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.
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.