March 25, 2015: When the early Boeing 787-8s emerged overweight and falling short of the marketing claims, Boeing said that nonetheless the fuel burn and performance guarantees to customers would be met.
When we revealed the first flight test performance results for the Bombardier CSeries, BBD acknowledged fuel burn and noise results were better than guarantees and meeting the “brochure” numbers.
With questions raised over the CFM LEAP-1B fuel burn at this stage of development, Boeing responded by saying it will meet customer “commitments.”
What does all this jargon mean? We interview a Marketing Executive, experienced in aircraft evaluations to find out.
The marketing executive remains anonymous. He said:
There are generally two levels for performance data in discussions between an OEM and an airline evaluating fleet options.
The first is what we would call “nominal” or “brochure”. These are the headline numbers that are generally used in brochures and which get shared with customers in typical route evaluations and marketing studies. These figures are in fact meant to represent the average aircraft at delivery. Although they are considered the best numbers to demonstrate the value of the aircraft, they are not necessarily overly aggressive.
The “guarantee” figures include margins that the OEMs include in order to account for, and protect against, any variations in build for individual aircraft. The guarantee margin is usually the cumulative effect of potential variations on empty weight, engine performance (there is also a “nominal” and “guarantee” SFC that the engine manufacturer contractually owes the airframe manufacturer) and aerodynamic drag (i.e. how clean and “straight” the airframe is). Different programs will have different margins and there is not necessarily an industry standard. To give you a range, I would expect margins of a key point such as fuel burn to be anywhere from 5% to 1% depending on the maturity of the airframe/engine combination. Furthermore, Performance Guarantees can be offered for any parameter of importance to the airline’s business case: for example: take-off or landing field length, max cruise speed, empty weight, max. range, noise levels, etc… and the percentage can be different for each of these.
Because airlines will seek rectification and financial penalties attached to missing a guarantee point, the guarantee margin can be a point of negotiation and there are many different formulas that can be considered to ensure the airframe OEM and airline customers each protect their interests.
We also spoke with another person familiar with procedures by Airbus and Boeing. He reports:
Usually, a sales director works them out with revenue management (same team that does pricing) because Boeing will often try to negotiate higher pricing in exchange for improved guarantees. Airbus generally doesn’t tie the two as tightly, which is a growing point of frustration for [Boeing] sales teams.
Thus, it appears that the OEMs, parsing words carefully, can make accurate claims despite conflicting information to marketing statements.