Odds and Ends: Volcano protection; Airbus trims guidance on A350; More on Boeing

Volcano protection: No, we’re not talking about any eruptions from IAM 751. Instead, Airbus and Europe’s easyJet created some man-made volcano ash to conduct tests for detecting the real thing.

Airbus trims guidance: EADS/Airbus trimmed its financial guidance on A350 development costs, according to The Financial Times (free registration required). According to The Times, the entry-into-service of the A350–slated for 3Q2014–“is at risk.” We have EIS in 1Q2015. EADS for now is sticking with the 2014 EIS.

Boeing 777X: As might be expected, there continues to be a lot of news on the 777X.

30 Comments on “Odds and Ends: Volcano protection; Airbus trims guidance on A350; More on Boeing

  1. Scott,

    You quote the FT article as saying the A350 EIS “is at risk”, but that phrase does not appear in the article. It does say:

    EADS described the A350 programme as “challenging”, partly because of the need to ensure that a planned ramp-up in aircraft production is done in a smooth and high quality manner.

    It added: “The A350 . . . programme is progressing well . . . The increasing effort to prepare for the industrial ramp-up and a mature entry into service is triggering some higher costs.”

    The description of the program as challenging is not new. Airbus have been saying that for a number of quarters. The costs are, however, new. And if they’re going from a projected neutral cashflow to -€1.5bn, that’s a fairly significant set of extra costs.

    • Things like changing 40% of cabin fittings ( for lighter weight / better performace / whatnot ) comes at cost.. Probably just now 😉 ( I don’t think suppliers will do this for a smile and some back patting.)

      • How about 2nd FAL?? If we see a surprising rush of orders for surprisingly early delivery at Dubai the mystery might be solved.

  2. On volcano ash – gosh- I can get a good – better deal on some gen u wine ash from Washington state – St Helens brand. Perhaps Sicily could spare some from Mr Aetna

    maybe Airbus doesn’t need its ashes hauled :_PP

  3. Indeed, the article says:
    The first aircraft is meant to enter service with Qatar Airways, the launch customer, in the second half of next year, and EADS said this timetable was on track.

  4. AVOID seems to be a camera based system. So how is that different than the old tried and true Mk. 1 EYEBALL system? Inflight, you can easily see ash from 37 nm away in VFR on top conditions. Volcano ash is very fine, that is why radar cannot ‘see’ it very well. Perhaps a real time space based system combined with GPS can show ash clouds along your route better than AVOID can?

    • AVOID uses an IR camera. I’m pretty sure that there are compounds in dust and ash that absorb IR more readily than visible light, making an IR camera more sensitive to particulate concentrations than a traditional camera. Besides, Mk. 1 EYEBALL’s lack standardized calibration curves.

    • My assumption is that they measure “brightness” i.e. the equivalent radiation temperature. i.e. dry atmosphere with good transmissiveness will show the
      temperature of the stellar background ( <50K ) while vulcanic dust will show the insitu temperature equivalent radiation for ~150k..250K.

  5. Scott – the Financial Times is abbreviated as ‘FT’. The ‘Times’ is that daily issue of toilet paper sold by Murdoch. 🙂

  6. The Reuters article talks about orders for 100 777X at Dubai. Used to be reports of 250. Is there any fact behind it or is it just somebody’s guess that Boeing just “lost,” at least in the near term, orders for 150 airframes?

    • So let me get this straight….Boeing wants to make sure 777X output is fast. So they offered a deal the Union hated and now are threatening to move it out of Washington State. How did they think the Union was going to go for a 18 to 20 year contract?
      The corporate Kool-Aid never ceases to amaze me.

      I wonder if the Washington State politicians are considering a Right to Work vote?
      The choice could be lose Boeing or go RIght to Work?

      • I have no inside info re the reasons ( if true) quoted about the ” 18 to 20 year” contract. BUT i do have a few opinions.

        1) Any contract say over about 6 to 8 years would essentially gut the union, especially with the typical 5 to 10 year boom bust cycles. And there is no doubt if McNerney had his way, he would banish the union to Mars or Pluto or preferably to a different universe. Once rid of the IAM, the rest would be fall like a house of cards.

        2) The whole thing is/was a kubuki-dance to extract the max freebies from WA state

        3) After whacking SPEEA re the pension game such that SPEEA wound up being divided between Engineers and Techs ( with the Techs being sold out due to Engineering folks apathy and lack of cojones ) why not go for the gold with IAM. ?
        After all, a significant amount of Engineers ( young and still paying off major student loans ) simply cannot afford a strike, and have little appreciation of labor history. A certain amount of ineptness by SPEEA also contributed to McNerney success. Thus we have the – spread out the engineering all over the place game. And the facility issues re dispersing SPEEA types is small change compared to assembly areas.

        4) Most of the Boeing Board and senior level management were not around during the 1997-98 debacle caused partly by giving a few grey beards a golden handshake ( few = 9500 ) in 1995. One can certainly argue that the 777 was the last design/produce airplane to come close to meeting schedule hoops until the 737-P8 and now probably the 767 tanker. ( if one forgets the 767 tanker debacle in 2004 and certain prison terms ). !5 years of power point rangers along with a buyout by MCD and the dismissal/retirement of the ‘ old guard” has an effect. Those who do not learn from history- do not learn from history.

        5) Of course Ray Conner was IAM many years ago, and that does seem to make it surprising as to his involvement in the game – UNTIL- ( history) one remembers a guy named Alan Mulaly being placed in the same position in 2000-2001. Watching Alan then getting on TV and spouting the company party line gave me the impression ( body language and facial expression ) of having a mouthful of lemons ( or worse). ( Disclaimer here I have had good vibes- memories of good dealings with both Ray Conner and Alan M in years gone by- both as an employee and a PITA retiree )

        6) lastly ( for the moment) I think that deep down – BA knows it essentially has to due the major- final assembly-test with a well trained workforce. That either narrows down the options or simply results in Everett area so BA tried to go for the gold.

      • State Sen. Mike Baumgartner (R-Spokane) called on Gov. Jay Inslee (D) to call a special session to take up right to work. Inslee’s spokesman immediately rejected the idea. The House is controlled by Democrats, the Senate by a coalition that gives Republicans control, so even if the Senate were to take up a bill and pass it, the House never would and Inslee in any event would veto it.

    • Boeing’s not going to launch another clean sheet for about 15 years? File under, ‘we will make no wine before it is time’. Note to Embraer and Bombardier, leapfrog 737 with larger CFRP wing aircraft, launch in 2016 with 12 year advantage.

    • Buffenbarger said Conner and Deal expressed the Boeing board’s view that launch of the Airbus A350 went “a lot more smoothly than was anticipated. So they see stiffer competition now arriving earlier rather than later.”

      So, Boeing has based their strategy betting on Airbus doing the same stupid things on the A350 as they themselves did on the 787. That’s nothing but incompetent in my book.

      • Seeing LH’s A350 purchase as an unexpected loss to Boeing caught my eye.
        Together with the “better than .. ” this comes with a whiff of hubris.
        It IMHO indicates that Boeing is either uninterested or unable to understand Airbus way of doing things.

          • We are looking at supplier expectations and not buyer hedging.

            Independently on hedging:
            LH ordered 748i in 2006 but must have been involved in defining the type for quite some time before that.
            Airbus announced delays in 2005 rather unexpectedly at that afair.

            Taken together I would go for a first order decission on having a properly sized fleet granularity supported by very low pricing to recoup losses from the Connexion cancellation and on a still lesser level a potential A380 hedge.
            ( See what that potential hedge would have been worth. The A350_XWB_ product announcement was imho indicator to the development process at Boeing had run/ was going to run aground. )

      • “It IMHO indicates that Boeing is either uninterested or unable to understand Airbus way of doing things.

        Concur. In addition, I’d guess that you could add the Not Invented Here (NIH) syndrome to the diagnosis. 😉

    • On the rush to judgement- I’ve taken a closer look at one of the issues re conversion to 401K AKA the Boeing VIP plan. perhaps a bit outdated, but to show a good reason to look at this particular ” gift ” and ‘ comparable’ benefit game VERY CLOSELY. Sound and fury signifying what ??

      The recent Boeing “push’ to convert to a 401k type plan remind me of a not well known locally case brought against Boeing in Illinois on the hidden fees paid.

      My point is that to foist such a game on employees- union or not either with no real explanation or in the case of the union a few days to evaluate is reprehensible

      True it is mentioned in the Annual report ( 10K )- but tracing it down is not trivial due to lack of names and confusing dates shown.

      The initial filing was on 9/28/2006 and of course the case like most is still wending its way thru the system.

      My summary of the case after getting the 40 pages of the complaint is the serious questions regarding hidden fees and decreased real returns

      Some financial gurus claim a 1% change in fees can decrease returns over 30 years by over 20 percent.

      One example of the several complaints in this case is extracted below to show just part of complaint.

      105. The Boeing Stock Fund is an investment option in the Plan.
      106. As the name suggests, The Boeing Company Stock Fund provides participants
      with the opportunity to use a portion of their retirement savings to purchase stock in the company for which they work.
      107. By its nature, The Boeing Company Stock Fund is undiversified and risky,
      especially when it represents a disproportionately high percentage of a participant’s retirement savings.
      108. While The Boeing Company Stock Fund benefits Boeing by providing a steadymarket for the Company’s stock and more than $3.3 billion dollars (as of 2004) in working capital from their employees’ salaries, the Fund causes participants to embrace the risks inherent in undiversified investing. . . .

      115. By its very nature, The Boeing Company Stock Fund forgoes such investment
      management and holds an undiversified portfolio containing employer stock. Thus, The Boeing Company Stock Fund should not assess investment management charges against participants’ accounts. . . .

      128. For example, if a non-Plan investor purchases 100 shares of Boeing stock at $100 per share, and the share value thereafter rises by 10%, he or she has reaped a $1,000 gain on the initial $10,000 investment.
      129. However, a Plan participant placing the same $10,000 in The Boeing Company
      Stock Fund does not receive 100 shares of Boeing stock. He or she receives The Boeing Company Stock Fund units representing an interest in the shares of employer stock held in the Fund and an interest in The Boeing Company Stock Fund’s cash.
      130. If The Boeing Company Stock Fund holds 3 percent cash and 97 percent stock,
      the 10 percent increase in the value of the employer stock will translate into a $970 gain for the participant, while the value of the cash remains static. . . .

      For those who want to chase down the facts and details so as to be prepared to ASK the right questions at the right time Below are my sources

      FROM Boeing 2012 ANNUAL REPORT ( 10K ) pages 103 and 104

      On October 13, 2006, we were named as a defendant in a lawsuit filed in the U.S. District Court for the Southern District of Illinois. Plaintiffs, seeking to represent a class of similarly situated participants and beneficiaries in The Boeing Company Voluntary Investment Plan (the VIP), alleged that fees and expenses incurred by the VIP were and are unreasonable and excessive, not incurred solely for the benefit of the VIP and its participants, and were undisclosed to participants.

      The plaintiffs further alleged that defendants breached their fiduciary duties in violation of §502(a)(2) of ERISA, and sought injunctive and equitable relief pursuant to §502(a)(3) of ERISA. During the first quarter of 2010, the Seventh Circuit Court of Appeals granted a stay of trial proceedings in the district court pending resolution of an appeal made by Boeing in 2008 to the case’s class certification order.

      On January 21, 2011, the Seventh Circuit reversed the district court’s class certification order and decertified the class. The Seventh Circuit remanded the case to the district court for further proceedings.

      On March 2, 2011, plaintiffs filed an amended motion for class certification and a supplemental motion on August 7, 2011. Boeing’s opposition to class certification was filed on September 6, 2011. Plaintiffs’ reply brief in support of class certification was filed on September 27, 2011. The court has stated its intent to issue rulings on the amended motion for class certification and the alternative motion to proceed as a direct action for breach of fiduciary duty and then stay the case until it is determined if an appeal of the class certification order is filed.

      As a result, on September 19, 2012 the district court issued an order denying Boeing’s motions for summary judgment as premature pending class determination. The Company cannot reasonably estimate the range of loss, if any, that may result from this matter given the current procedural status of the litigation.


      For those who want still further information



      CASE 06-743 9/28/2006

      Gary Spano ET AL V BOEING ( Regarding the 401K plan AKA VIP)


      YEP TRUST BUT VERIFY cannot be done in a few days. OH BTW looking up the 2012 Annual report on the Boeing site – doesn’t work- probably just a webmaster thing . .

  7. Interesting article Don. So far from being a great victory for Boeing, according to the Union chap they see it as an indicator of trouble because the A350 also got some of LH’s order. On the expectation regarding an Airbus screw-up, I agree with OV-099. It’s only those who don’t learn from history that are doomed to repeat it. Assuming Airbus did not learn from the 787 debacle is wishful thinking par excellence, as they say in Alabama. Must be a limitless supply at the Kool-Aid fountain of Boeing marvellousness in Chicago. 🙂

    • A380 and A400, although politicians and air forces share some of the guilt for A400 delays. Airbus have put 3 clean sheet designs in the air in 8 years, really dumb to trust that they’d screw up after so much recent experience. So dumb I think it was an excuse not a reason.

      • Expect some hints in the current run of snooping leaks that the NSA and their brethren did not limit themselves to passive industrial snooping activities.

  8. SEATTLE, Nov. 5, 2013 /PRNewswire/ — Boeing Commercial Airplanes (NYSE: BA) has issued a statement from President and CEO Ray Conner in response to International Association of Machinists & Aerospace Workers District 751’s decision to proceed with its efforts to secure a historic long-term contract extension that would result in locating final assembly of the new 777X and fabrication and assembly of the airplane’s wing in Puget Sound.”

    “I want to congratulate IAM District 751 Directing Business Representative Tom Wroblewski for his leadership, vision and determination to forge an agreement of historic proportion that, when ratified, will secure and extend thousands of high-wage, high-skilled aerospace jobs and expanded economic opportunity for residents of Puget Sound and Portland for many years to come,” said Conner. “Tom and his team pressed hard for an agreement that maintains market-leading pay and benefits for the members he represents, while also recognizing the critical importance of our efforts to achieve increasing competitiveness in order to win against a growing list of global competitors.

    “This is important to everyone with a stake in Boeing – including our employees, the community and our customers – and we look forward to the ratification and a long successful future as the global leader in aerospace,” Conner said.

    I am confused, who managed this epic failure; Boeing/IAM management against the IAM or it was all just a Boeing maneuver to cover a decision already taken: to movie out the hostile Washingtonians ?

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