Pontifications: the A380, Airbus and Boeing

Hamilton (5)

By Scott Hamilton

May 4, 2015, c. Leeham Co. Of all the things we write about, nothing stirs responses and readership than news–of any kind–about the Airbus A380.

Last week I wrote about Malaysia Airlines putting a large number of its Airbus and Boeing wide-bodies for sale or lease. MASCargo’s entire fleet of Boeing 747-400s and Airbus A330Fs is on the chopping block. Some Boeing 777-200ERs are, too. The six A380s (all of those in the MAS fleet) are also being offered for sale or lease.

Holy crap. This news headlined not only international press but sent the social media into a frenzy. Within 12 hours it had become our second most read story of 2015. In less than 36 hours, it became our top story of the year so far.

I also wrote last week about the 10 year anniversary of the A380. It was a mixed review: the plane is a technological success, if by now a bit dated, but sales continue to be poor. I talked about the prospect of an A380neo and how Boeing is rooting for Airbus to proceed, sucking up money and resources in the process. I wrote about the urban legend that Boeing tricked Airbus into launching the A380 program as a way to divert money and resources.

And then I suggested that Boeing’s own failed strategy, ineptitude and arrogance prevented the company from taking advantage of Airbus’ focus on the A380.

787 CNN 2

CNN.com had this on its home page Saturday. Even though there are more than 250 Boeing 787s in service, the strategic industrial and early design blunders continue to dog the airplane.

You’d have thunk I dropped a skunk at a lawn party.

One reader suggested I was part of the Airbus PR department or Airbus’ John Leahy ghosted the article. Never mind that the day before I wrote a strong defense of the Boeing 787 and suggestions that “everyone” was deferring the 787; and gave an equally strong defense of the 787 in TheStreet.com. Perhaps Boeing’s Randy Tinseth ghosted my article and impersonated me to The Street.

I didn’t go into detail in my article about Boeing’s “failed strategy, ineptitude and arrogance” because I thought after all these years, these were pretty obvious. Apparently not. So I’ll hit some highlights.

Failed strategy

Go all the way back to the merger between Boeing and McDonnell Douglas. The financially-driven McDonnell family and MDC CEO Harry Stonecipher pushed onto Boeing the (failed) MDC strategy of developing more derivatives instead of developing new airplanes. The 757-300 and 767-400 were sales duds. Research and development was starved for money. Proposals for the 747-500/600/X went nowhere.

When it came time to fish or cut bait on whether to launch the 7E7 (later named the 787), debate in the board room centered around developing this airplane for much less money than it cost to develop the 777. Lynn Lunsford, then the aerospace writer for The Wall Street Journal, wrote on April 21, 2003, a detailed insider’s look at board considerations. This cost-cutting approach led to the failed industrial partnership that later so bedeviled the 787 program. Irony of irony, one board member who cautioned against overly focusing on costs was–Jim McNerney, who warned doing so could allow Airbus to overtake Boeing. His warning, it turned out, was spot on.

From this core failed strategy of international industrialization, the insidious knock-on effects have set Boeing back for decades in its competition with Airbus. If the 787 had entered service in May 2008 as planned, then Boeing was going to develop a clean-sheet replacement for the 737, followed by a clean-sheet replacement for the 777. We all know what’s happened since: Airbus maneuvered Boeing into doing the 737 MAX and, with no stomach for the risk associated with a new design, Boeing settled for an extreme makeover of the 777 in the form of the 777X in response to the A350-900/1000. The MAX 7 is the new 737-600 and the MAX 9 can’t hold its own with the A321neo.

If Airbus spent too much time, effort, money and resources on the A380, what does this say about the 747-8, especially the 747-8I?

Ineptitude

This is inside baseball stuff, but Boeing’s sales process is cumbersome to the point of absurdity, complain Boeing insiders. There is a committee process that takes a long, long time to go through. At Airbus, when necessary, Group CEO Tom Enders, Airbus Commercial CEO Fabrice Bregier and super-salesman Leahy can make a decision in an hour, according to customers. Boeing has lost deals due to its process, Boeing insiders tell me. None of this is new; The Wall Street Journal wrote about process years ago. It just hasn’t changed.

Furthermore, while Airbus coordinates efforts between sales and support services, the Boeing insiders complain sales and its support group (Commercial Aviation Services, or CAS)–because over the high emphasis on each being its own profit center–make it difficult to offer competitive packages to match or beat Airbus.

Arrogance

Boeing’s arrogance is well known and decades ingrained. Wags even say the stock symbol is “BA” for a reason. Sales campaigns have been lost because Boeing refused to believe customers were seriously considering the A320 (think legacy United Airlines and Frontier Airlines, campaigns that date to the 1990s and 2000s; and jetBlue, also to the 1990s). None of this is new. The Wall Street Journal wrote about this, too.Things haven’t changed, either. Boeing sales was said to be gobsmacked when Delta Air Lines ordered the A321ceo instead of adding to its existing order for the 737-900ER.

Or that the A320neo was an inferior plane to the 737NG and would never be launched. Not only was the A320neo launched, it became the fastest selling airliner in history and Airbus flipped several 737 operators.

Think Boeing’s insistence that the 737-900ER and the MAX 9 are better than the A321ceo/neo; the market thinks otherwise, and the A321 comfortably outsells the 737 counterparts.

Think Boeing’s insistence the 747-8I is better than the A380. The A380 has around 90% of the VLAP sector. The market has spoken again.

Do I suggest that Airbus has bettered Boeing on strategy and arrogance? In some cases yes, in some cases no. Generally speaking, Boeing’s wide-body strategy has been better than Airbus. One need look no further than the A340 to look at a failed strategy, and the A300s were inferior to the Boeing 767. Airbus had to try four or five times to get to the A350 XWB and the -800 was a dud and the -1000 has challenges. But Airbus has reached sales parity in recent years in the wide-body sector while surpassing Boeing in single-aisle market share.

Airbus is not without its own arrogance, either. But Boeing has this down to a science, with decades more experience.

Separately…

127 Comments on “Pontifications: the A380, Airbus and Boeing

  1. I think Boeing manoeuvred themselves into into 737max.They had a plan to just scale down and recycle 787 technology.Think what a disaster that would have been, hence why they didn’t do it in the end. I keep trying to formulate my ideal strategy, but it just makes me realise how incredibly difficult it is. I think that the idea of having investment and “harvesting “phases is wrong (in fact I think it’s just management BS to try to justify why the development program is so far over budget)and it should be as continuous as possible.But of course new technology arrives in fits and starts and some aircraft types remain relevant to the market much longer than others . I don’t remember that many sceptics when the A380 was launched, athough plenty of experts predicted that compromising the A350 by developing the 800 was a mistake. The scepticism about the freight market seems to be very recent.The other factor I wonder about is that all large aircraft companies have enormous government support, and like the banks they are too big to fail, and know they will be bailed out. I just can’t decide (like Airbus)what would be best for theA380,it’s the ultimate click bait.

    • I think the 737 replacement issue was more time to market than product development risk. Although the replacement aircraft would eventually beat the A320 NEO, there would be a gap during which a couple thousand “nearly as good” A320 NEO’s would be sold on availability. Boeing just couldn’t afford that gap. Airbus was mighty relieved when its bluff wasn’t called.

      • “Airbus was mighty relieved when its bluff wasn’t called.” That could explain why Scott says that “Airbus manoeuvred Boeing into doing the MAX.” It would also confirm what I have always said: Boeing should have committed itself to the NSA immediately and take to hit. That early hit would have allowed Boeing to bounce back with a knock-out punch.

        • Boeing already had a black eye from the delay’s on the 787 which in turn gave airbus many more orders for the A330, it being the only game in town and delivery dates where not too far out.
          Over promising seems to be the norm today, Bombardier CS-100, CS-300, Mitsubishi’s regional and the Chinese offerings.
          Boeing needs to deliver on time, no excuses anymore or the cloud of the 787 will hang over them for a long time.

          • Over promising on time (787, CSeries) is one thing. Over promising on performance (MAX) is another.

            “Boeing already had a black eye from the delay’s on the 787”. Today Boeing has two black eyes. One for the 787 and one for the MAX. For the 777X the referee (jury) is still out.

      • Seriously FF?

        If Boeing didn’t do the MAX:

        – the A320NEO would have had pretty much 8 years of uncontested dominance of the 170-200 seat market. How do you fancy your market share eroding to <30%?
        – Bombardier would have picked up many CSeries orders by being the only realistic alternative in the <170 seat market. [They'd have already launched a CS500 derivative to capitalise on this.] This would have made the "big-2" a definitive "big-3".
        – The new Boeing 737RS would have been launched around ~2025, this completely rules out propfans.
        – Indeed, its likely that any podded engine developed would fit under an A320 wing, so there would have been little to stop Airbus sticking this under an A320 making a NEO2.
        – That stopgap would then allow Airbus the freedom to launch their own A320 replacement for the ~2035 timeframe, which could include propfans, leaving it a step change in efficiency above the 737RS, which could not be retrofitted.

        Airbus (and Bombardier) would be having wet dreams if Boeing didn't decide to go with the MAX!

        • It takes seven years to develop a new airplane. We are already two years into the MAX development. That means the NSA could have hit the market (and Airbus) in 2020. That is what you call vision. Or 20/20 vision. 😉 But for now we will have to do with 1/4 vision. I mean quarterly vision. Compare that to 2017 for the MAX. That is only a 3-4 year gap.

          I forgot to menton that it would have cost 12 billion dollars. But that money was not available because other projects were going on at the time. Apparently they were planning a 12 billion dollar buyback programme.

          But I am sure they did the right thing. After all that’s why they get paid so much. Aren’t they?

          • It takes ~10 years to get an aircraft from concept to customer.

            A350 – 2004 launch, 2006 redesign, 2015 in customer’s hands. [9 yrs]
            B787 – 2003 launch, 2011 in customer’s hands. [8 yrs – 9 if you practically include all 2003 on design board and practically all 2011 not in ANA’s hands]
            A380 – 2000 launch, 2007 in customer’s hands, but then redesign. [7yrs for headlines then delays for the majority]

            None of the above includes pre-launch design work. Airbus and Boeing are already working on the successors to A320 and B737, with potential subsystems in various TRL gates.

          • @ Brendan

            Boeing was already prepared to launch the NSA at the time Airbus announced the A320neo. What derailed the whole operation was not so much the AA order as the then unfolding Dreamliner catastrophe. I think we all recognize the damage the latter did to Boeing’s reputation. But not everyone recognizes how harmful the 787 has been to the 737 and 777.

            Thanks to Bombardier, Boeing was ready in 2013, technically speaking, to launch a 737 replacement. Had they proceeded with this initiative they would already be in the detailed design phase, soon ready to start cutting metal and fibre. The NSA would have arrived on the market only 3-4 years after the MAX will (2020 versus 2017).

            The view I had at the time was that Boeing could have synchronized the 777X design with the one they would have been doing on the NSA. For example Boeing could have started to work on a small CFRP wing, à la CSeries, and import their expertise on the larger 777X later on. This way the engineers would have been kept busy on a continuous basis, with no last minute hiring and no intermittent layoffs.

            And everybody would be happy, like the were in the sixties when the place was buzzing with pride and euphoria.

          • The NSA in form of the mirage Boeing availed glimpes to the public to fend of the NEO had no near future path to production.
            More like something to EIS beyond 2030. ( and there is a B press notice around that concedes this.)
            In comparison the 787 was a real conservative down to earth thing 😉

          • @ Uwe

            Fighting someone else’s propaganda with one’s own is not always the most effective way of doing it. 😉

        • Brendon:

          prop fans are going now where so that is not an issue

          • Tell that to the folks working on the NSR/A30X.

  2. This is a very well written article and hits at the heart of the core issues at both OEM.

    It is a pleasure to visit your website and get more insight into the dynamics of the industry.

  3. The biggest problem boeing has is that it seems to consider product development as the exception rather than the rule. Since the halcyon days of b757/767 boeing has had to be forced kicking and screaming into any development. Their excellent engineers have bailed them out on the b777 but as time has gone on boeing has fallen behind Airbus in terms of consistent product development. With Airbus all aircraft exhibit a common though evolutionary design thread ie FBW, structures, systems. Boeing on the other hand has a 60s grandfathered 737, an 90s grandfathered b777 and a completely different modern b787. Individual aircraft are still excellent but as a range they have next to no commonality beyond the all important yoke. The max appears uncompetitive, the jury must be out on the x until the design stabilises and the dreamliner will never make a return this side of 2025. Finally what next? MOM? NSA? Proper b777 replacement? All needed and no cash to cover them.

    • You have a very lucid understanding of the situation. The Boeing fan boys should take note of what you say in this post.

    • If Boeing just stopped its $12 billion share buyback program it would have all the cash it needs for development.

      It chooses to believe that handing cash back to investors is a better use of cash than reinvesting in its own business. Quite an admission by their leadership IMHO.

      • Cost of share backpack programme: 12 billion.
        Cost of developing the NSA: 12 billion.

        The shareholders won the battle and Boeing is going to lose the war.

        • Shareholders can win the war too if it’s a matter of jumping the fence.

          • The only way to win this war would be to be the first to sell your shares. For sure you don’t want to be the last as in the infamous “Will the last person leaving SEATTLE – Turn out the lights.” 😉

      • Same could be said of both OEMs, madness to strip out funds when they both need massive cash resources for even a limited development programme. If you look at the historical need for R and D then both are incurring up to 4bn dollars annually as they either do major or minor development

      • ” It chooses to believe that handing cash back to investors is a better use of cash than reinvesting in its own business. ”

        But it helps to ensure that the exec bone-us gets paid to the deserving . . .

  4. Wonderful piece Scott, thank you! Although I suspect this wasn’t your primary motive, I’m now curious to see if this posting becomes your new chart topping story.

    You’re definitely tapping into emotional chords with the debate about Airbus vs. Boeing and your strong views about the (de)merits of individual aircraft.

    But I can also imagine that readers would be emotionally exhausted after last week’s vivid debates 😉

    • MAS fleet restructuring is now the top post of the year. Blew right past everything.

  5. Scott, please explain how “Airbus manoeuvred Boeing into doing the 737 MAX.” I cannot make sense of that statement. The way I interpreted the situation at the time was that Boeing had the prefect opportunity of launching the NSA immediately after Airbus had committed itself to the A320neo. The NSA would have locked-in the neo from the start and a lot of orders (and customers) that went to the neo would have gone to the NSA instead. It is not Airbus that manoeuvred Boeing. It is Boeing that failed to manoeuvre Airbus.

    • Because Boeing had been humming and hawing about the new single aisle aircraft for years, and Leahy really pulled a rabbit out of the hat by not only announcing the A320neo unexpectedly, he also had customers already lined up. Not only that, but Airbus was already ready with planning on a short time scale.

      Like I said, practically out of the blue.

      Boeing really was forced to drop plans for any advanced new single aisle since it was clear within a couple of months that Airbus would just walk away with the market in the mean time.

      • Of course Airbus would have walked away with a big chunk of the market. But what do you think is happening right now? Airbus is still walking away with a big chunk of the market. They are just doing it more slowly. While Airbus was trying, and succeeded, to put Boeing to sleep, Boeing should have gone for the kill.

        I have to agree with Scott: Airbus did manoeuvre Boeing into the MAX. And they probably did so to prevent them from doing the NSA. Because they knew that this would have been the end of the A320. Just like not doing the NSA signifies the end of the 737. Boeing has been acting like a teenager in a men’s club.

        • Pratt & Whitney comes into too. They had their new GTF engine, but only a few programs lined up. It was their chance to get back in the big time as the 737 was sole source with GE, and the IAE V2500 is multi manufacturer.
          Its no coincidence to me that the A320 neo EIS matches the GTF timetable.
          And if the rumoured GE SFC problems for the 737max are true, then PW and Airbus have done a Mayberry on both Boeing and GE

          • This reminds me that in the sixties and seventies all we could see on various airplane models was the ubiquitous JT8D. Pratt was dominating. But almost overnight their little empire crumbled.

            It was not so much CFMI that took P&W out of the narrowbody market as P&W not taking the CFM threat seriously and not being willing to invest in R&D. Surprisingly, Dassault looked at CFMI with equal contempt (Mercure). Do we recognize a pattern here?

            Boeing responded in a very similar fashion towards Airbus, not taking them seriously and not investing in R&D. As a result of this kind of attitude P&W was left out of the narrowbody market for more than thirty years. Is a similar scenario on its way at Boeing? Just asking. 😉

    • Airbus forced Boeing’s hand to reengine 737 by landing the American order. Within 48 hours, McNerney decided to do the MAX. Albaugh wanted to do NSA.

      • That is exactly what I always thought you meant. Because you had said the same before. If that is indeed the case it shows how shallow Boeing’s strategy is.

        That being said, what do you think of the other explanation I offered when I was trying to second-guess you? To be fair that explanation originally came from somebody else who happens to live in Toulouse. 😉

        • I thought Scott and I said the same thing… :-S

      • Aren’t you all underestimating how hard the NSA would be?Ramping up all this fairly immature technology to 50 a month.Then trying to sell it at a large premium despite it not being that much better than the A320.Replacing these planes is going to take balls the size of grapefruits!

        • Aren’t you all understanding how hard it’s going to be for Boeing to cede the narrowbody market to Airbus and Bombardier? Ramping down a very mature but obsolete 50 year old design? Then to sell at a lost just to maintain the assembly hall humming until the engineers can come up with a ‘quick solution’? Not replacing these plane is going to cost the war to Boeing. And yes it would have taken big balls. That is exactly what I meant when I wrote “Boeing has been acting like a teenager in men’s club.”

          • I agree that in the long run the NSA strategy was the winner one, but before that, Boeing was going to have 5-10 very dark years and that looked nearly as hell for a management so focused on the “next quarter”

          • I think the market cycle also told against issuing the NSA now. Boeing would have missed out on the current sales boom. From the industrialization angle, you want to pump out as many units as efficiently as possible. So least change and the market is lively enough that you can still sell with a slightly inferior product. You want to introduce new models during the down cycle when there is less disruption.

            I agree however that it is a close decision and Boeing clearly changed their collective minds in a hurry when it was clear how the market was going.

          • @ FF

            While designing the NSA Boeing would not have missed out on the current sales boom because sales are taken care of by sales people, not by engineers. I think the NSA prospect would have had a more immediate impact on the A320neo’s own sales. For some reason there is a myth surrounding the 737 that makes people want to protect it like if it was a sacred cow. A cash cow it is, but sacred it is not. The only thing sacred at Boeing is money. They venerate it and distribute it to shareholders like if it was sacramental bread.

  6. Scott,

    There is no need to explain Boeing’s arrogance at all, you are right about that. One only has to look at their ridiculousness in:

    1. 767 tanker lease deal: which resulted in prison for one, firing for another, and tarnished reputations of the Air Force acquisition (who, in their right mind thought THAT deal was good for the taxpayer)

    2. Union/employee relations: ‘Nuff said.

    3. 737NG is already better than A320NEO: I mean, come on……I didn’t know marijuana was legal way back then, but apparently Boeing got high on their own supply with t

    4. X-32 would beat the then X-35 (now F-35): Friend of mine who was working at Boeing at the time said “when Lockheed’s plane showed up, I knew it was game over.”

    Boeing has somewhat gotten back into the game a bit and eaten some much needed humble pie. I think perhaps Airbus is doing the same with regard to the wildly optimistic (some say crazy) A380/VLA sales numbers.

    Which is why I’m seriously rooting for Bombardier to kick ’em both in the butt with the C-series. Beyond the fact that it is a really good looking plane!

      • She argued that the current 737 delivers to airlines 2 percent better operating economics per passenger than the promised A320neo will in 2015, and that a re-engined 737 would restore the Boeing advantage to a full 8 percent.

        Lovely…

        So it’s not just vs. the neo here. We have a Boeing vice-president claiming that a re-engined 737 is only 6% better than the NG.

  7. “One reader suggested I was part of the Airbus PR department or Airbus’ John Leahy ghosted the article.”

    Obviously- few know of Scotts affinity for crepes and his secret stash of French wine. Or the pimped out Citroen in his secret Scott cave :-PPP

      • Yep it was a free perk upgrade from his 2CV- And has a Airbus bumper sticker on the back.
        The 2CV ( I cant spell deuceChevelle ) with its cloth top didn’t go so well in the rain capitol Known as NW WA state. I heart that lehay gave him a gold key fob and promised free hydraulic oil changes for the DS.

        • LOL! 🙂 You pronounce ‘deu’, as in Deutsch (minus the tsch) and chevo, as in chevy (with an ‘o’ instead of a ‘y’). It writes ‘Deux Chevaux’ but is pronounced ‘deuchevo’.

        • The deudeuche !
          Indeed you seem to be well aware of the plumbing of the famous DS 😀

          I guess it’s the best part of the Mentalist 😀

          (sorry for this smooth citroen provided off topic)

          • It might not be as off-topic as you think. For the DS was the first car to introduce the front-wheel drive concept. It was a derision at the time but today all the cars are front-wheel driven. What does this has to do with Airbus/Boeing you ask? Well, consider the following:

            Sud-Aviation (now part of Airbus) was the first to introduce the analogue fly-by-wire technology on the Concorde.

            Airbus was the first to introduce the concept of the Big Twin with the launch of the A300. That concept actually originated at American Airlines (the Kolk machine). Today all the large aircraft, except the A380, are twin-engine jobs.

            Airbus was the first to introduce the Forward-Facing Crew Cockpit concept on the A300/310. Anyone entering the cockpit of a Boeing 767 can clearly see that it was designed for a three-man crew although there are only two seats. It was a last-minute change pressured by Airbus who was already starting to be ahead of Boeing at the time.

            Airbus was the first to make use of exotic material on a large scale by making the tail fin of the A310 out of composite.

            Airbus was the first to introduce the digital fly-by-wire concept in a commercial airplane when it launched the A320 more than 30 years ago. Today all the new commercial aircraft are FBW. And all of them, except for Boeing, use side sticks.

            Boeing used to be an innovator and a model for the industry. Today it is a model for what not to do.

          • The first front wheel drive Citroën was considerably earlier… the clue is in the name <>.

            The 2CV, also a lot earlier than the DS, was front wheel drive as well.

          • Ha ha ha! Stupid Anglo-Saxon blog software turns French quotes into text mark up!

            That first car should have been! “Traction Avant”…

    • Over the course of a year, Leeham seem to upset the tribal and/or nationalistic followers of both A&B in equal measure – must be doing something right then!

      • This is the forum where Airbus fan boys, themselves long-time Boeing admirer, are trying to convince the Boeing fan boys that Airbus deserves respectability. And it’s all carried out in heated but respectful discussions. The Airbus fan boys are apparently succeeding for the Boeing fan boys are slowly coming to terms with the fact that Airbus is a force to be reckoned with. All this thanks to the honesty and open-mindedness of someone who happens to live in Seattle.

    • If Scott has a Citroen DS in his stable, he gains an automatic 500 style points…

  8. Mcnerny has been, and will remain, a derivative favoring CEO which in commercial aviation long term is bound to be a failure. The 764 and 753 examples are correct. Skip those and get the 787 into the air without all of the industrialization issues five years faster and billions more in profits would have been made.

    The only point in his defense I’d say which IMHO this blog is a bit biased against, is the antipathy of the machinists union which required Boeing management to come up with a strategy as Airbus moved more away from subsidies and toward efficient manufacturing. It’s a weak defense and JM etc way overplayed their hand/exacerbated the problems long term but it’s also valid to asset that define benefit is not a long term viable solution and had to be fought.

    Boeing will need, however, to be very profitable on the eventual NSA and short term “shrinking” 787 production/systems/industrialization would ultimately have jeopardized this even if it had led to a brief market share gap for one or the other OEMs.

  9. I think the choices made at the start of the 7e7 project can be seen as the reason for a lack of choice Boeing had later on.

    Google back and you can find frustrated CEO’s of Southwest, Delta and American publicly telling Boeing they can’t wait for an efficient NB after 2020. At the same time we can hear McNerney say they airlines will wait until 2020 & Airbus is just catching up.

    Personally I’m wondering how the old flight test engineer Randy Tinseth thinks he is supporting Boeing Brand credibility by producing graphics that are so suggestive, half truth and incomplete they irritate even the most loyal Boeing supporters.

  10. It’s “normal” to let the competitor enjoy “monopoly” in a niche for a while before successfully addressing the problem:
    B777-300ER and A321neo can be used as examples.

    What is really inexcusable for BA is not addressing at all or not aggressively enough “Ineptitude” culture.

  11. If a twenty year old Al fuse and wing A330-900 can compete with a 787 over the Atlantic, then there is even less of a case for an all new A320 / 738 replacement. A 20 billion program over 4,000 units a 5 million surcharge per aircraft, which might require 20% fuel savings based on a CFRP fuse and wing, not including engines, so that is impossible to justify financially. 2035 replacement target for the 738 once the engine has run its course? Airbus or Boeing can build a middle of market aircraft. Airbus can build a new big twin with a 21′ diam. fuselage to leapfrog the 777 and replace the A380?

    • I’m with you on the old vs. the new. I LOVE the a320 fuselage width, and think more tweaks and a new wing would make a great new 757/67 mid-ranger.

      If the new wing was optimized for a321/322 and distance, then the current wing could remain for the shorter range fleets.

      There was a great story on here a month or so ago about the small ‘real’ weight savings you get from CRFP as the panels make up only a part of the weihh with all the metal connectors and electrical conducting mesh taking much of the saving away.

      My mantra would be ‘keep on trucking’, and keep making what you have, more reliable, safer, lighter, and retrofitting tech-upgrades like engines and components as they come along and prove their worth.

    • You are looking at Boeing’s future with the wrong end of a telescope. But you have the right idea if you want to evaluate what the next quarter is going to look like. And for that you need a microscope.

      Otherwise your reasoning is impeccable. But what you cannot see when you are using a microscope is that in a little more than five years from now the 737 will be dead and the A320 will still look fresh.

      “A 20 billion program over 4,000 units a 5 million surcharge per aircraft, which might require 20% fuel savings based on a CFRP fuse and wing, not including engines, so that is impossible to justify financially.”

      Let me ask you Ted: How is it possible to justify a 12 billion buyback programme in the present situation? How is it possible to justify doing nothing, i.e. MAX, when you know, or should know, that the future of your best-selling model is compromised? How can you possibly justify a 30 billion forward lost on the Dreamliner?

      The question is not if Boeing can afford to replace the 737 at this stage. The question is can Boeing afford NOT TO REPLACE what was until not that long ago the pride of the company, but which today is becoming an embarrassment. Stop looking at the backlog for a minute and look beyond. What do you see? You see nothing, because there is nothing to see.

      Boeing will have to face the fact that sooner rather than later its hot selling commodity will fast become cold turkey.

      • The question is not if Boeing can afford to replace the 737 at this stage. The question is can Boeing afford NOT TO REPLACE what was until not that long ago the pride of the company, but which today is becoming an embarrassment.

        I wouldn’t exactly call north of 2700 orders (and 42% market share) an embarrassment. It’s just short of where they used to be – and their own hybris-fueled (so I assume) marketing (“NEO is just creating parity with the NG”) may make this appear a bit worse than it actually is.

        As for replacing MAX with NSA – I said it before and I’ll say it again: I think at this point this would be insane. They’ve sold a more than respectable 2700 MAX and are investing ~2-3bn in its development, with CFM spending roughly the same amount on LEAP. While CFM also has a place on NEO, they’re exclusive to MAX and would have a word or two to say about Boeing launching a MAX replacement before CFM has reached its projected ROI on LEAP.
        Thus, Boeing would be crazy to prematurely launch a MAX replacement and basically devalue a plane that won’t even EIS until 2017.

        Now – if Boeing had so far only sold ~1000 MAX vs. ~5400 NEO (i.e. Boeing only had 15% market share), that would be a completely different story and I’d agree that launching an NSA sooner rather than later would probably be a good idea.

        • “If Boeing had so far only sold ~1000 MAX vs. ~5400 NEO (i.e. Boeing only had 15% market share), that would be a completely different story and I’d agree that launching an NSA sooner rather than later would probably be a good idea.”

          Can’t you see that this is exactly where we are going? And once you are there it’s too late. In 2013 the NSA would have been a preemptive measure. Today it would be more like a defensive measure. Boeing is not only competing with Airbus. It is also competing with Bombardier. The latter is in the same precarious position Airbus was in 1972. Look what Airbus has become today. Never misunderestimate your enemy, as George used to say.

          • Can’t you see that this is exactly where we are going?

            To be honest – no. MAX has quite steadily held its ~40% share and I don’t see any signs of its order book imploding. Not that Airbus alone could deal with the demand anyway.

            And once you are there it’s too late. In 2013 the NSA would have been a preemptive measure. Today it would be more like a defensive measure.

            True. How that preemptive measure would have panned out would have remained to be seen, of course. It would have given Airbus in or around 7 years of exclusivity in the A320/737 niche, and Boeing could only have offered a new fuselage with about 1/2 generation of engine advancements over the GTF/LEAP. Following their experiences with the 787, airlines wouldn’t necessarily have come flocking to order the NSA by the truckload, either. Not sure the business case was all that solid to launch a $12bn+ programme based on that.

            As it stands, Boeing have sold about 2700 planes that they would not have sold if they had launched NSA in 2011. That’s a pretty solid order book to make money from – which should come in handy once the NSA does get launched. (And I agree: Spending 12bn on share buybacks seems absolutely crazy in that context.)

            Boeing is not only competing with Airbus. It is also competing with Bombardier.

            So is Airbus.

            The latter is in the same precarious position Airbus was in 1972. Look what Airbus has become today. Never misunderestimate your enemy, as George used to say.

            Fair enough, but I think underestimating Airbus is exactly what led to Boeing flaunting the NSA. Initially they didn’t quite believe that Airbus were going to do the NEO. Then, they didn’t believe airlines would go for it. And throughout, they believed that airlines would wait until some time to the right of 2020 to get Boeing’s NSA.
            That (IMHO) was almost a textbook example of arrogance and underestimating the competition. It took Boeing the AA order to realise this and finally commit to the MAX.

        • I agree with anfromme that the MAX has sold a respectable number so far. But Normand does have a point too. Allowing the market share to drop to 15% before responding with the NSA would be disastrously late.

          The latter is in the same precarious position Airbus was in 1972. Look what Airbus has become today. Never misunderestimate your enemy, as George used to say.

          I haven’t heard much from the Boeing side, but John Leahy and Airbus have repeatedly shown respect to the potential threat from emerging makers like BBD, the Chinese and the Russians. They used their own success as an example of what would happen if the competitors did not take them so seriously. The decision to launch the neo was firmed up early on to counter exactly such competition and I think, on top of that, it also takes a long term view of things like allowing them some time to bring out a proper NB replacement after the next decade to really turn the screws on the emerging competition.

          • I agree with anfromme that the MAX has sold a respectable number so far. But Normand does have a point too. Allowing the market share to drop to 15% before responding with the NSA would be disastrously late.

            I’m not suggesting Boeing should wait until their narrowbody market share drops that low 🙂
            But I also don’t think it’s going to drop that low to begin with.

            I believe the book-to-bill ratios for NEO and MAX are going to show first signs of becoming disdvantageous in or around 2022. That’s going to be compounded by airlines shouting for something new by 2030, and possibly the Chinese competition finally getting into gear. So the early to mid-2020s would be my best bet for Boeing and Airbus launching new single aisles, with EIS in the early 2030s.

  12. I think a problem in the Boeing camp is there seems to be a resistance facing real portfolio issues. Accepting an issue is the start of a solution.

    Some issue:
    – The MAX and NEO are not as good. The MAX isn’t holding up. Take a close look at the order book, not even until 2025. Ignore/ deny, and we’re up for a market shift.

    The XWB has consumed most of the 777 / A340 market. And yes, hundreds of -900s will become -1000s soon. The 787-9 seems a great machine, but the rest of the 787/777s families are compromised, late or both. Ignore / deny, and we’re up for a market shift.

  13. Give Bombardier credit for the CSeries scaring Airbus into starting the NEO/MAX contest along with being the first to fly the GTF.

    • Is BA waiting until BBD is on its knees with a brand new aircraft but limited orders and then they buy the company and get the frame development for free after they offload the other BBD stuff. Invest in a C500 and then go for the MOM given that they are protected at the bottom end. This is one industry where the company seems to fall in value dramatically based on long-term investment and the intellectual capital invested is consistently undervalued at certain points in the life cycle.

      • C series is an excellent example of how risky this market is.BBD still has ramp up and customer support to sort out. Huge government support is essential. I don’t think that the Chinese would bat an eyelid at $30billion to get into this market. I can’t be the only one who thinks BBD might have been better off being hung for a sheep as a lamb and aimed straight at the target.With the benefit of hindsight maybe Boeing should have gone for something similar at the same sort time,a big c series.

    • Airbus and John Leahy should thank Bombardier for the competition which they won when the NEO/Max contest started, with the Cseries being a threat to Airbus. The only positive in this saga is Bombardier seems to have won many orders for there CS300 compare to the A319NEO/737-7MAX, making theme heavier and less efficient.

  14. I think we can all see a point in the next 10 years where comac has the 919 in operation and an a330 lookalike (929) in advanced development. They have a captive market to build to which is potentially by then the largest short haul market and over 3 programmes they will be hard on the heels of the incumbents. Airbus and Boeing lose a key market over time and are put under price pressure they have not met before. It is innovate or die territory in my book

  15. I’m not really into conspiracy theories, companies tricking each other or farfetched feel good stories. The sole I’ve kept over the years is Airbus not launching a real optimized 200 seater, ‘A320 Plus’ while airlines asked for it. (Jetblue, AF, Ryanair).

    Filling the large gap (7-8 rows) between A320 and A321 by something slightly larger then 737-800 would IMO have let to addition orders and conversions, besting the 737-800/-8 in every area. But also triggering a quick NSA launch by Boeing.

    Thus dramatically shortening the life cycle of the A320 NEO family and have major airlines switching (back) to Boeing NB’s. Keeping alive the 737-800/-8 was maybe overall a better idea then beating it.

    http://i191.photobucket.com/albums/z160/keesje_pics/AirbusA320NEOfamilyconcepts.jpg

  16. “…besting the 737-800/-8 in every area. But also triggering a quick NSA launch by Boeing. Keeping alive the 737-800/-8 was maybe overall a better idea then beating it.”

    So you too believe that this was all conscious and deliberate, don’t you? You guys make me feel incredibly naive for not seeing the machiavellian intent in Airbus’s strategy. I thought only Boeing was evil. 😉

    • Normand, there is/was no technical limitation for the “missing” A320 capasity, all ingredients are/were on the shelve. Many airlines have been asking for a decade + for a cost/ flightsafety wise smart 200 seats/ 4 cabin crew config.

      Boeing responded just a few months ago with a 738-200.. And Airbus is reconfiguring their A320 for a crazy 186..

      Moving into 737-8 /-9 territory would IMO be paid for by 1000 quick A320 conversions alone. A no brainer, likely to be launched as soon as Boeing innitiates a NSA study.

      • So keesje

        You are saying Airbus intentionally gave Boeing a segment to avoid the NSA. If this is the case they are impressively Machiavellian in their decision making. So they give up a part of a market that was too large for them to service to avoid the NSA being launched. All they need to do is be ready for the eventual death of the a320, not imminent but presumably a competitor will out at some stage.

        For 10+ years both OEMs have talked about it being difficult making the sums add up on NSA proposals and surely the NEO makes this even more problematic. I predict slow incremental upgrades for a320 for at least 15 years. The production cost must be as low as it can go as all aspects of the design are fully proven.

        Maybe tweak the wing and replace elements with CFRP. Focus on weight and aerodynamics as things have moved on since their push around 2003, the next NSA will be very different, some sort of turbo prop, slower, straighter winged, some sort of lifting body shape with emphasis on function ie loading/ unloading and very substantially more economical

  17. @ jd evora

    “I agree that in the long run the NSA strategy was the winner one, but before that, Boeing was going to have 5-10 very dark years.”

    Yes, but by not doing it Boeing might face 10-20 years of even darker years later on. And like you suggest, you can’t see that when your eyes are set on the next quarter.

    • Yes, but by not doing it Boeing might face 10-20 years of even darker years later on.

      Why, though?
      I don’t see MAX impacting Boeing’s ability to launching an NSA in the early 2020s, in or around the same time as Airbus. If anything, the money MAX will make before then (and even after that, leading up to the NSA EIS) is going to help. Note how I’m not taking a quarter-based view here – I’m looking at 10-15 years (i.e. the interval between MAX launch and a prospective NSA launch and beyond).
      I believe the alternative would have been a 2011-launched NSA that effectively handed Airbus the narrowbody market between ~2010 and ~2020, while being open to getting leapfrogged first with regard to engine technology (think RR Advance) and then with regard to the actual airframe (think 2020-launched A320 successor).

      Personally, I think the bigger issue in the long run for Boeing – portfolio-wise – is going to be the 777X, not the 737MAX. The X is going to be a fine airplane, but it’s a pretty hefty (read: costly) rework of the 777 which is still only going to have limited long-term appeal, held back by its size and weight and exposed to the threat of a potential A350-1100. But then – a from-scratch 777 successor wouldn’t have been a clear winner, either, if you think about its implications for the 787-10 and A350-900 (and the additional cost and time required). Personally, I do think a newly developed plane would have been the better decision for Boeing in that category, though.

  18. A MoM seems a feasible strategy for Boeing. Indications are it might be aimed at the segment well above the A321 in terms of capacity, as well as payload-range. Still the opportunity is there for filling in lots of room below the A350/787.
    I expect a MoM would trigger an Airbus responds, because it wouldn’t replace 757/ 767s only, but also undermine the A330.
    http://i191.photobucket.com/albums/z160/keesje_pics/Airbus%20A360%20Concept_zpszrtxls4q.jpg

    Automatically such a MoM would define the upper design limit for a new NSA.
    Only challenge I can see is MAX going well under 40% marketshare, or required discounts to stay above this 40% becoming unacceptable. In that case a NSA most likely goes before a MoM.

    Another feasible development might be a bigger wing for the 787. Based on payload range, commonality and EIS, it seems the 787-10/ 777-8 combi won’t cut it against the XWB’s. A 787-10 with the range of the -9 seems beyond the current 787(-8) wings possibilities.

  19. Maybe Keesje has a good point about a an A320+.
    Does anyone have a feel for the cost of development?
    If the price was right would expect almost 100% conversion rate by existing A320 customers.
    In the past we saw the A320 effectively replacing the A319 and the A330-300 doing the same with the A330-200 because if my memory serves me correctly the trip costs were about the same.

    • The cost would be minimal.

      You take an A321, and cut a few sections out.

      After initial stress calcs; you then largely pass by comparison to A321. Same with engines, you may not de-rate them anyway for improved field performance. Systems are already done.

      About the only thing that would need copious amounts of paperwork would be weight and balance.

  20. The Failed 737RS strategy was not the max generation, it was the last one.

    They should have gone for it much sooner. then they would have had something to work with as far as derivative goes.

    Love the 737 but its one generation past its due date, and that is not the Max I am talking about. There should have never been a 737-700/800/900.

    • @TransWorld

      “The Failed 737RS strategy was not the max generation, it was the last one.”

      That’s exactly my point of view as well.

      What Boeing has accomplished with the 737NG may have been remarkable, but from a strategic point of view, the decision back then not to replace the 737-Classic with something entirely new, has IMO been detrimental to its long term single-aisle strategy.

      https://leehamnews.com/2015/02/24/order-cycle-may-have-peaked-for-mainline-single-aisles-but-smaller-jet-cycle-booming/#comment-94058

      • Be that as it may, what’s the correct decision now? A) start a new single aisle today. What’s that look like? Basically an Al-Li A320 copy, carbon wing, GTF engine, split wingtip of a folding tip? Or B) wait a few years?

        • The first thing to do is to stop that nonsensical buyback thing. The next one is to evaluate how best to mesh the R&D on the 777X with the one on the NSA. In the meantime Boeing should try to infiltrate Bombardier with retired Mossad agents (they are the most experienced) and find out how they managed to produce such an engineering marvel as the CSeries for a mere 5 billion dollars.

          By the time we get there Boeing will be a century old and a new CEO will be at the helm. In order to help this brave gentleman to get prepared for the humongous task that is awaiting him in Chicago, let me just say this to him (sorry, women are excluded this time around): Boeing has the talent. It also has the experience. It even has the money. The only thing it doesn’t have is courage.

          • We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.

            John F. Kennedy September 12, 1962

          • What financial risk did the subcontractors actually have ?
            For them it was cost plus.

            Kennedy’s moon race was brilliant because it defanged imbeciles like le May and cohorts.
            Later “Plays with Apes” nicely turned that advance back to significantly less productive activities.

        • IMJ, the elephant in the room is the very real possibility that — Sowerbob pointed out above — that the next NSA will be very different animal than the current 737/A320 (i.e. wider body shape etc). I expect Airbus to launch such an undertaking late in the next decade. If Boeing had launched a conventional looking NSA back in 2011, it would have risked having a relatively short product lifecycle. For the time being they seem to be damned if they do and damned if they don’t – and they probably know it. Hence, the strategic mistake was IMO made back in 1993 with the launch of the 737NG, and not an all A320 competitor that would have had a maximum level of commonality with the just-launched 777. Like the A320, it also would have been born to be re-engined with much larger diameter engines – an eventuality which should have been foreseen by Boeing at the time.

      • “the decision back then not to replace the 737-Classic with something entirely new, has IMO been detrimental to its long term single-aisle strategy.”

        Indeed. They had the 757 in the same fuselage width but far better nose (including crew commonality with 767 by grafting its flight deck windows, seats and main panels into the narrower fuselage).

        The NG was a good time to make the break to better, but IIRC operators wanted commonality with the original 737 and its 707 nose.

  21. Amazing. Used to be that every article or commentary by Scott got A380 dragged into the comments. Now he writes about the A380 and it is hardly mentioned in the comments!

  22. Here is another big what if. What if Boeing had actually gone ahead with the Sonic Cruiser?

  23. From the Frank Shrontz article, “I think the problem is, in working with the unions, that the union leadership by some necessity takes a short-term view of the world. They’re up for election every year, and ‘What have you done for me lately?’ is important in getting them elected. From the company point of view it’s the long term that counts. The company tries to take a view out 10 to 20 years, and union has to take a view of three or four, and that brings it into conflict in many cases.”

    The union takes a short-term view of the world?!

    • minor nit re article – the Union9s) do not have elections every year for the top leaders ( president, treasurer, etc ) But the on the floor agents, council reps, business agents, etc also have elections, staggered between the ‘ executive’ elections. And most unions do try to take long term views re between contracts. But various other rules as to 3, 4, 5 year or longer contracts come into play, so the pros and cons of choices of contract length are not obvious to many of those not involved.

  24. @ OV-099

    Thanks for the video. I watched it, and listened to it, on my iMac 27″. It blew me away!

    • Yes, perhaps one of the best speeches of all time. 🙂

      Now, here are the important excerpts from the speech that started it all (May 25, 1961):

      I therefore ask the Congress, above and beyond the increases I have earlier requested for space activities, to provide the funds which are needed to meet the following national goals:

      First, I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth. No single space project in this period will be more impressive to mankind, or more important for the long-range exploration of space; and none will be so difficult or expensive to accomplish. We propose to accelerate the development of the appropriate lunar space craft. We propose to develop alternate liquid and solid fuel boosters, much larger than any now being developed, until certain which is superior. We propose additional funds for other engine development and for unmanned explorations–explorations which are particularly important for one purpose which this nation will never overlook: the survival of the man who first makes this daring flight. But in a very real sense, it will not be one man going to the moon–if we make this judgment affirmatively, it will be an entire nation. For all of us must work to put him there.

      and

      Let it be clear–and this is a judgment which the Members of the Congress must finally make–let it be clear that I am asking the Congress and the country to accept a firm commitment to a new course of action, a course which will last for many years and carry very heavy costs: 531 million dollars in fiscal ’62–an estimated seven to nine billion dollars additional over the next five years. If we are to go only half way, or reduce our sights in the face of difficulty, in my judgment it would be better not to go at all.

      I believe we should go to the moon. But I think every citizen of this country as well as the Members of the Congress should consider the matter carefully in making their judgment, to which we have given attention over many weeks and months, because it is a heavy burden, and there is no sense in agreeing or desiring that the United States take an affirmative position in outer space, unless we are prepared to do the work and bear the burdens to make it successful. If we are not, we should decide today and this year.

      This decision demands a major national commitment of scientific and technical manpower, materiel and facilities, and the possibility of their diversion from other important activities where they are already thinly spread. It means a degree of dedication, organization and discipline which have not always characterized our research and development efforts. It means we cannot afford undue work stoppages, inflated costs of material or talent, wasteful inter-agency rivalries, or a high turnover of key personnel.

        • United States should be thankful to the USSR for its decisive contribution to its accelerated development. In that sense communism is probably the best thing that ever happened to the US. After the USSR crumbled the ‘Big Bang’ paradigm shift gave the stock market more freedom than ever and that led to the Great Recession of 2008, from which we have not recovered yet. Coincidentally the Dreamliner debacle was about to unravel at that time. Although unrelated both are symptomatic of what’s happening to this country. I wish Boeing would take Airbus as seriously today as the United States were taking the USSR in those days.

          • I do actually believe that Boeing takes Airbus very seriously today – in contrast to the year 1993 when they launched the 737NG. 😉

            Therefore, we shouldn’t take Boeing marketing too seriously these days as they’re making the best use of the hand that they’ve got.

            As for the Apollo programme and JFK’s 2 major space speeches, I’m particularly fond of this quote – in addition to many others: 🙂 “If we are to go only half way, or reduce our sights in the face of difficulty, in my judgment it would be better not to go at all.

            Of course, NASA was given more than enough resources to do the job, thanks partly to then administrator, the late James Webb who recommended to JFK that he should ask the Congress for plenty more funds over the course the programme than what was envisaged in 1961 for the program to be successful.

            IMO, that same philosophy should be followed as well for most multibillion dollar hi-tech development programmes — whether or not they are privately or publicly funded.

            For example, if you look at publicly funded projects in the US such as the Space-Shuttle/-Station, the Superconducting Supercollider (SSC) and a myriad number of other programs at the DOD, they have all been constrained from the beginning by low-price strategies, which seems to have been the most important metric up-front when a decision has been made to move forward. Not surprisingly, therefore, these programmes all encounterd massive cost and schedule overruns, delays and even outright cancellations (SSC etc.)

            When it comes to privately funded programmes, the 787 naturally springs to mind. Not only did the 787 constitute a paradigm shift for the Boeing company where “everything” was going to be different. As is well known, the company didn’t follow industrial best-practice recommendations suggesting that new products should use existing processes and tools, the existing organization and demonstrated technologies; or at least two of the above stated best-practices.

            So, Boeing didn’t only reject industrial best-practices, but incredibly, they even managed to cook up a programme that was to be finished in 4 years, and on a “shoestring” budget as well. The 777 programme, on the other hand, did follow industrial best practices, but Boeing apparently had to “throw money” at the programme in order for it to come in on schedule; and reportedly. they busted the budget by up to 100 percent.

            In contrast, the Apollo programme , which was given ample funding from the beginning, could obviously not follow industrial best-practices and was challenged to succeed on a very ambitious schedule.

            So, what’s the lesson here for the two OEMs?

            Realistic funding is obviously very important, but also – i.e. paraphrasing JFK – a degree of dedication, organization and discipline, no undue work stoppages, inflated costs of material or talent, wasteful inter-company rivalries, or a high turnover of key personnel.

          • “When it comes to privately funded programmes, the 787 naturally springs to mind.”

            How much “statefull” help was inducted into the 787 project ? ( predominantly supporting the risk sharing partners as the load bearing entities. )
            Would be interesting to know how much in the red
            those partners are today.

          • Did we ever see a run up of the amount and type of subsidy (gift, tax reduction, credit or something RLI like … and obviously the source organisation ) for the Dreamliner ?

            IMU nobody helped out with RLI style money and there wasn’t much talk about credit. so is the majority linked to direct subsidy and taxgifts?

  25. Hey Scott- was looking at the A330 demand world and started trying to calculate how much is really there long term. I know this is nothing new but I wanted to understand how you can come to the story that Airbus will surpass Boeing in production of widebodies. I gather that there must be some forecasting you know that has not shown up on Airbus website. Here is what I did: Looking at the A330-200 I see a current demand of 43, but I took out the Kingfisher order of 15 and now I’m down to 28. I take the A330-300 and I get 87 , but I took out 12 because the AirAsia and GA might be iffy which puts us at 75 which get us to 103 total demanded. Running at 6 per month puts the current production at 1.43 years left. Adding the A330 800/900 to that pot and we get 145 units, which puts that run at just over 2 years. So there are just over 3 years of demand left for all A330s? 248 frames and I did not include the mess of the A330F because the numbers add a few more months not years. No matter how you look at it the program will see an end around 2020 at best, and that’s the time real slots open up on the 787 line? Looks like to me the 787 program has the mid-market figured out correctly because in another year Airbus will need to sell three frames for the price of one plus add some cash? Now I see why Delta went for the A330. They got the 242 ton version for almost nothing, they got the A330-900 for nothing, and for good measure they got early slots for the A350-900 for a little above nothing. Boeing the other hand was offering 787/777 at a price they will never make money on. Boy, with the recent games Congress is playing with Defense Boeing’s long term future might be worse than Airbus, despite Airbus giving money to customers just to take any production slot. Again, Boeing’s issues for available capacity might fit well with economic cycles. I still don’t get where you can say Airbus takes over when one program will have no demand, the A380 will have to fight the resale market, and the A350 will be at 50% of current booked demand? Revenue numbers, profit numbers, and overall demand are not adding up for a strong widebody market on either side of the pond. What’s going on?

    • I took A330ceo down to three by 2018, added back in A330neo on a sliding scale. Took A350 up to 13 (which is being discussed).

      I took 777 Classic down to five in 2017, 848 down to zero in 2018.

      A320 and 737 go up to 54 in 2018 and to 60 by 2020.

      I took A380 down to 2.

      Boeing regains lead when 787 goes to 16 in 2020.

    • “No matter how you look at it the program will see an end around 2020 at best, and that’s the time real slots open up on the 787 line?”
      I doubt this.

      The A330 with new engines can be sold far cheaper than the 787 with deferred costs of about $30 billion. This is about $30 million per aircraft. Can Boeing produce the 787 cheaper than the A330 in 2020? I doubt this. For $30 million an airline can buy a lot of fuel or about $1 million less interest per year.

      If an airline does not need the range of a 787 the A330 is the inexpensive option. If an airline does need more range the A350 is also an option.

      Airbus has just a backlog for about 10 A330-200F but there is also a backlog for about 25 A330MRTT. The Netherlands, Norway and Poland may order another 4 to be delivered from 2019 on. The A330MRTT is the only modern tanker available today.

      • I look at 2020 as problematic for Boeing.

        1. The 777X will probably still be a long way from entering production. This is a complex machine of an enormous size and it has an exotic new wing manufactured in-house. In the end Boeing will have build a nice plane but it will take much more time (and money) than they would like. There will be a very uncomfortable production gap between the Classic and the 777X. We are talking big money here, for the existing 777 is a high-margin product.

        2. The 737 MAX production will slowly start going down and new sales will have to be made with thin profit margins, if not at a loss, to keep the line producing reasonably high volumes. I see the 737 as contributing less to Boeing’s balance sheet after 2020.

        3. The 787 will be produced in larger quantities than ever but a percentage of the profits will still have to be used to absorb previous deficits (deferred costs). And it remains to be seen if new orders will replenish the order book at a comfortable rate. We have to keep in mind that the A330neo will be in production by then and the A350 will probably be more popular than ever.

        One last question: will the stock stay above $100 in 2020? If what I say above is a realistic representation of what will happen at the turn of the next decade then we can expect some investors to start getting impatient with Boeing.

  26. Well, while it is true that Boeing’s partnership approach to the 787 “failed”, you have to understand why.

    It was not a solid partnership, because some suppliers did not view it that way. (And recall Boeing had internal ethics problems of various types.) Games were being played for financial squeeze, instead of focusing on a successful airplane project including early returns. Boeing Commercial was doing what the military division had warned them about in Boeing’s own magazine – fooling yourself on project status.

    Some of those suppliers had performed well in the past but on the 787 did badly. Consistency is a challenge, in the software business recognized as critical to get high ratings in the CMM system.

    There’s also a red herring about using outside suppliers. Boeing has for most of its history – Korry indicator lights, for example (started by an early employee), avionics almost always (though Boeing was the integrator – Collins displays with Sperry gyros for example to get the best from each. Recall on the 747 P&W let Boeing down badly by not making an engine robust enough to withstand flight loads – positioning from PAE to BFI was considered a good flight if all engines kept working.

    • “Boeing Commercial was doing what the military division had warned them about in Boeing’s own magazine – fooling yourself on project status.”

      I am sure Boeing learned a lot from the 787 debacle, but believing, and trying to make others believe, that the 777X will be ready in 2020, and even possibly in 2019, appears to me as unrealistic.

      • Such environments tend to advantage learning where there are easy gains. Much more effective on $/$ base boosting PR and clamping down on information leaks than sinking money into difficult and exacting process improvements or god forbid being fair to your employes.

      • Last I heard in the media Boeing had not learned its 787 lesson.

        They repeatedly talked about not outsourcing, rather than about values.

        McNerney did try to shape up management, but seems to not get the point about partnerships.

    • I should say that some suppliers did their job well, as did some Boeing departments, and that many people in both Boeing and suppliers worked very hard to finish the job. They suffered from others’ incompetence and deviousness.
      The huge cost of delay and rework, and an airplane not all that it could be, are the legacy of the jerks in both Boeing and suppliers.

  27. @OV-099

    “…if you look at publicly funded projects in the US such as the Space-Shuttle/-Station, the Superconducting Supercollider (SSC) and a myriad number of other programs at the DOD, they have all been constrained from the beginning by low-price strategies…”

    If you had told me in the mid-sixties that Boeing was planning to build a double-decker with 2 1/2 times the capacity of the existing 707, I would have said to you that it was ludicrous. Yet they did it, and in record time. Then if you had told me back in 1962 that NASA was going to walk two people on the Moon within seven years, and repeat it five more times with only one failure, I would have asked you what you had been smoking.

    Then came the SST. I really liked the Lockheed design. But Boeing was chosen, presumably because of its recent accomplishments with the Jumbo Jet. Boeing was offering a 350 passenger aircraft with Mach 3 capability and a variable-geometry wing. I thought they were out of their mind. Indeed they were. After the 747 and the Moon there were no limits to what United States could accomplish. Even the sky was not the limit.

    Still oblivious to the Airbus challenge, the US did not fail to notice that the Europeans were also in the race for the Higgs and were planning to build a giant accelerator to find it before the Americans. Something had te be done to prevent this. So they decided to build a machine four times bigger than the European LHC. We can say today that the SSC was an overreaction to the LHC just like the 787 was an overreaction to the A380.

    But I was not myself overreacting when I started to laugh and rolled myself on the floor while reading the reports in Aviation Week about how Boeing intended to produce this engineering marvel. The sad part is that they continue today to ignore the warning signs of decadence.

    • “just like the 787 was an overreaction to the A380”

      Confusion alert!
      Very different size category, very different market strategy.
      (One aspect is Boeing’s long-held belief that medium size aircraft facilitate what end customers want – direct to destination, whereas the A380 size is for routes that can’t increase frequency (such as slots and curfews) or can’t space flights out. For example, some transcontinental routes have two sizeable airplanes departing within half an hour of each other, because end customers want to arrive before a certain time.

      • You should address your ‘confusion alert’ to Boeing for they were the one who positioned the 787 against the A380.

  28. “But Airbus has reached sales parity in recent years in the wide-body sector while surpassing Boeing in single-aisle market share.”

    Really?
    2014 Widebody orders…

    Airbus.. 135
    Boeing… 328

    That’s parity?

    “If Airbus spent too much time, effort, money and resources on the A380, what does this say about the 747-8, especially the 747-8I?”

    One, the 380, is a 25 billion dollar blunder while the other, the 747-8, is a four billion dollar blunder.

    • Obviously Geo hasn’t been keeping up with the situation for very long. Boeing indeed had a lopsided victory for widebody orders in 2014: the 228 or so 777X orders announced at the 2013 Dubai Air Show were firmed up in 2014. Airbus had cancellations of 70 A350 orders. These were two unusual events. Over the past five or so years, in aggregate, Airbus has more WB orders than Boeing.

      Through April Boeing has 45 WB orders and Airbus 35 WB orders, but the year is young.

        • Other facts:

          777X backlog: 79% ME3
          A350-1000 backlog: 35% ME3 (-1)

          Pretty lopsided eh?

          • The concentration risk argument isn’t really compelling.

            Whoever won the Emirates order for 150 airplanes was going to have concentration risk.

            I would imagine Airbus competed intensely for such an order but failed.

      • Why 5 years? You can pick any arbitrary number to try and make your case.

        To be fair let’s look at total unfilled orders in wide bodies (as of Feb 9th),,,

        Boeing… 1490
        Airbus… 1257

        And that doesn’t include of course 269 787s already delivered!

        Put it another way…

        In wide bodies Airbus has a 45.8% share of unfilled orders.
        In narrow bodies Boeing has a 45.6% share of unfilled orders.

        You read , justifiably, how Airbus dominates on narrow bodies I have yet to read anybody seriously make the claim that Boeing has achieved parity in narrow bodies.
        By the same token I have yet to read anywhere else how Airbus has achieved parity in wide bodies.

        http://seekingalpha.com/article/2898876-boeing-airbus-now-dominate-increased-competition-looms-with-implications-for-both

  29. 2014 Was a year where Emirates totally determined the Widebody competition. Boeing was on the good side!

    On the VLA , the A380 costed much more then the 747-8, although cost risings, technical issues and delays were not in the 787 category.

    The A380 also sold far better then the 747-8. Even more when compared to the relevant -8i. And the A380 is far from the end of its life cycle, lots to come. When LH ordered the 8i, a year after launch, there was already a light panic. And LH paid a suitable price as launching customer.

  30. Okay Scott and Bjorn,what would your alternative strategies have been for the last 20 years of the 737?Also the next 20 years ?personally,I think with the benefit of hindsight I would have gone for something technologically similar to the c series starting at about the right time to enter service(realistically!) in 2017.There are obviously some enormous difficulties with that plan,but it’s the best I can come up with.Airbus is always going to be in the position of following on with something better.

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