all on frames that required no rework, and when the rate was between 2.5/month and 5/month. There was no languishing period here that can explain this. An amazing 41% learning curve fits these three cost points very closely. This is probably due to the virtual elimination of traveled work and also the increased efficiency associated with a higher production rate.
Obviously, a 41% learning curve is not sustainable over the entire remainder of the program. A least-square fit of the last three cost points (LN-66, 75, 100) that also intersects the first cost point (LN-7) yields a 19% learning curve. This curve over predicts the cost of LN-100 by about $18M. Boeing’s stated goal is to achieve an overall program learning curve of 25%. We will have to wait and see what the future cost points are, but the 25% goal, once derided by analysts, looks way less ridiculous.
Bottom line is that cost reduction on the 787-8 is going very well so far, at least as well or much better than the 777, and very close to the targets set by Boeing around the time of EIS. This simply cannot be explained away by a 2.5 year languishing period that ended long before LN-66 marked the end of change incorporation.
“Bottom line is that cost reduction on the 787-8 is going very well so far”
That’s very good news. I think a lot depends on where you start the learning curve. If there a relatively smooth start, there is less opportunities to improve..
True enough, keesje.
That is why I was always a bit confused by analysts who were so pessimistic about Boeing’s 25% learning curve goal. They would say something like – the 777 program only achieved 16%, yada, yada, yada, and it was the best run Boeing program ever, yada, yada and so on.
Not only did Boeing start horribly, but the 787 construction represents a wild departure from the Al airframes they had always done in the past. I think both of these provide extreme opportunities for learning. To me it is also telling that the 25% goal was stated around the time of the first delivery, after all the massive screw-ups.
That being said, the 41% learning curve between LN-66 and LN-100 is impressive and stands on it’s own. They must have really ironed a lot of things out to achieve this.