Pontifications: Boeing finally cracks on 777 production rates, but spin continues

By Scott Hamilton

By Scott Hamilton

June 8, 2015, c. Leeham Co. Boeing finally said it may reduce production rates on the 777 Classic, but only initially by one aircraft per month and only starting in 2018.

Dominic Gates of The Seattle Times reported Saturday that Elizabeth Lund, VP for the 777 program, acknowledged the rate may have to come down but in a continuation of the message offered by CEO Jim McNerney during the first quarter earnings call in April, “feathering” the 777X production into the 777 Classic rate is the equivalent of maintaining the current rate of 8.3/mo, or 100 per year.

Boeing’s message has been evolving for some months. Originally Boeing said the production rate of the Classic will maintain the current rates right up to entry-into-service of the X, slated for 2020. Over the past several months, this definitive declaration has softened to the point of the current messaging.

As I wrote shortly after the 1Q earnings call, McNerney’s messaging wasn’t being swallowed by Wall Street analysts, or by this journalist.

Gates, of The Times, made it clear in his story—written as a result of the Boeing media briefings pre-Paris Air Show—that the spin isn’t going over with other journalists, nor with Richard Aboulafia, the well-known analyst of The Teal Group. Aboulafia is generally considered friendly to Boeing but has become increasingly critical over Boeing’s Partnering for Success program (he calls it Partnering for Poverty) and bumbling the 787 program, giving Airbus time to respond with the A350, which also challenges dominance of the 777 Classic.

Gates advanced his Saturday story in an email Friday night with the subject line “777 horse feathers,” an American slang for “bullshit,” an unusually blunt communique for the often cynical Gates. Gates writes of Boeing’s messaging, as offered by Lund:

Briefing journalists this week in advance of the Paris Air Show in mid-June, Boeing 777 Vice President Elizabeth Lund said the jet maker “will feather in with some blanks” as it begins building the 777X.

What she refers to as “blanks” are empty positions introduced into the 777 workflow, from initial fabrication of parts through final assembly. As mechanics cope with the extra work and the learning process that comes with building a new model, having no airplane in the slot directly behind offers some breathing space.

“When you fire a blank, you just build one less,” Lund said.

Yet, in a circumlocution that left journalists scratching their heads, she strained to portray this as leaving the production rate unchanged.

Yes, you would deliver one less airplane the month that you get to delivery, but that is not a rate break,” she said.

Jason Clark, vice president of operations for 777 and 777X, said this slowdown tactic is normal anytime a new airplane is introduced on an existing assembly line. Inevitably, it takes much longer to build the early models of a new design that hasn’t been built before.

“Say you are bringing your first fuselage into the production system for 777X, you usually want to put a little time in between. … You bring in a couple of blanks,” Clark said.

“You could almost call it a little micro-break, one month when you just don’t have a line number, so instead of delivering 8.3, you are delivering 7 one month,” he added.

Setting aside the unfortunate metaphor of firing blanks, the theory baffles Aboulafia. Gates writes:

Richard Aboulafia, industry analyst with the Teal Group, said he can’t figure out Boeing’s convoluted and evasive message.

“The rate is staying the same, we’re just feathering in blanks. What? What? What?” he asked incredulously. “You aren’t delivering these planes. Your revenue drops. Tell me again, what’s that about feathering in blanks?”

Boeing’s relations and credibility with Wall Street analysts have been strained for some time. As I’ve written before, analysts tell me they often disbelieve what Chicago says but many are afraid to call Boeing out strongly (or at all) for fear of losing access to executives. Media relations and credibility between Boeing Commercial Aircraft and journalists are also often strained. In addition to Gates’ story above and what I’ve written previously, the Paris Air Show briefings turned into a disastrous affair. Last year Boeing only held briefings for the “air show dailies” (Aviation Week, Flight International and Aviation International News). Boeing this year resumed briefings for general media but split the trades from the general, drawing complaints from the general media, including The Times, The Wall Street Journal and others.

Boeing, as it always does, embargoed the briefings for the benefit of the trades and their longer deadlines. General media honored the embargo. In the past, the embargo was simultaneous. This year the trades were released from their embargo on Friday while the general media was embargoed to next Friday—only the general media wasn’t told, and found out when the trades began publishing their stories last Friday. To add salt to the wound, the trades saw elements of the 777X production that the general media, including The Seattle Times, did not see.

After a storm of protest, Boeing lifted the embargo for the general press, but ill-will was created by Boeing in the process.

It’s been simmering for a long time.

In an email I received from one reporter, this person commented about Boeing’s Paris Air Show briefing schedule, which was released late last week.

  • Sunday, Ray Conner won’t hold his usual journalist roundtable, but instead will host some kind of informal coffee reception with Randy Tinseth and John Wojick. (In other words, reduced access to ask pointed questions.)
  • Monday at noon, Mike Sinnett will arise from the grave to give a briefing on technology and innovation.
  • Tuesday at 10 a.m. Ray Conner’s main BCA press presentation.
  • Tuesday at noon. Scott Fancher will stonewall all comers at a briefing on airplane development.

This reporter later added, the comments above were too “mean” to Sinnett and not “mean enough” to Fancher, but it aptly reflects long-standing complaints within the journalist community about Boeing’s corporate communications and relations with journalists.

Boeing’s credibility continues to decline with messaging and its media relations.

Frankly, I’m not at all sure anybody at Boeing cares.

15 Comments on “Pontifications: Boeing finally cracks on 777 production rates, but spin continues

  1. Hello Scott

    What the “trades” are ? for non us natives ?

    • “trades” are “trade newspapers”, or “publications aimed at the industry they cover”. Examples are Flightglobal, Aviation Week, and Air et Cosmos.

      General media might employ aviation specialists (eg Jon Ostrower at the Wall St Journal, Dominic Gates at the Seattle Times), but the publication as a whole is aimed at a general audience.

    • “Trades” refers to publications that specialize in aviation: “General” are publications like the NY Times or Wall Street Journal.

  2. “As I’ve written before, analysts tell me they often disbelieve what Chicago says but many are afraid to call Boeing out strongly (or at all) for fear of losing access to executives.”

    It is my opinion, that in the end Boeing takes media serious that the industry reads, believes & quotes. Journalists taking a blind eye, repeating what industry, stakeholder/ stockholders/ nationals like to hear, at the end of the day dig their own grave these days.

    Internet doesn’t forget, before we know “padding of the truth” is back in the spotlights. http://blog.seattlepi.com/aerospace/2006/06/30/787-world-tour-adventure/

    An IMO (by now) legendary example is young blogger John Ostrower & 787 development. First ignored, then attacked, called out, and quickly accepted, when it became clear the market found out his news was 3-4 month ahead of the Randy Good News Machine. IMO he has to take care now not to let bigger interest of his employer put a brake on his views/ comments. His boss probably tells him to be “careful, double check and be balanced..” Isn’t unwelcome news/ views bad for readers numbers/ advertisers?

    In my opinion the same goes for Leeham news. Airbus, Boeing, BBD & Embraer see Scott is informed, isn’t BAC stock price linked, won’t take BS and won’t shut up for nobody. If it’s Randy word against Scott’s, all know where the truth likely is to be found.

    Airbus allowed Bjorn to fly the A350, a sign of recognition, but Leahy knows Leeham will expose problems & call him out on BS at will.

    • Darn, I don’t think there is a thing to quibble about even in the above.

  3. Why are the execs so afraid of saying:

    “Yep, we’re introducing a new plane, no doubt there will be a learning curve and a rate cut. Its common sense. But the new technologies will allow us to sell more aircraft at better margins in the long run, so the small bump is well worth it.”

    [To that I’d personally add: “Anyone divesting Boeing shares over such a (temporary) dip in production to introduce new and improved technologies is an investor I don’t want”.]

    • To finish my thought train to the above:

      I don’t see why large companies continually kneel to the clowns on wall street.

      Its not as if they (Boeing) are involved with issuing stock or bonds on a week-by-week basis, so small fluctuations in share prices over periods of a few weeks (that could affect bond rates) shouldn’t be a boardroom concern. The medium to longer term health of any stable company should be the prime motivator for any (and all) decisions.

    • Its called a Pyrmid scheme (wel maybe a shell game0

      You keep the dance going as long as you can so you suck out your tens and hundreds of millions and then leave the company a wreck.

      As long as you get yours so what?

      What I have yet to figure out is what all that money gets you, but if I did maybe I would have tried to be one of them.

      I will die poor but I get to keep my soul

      • “No point being the richest man in the graveyard.”

        A little line that was put to me quite a few years ago. Well worth keeping in mind.

  4. 777 production aside, what are Airbus projections for increasing deliveries, this year, and through 2020. Sales are great, but if they can’t substantially ramp up deliveries, they will remain number 2.

  5. One group of people cares, engineering. Too bad engineering isn’t running the show or has any authority to change it.

    At the air show, ask why engineering thinks the 777X will be another 787 debacle. Several sources I have who still work there (I retired) say they think it will.

  6. When you are a 777 airplane mechanic all this fal-dee-rall can be easily explained. Any exec at Boeing whose lips are moving IS TELLING LIES. Know it. Believe it. Depend on it. Den of thieves.

    There are lots of changes going on. Nothing is for sure. We will keep on producing the finest aircraft on the planet in spite of the jackasses who run the Chicago den of thieves. THAT you can bank on.

    • @Louise: Your comment is a bit too confrontational. Please use synonyms for the more inflammatory language in the future.

      Hamilton

  7. The wsj is reporting that EK is is eying a 10-15 frame order of the 77L.

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