Bjorn’s Corner: Holiday times

By Bjorn Fehrm

By Bjorn Fehrm

14 August 2015, ©. Leeham Co: It is holiday time in Europe and a lot of the European industry is shut down for summer break. This includes the Airbus Final Assembly Line (FAL) in Toulouse. Industrial holiday shut down or not depends a lot on the country’s industrial history.

Traditionally industry has closed shop for the month of July in the north of Europe and August in the south. For production-heavy industries with a lot of personnel in assembly work this is still the case. Examples are manufacturing industries like the auto industry, electromechanical goods industries and also the European aircraft industry.

For raw material industries, it depends if the manufacturing process can be interrupted for the three to four weeks a summer holiday would span. For many process chains, this is not possible. I earned my school summer break money on such an industry, replacing the worker that took his three or four weeks off.

Other parts of the world do not have summer breaks where the industry closes the doors and things go quiet. An example is the US, where, for example, Boeing produces aircraft 12 months of the year. Available vacation days are less than in Europe, typically two to three weeks against the typical four or five weeks in Europe. US vacations are usually taken spread over the year and the company normally doesn’t shut down production during the summer period.

Production rates

The differences in industrial holiday habits are to be considered when one talks about the production rates of Airbus versus Boeing. Airbus closes for two weeks during the summer and for 11 days around New Year. In total, this makes for a loss of one production month as it takes a day or two to get everything up to speed again. So when Airbus talks about rate 50 production of, for example, the A320, this means it will produce 50 aircraft per month but only during 11 months. In total Airbus then has a yearly production of 550 A320.

If Boeing announces a rate 50 production it means that it will produce 50 aircraft per month during 12 months of the year, or 600 aircraft. The net effect is that Airbus has to have a production rate which is 9% higher to produce the same amount of airplanes as Boeing during a year.

Production rates

Why is the production rate so important in an aircraft industry? Because produced aircraft means revenue and profits. The aircraft OEM gets paid in full at delivery of the aircraft. The aircraft is the main source of income for Airbus and Boeing. Airbus showed in its first half year result for 2015 that 95% of its revenue was for “Platforms,” i.e., aircraft, and only 5% for services delivered around these platforms. Boeing, on the other hand, makes services a profit-center. Boeing Commercial Aviation Services, or CAS, contributes more than $1bn a year to Boeing Commercial Airplanes (BCA) profits when information last leaked out during the tenure of Jim Albaugh, then-CEO of BCA.

A production rate increase from 50 to 60 aircraft per month is therefore an increase of the company’s revenue for that production line with 20%. As profit is made per sold aircraft one can expect that the company’s profits also increases in sync with increased production rates.

Summary

Airbus production is on holiday until August 24. With the day or two it takes to get everything going again, the 14 days in the summer and 11 in the winter will form a month of lost production time.

In knowledge industries, things are taken more flexibly. The summer vacation period is the time when the office is half empty and one can have a more quiet work environment. This is the time to clean the desktop and perhaps go a bit earlier from work the one or other day.

14 Comments on “Bjorn’s Corner: Holiday times

  1. Hi there – I think you are almost right – As I understand it, Airbus has 11 months of production for the wide-bodies (or Long Range, as they call them), but 11.5 months production for the narrow bodies. Hence, rate 50 is 575 aircraft per year for the A320 family, while 6 per month is 66 for the A330. Nobody has ever managed to satisifactorily explain to me why this is (apparently it isn’t that the Long Range production workers get more holiday!)

    • The single aisle final assembly line is split between Hamburg and Toulouse. Does this mean that the Hamburg FAL is not closing for summer holidays? Germany does normally have a production closure in either July or early August, worked there for 11 years.

  2. Well, forex “Werksferien” at VW, Wolfsburg fit into the school summer holiday slot accomodating those workers with school kids. ( used to be the majority and taking your 3/4 weeks of holiday used to be the norm too. ).
    While the manufacturing lines stand still a wide range of activities commence in those 4 weeks: production machines are refurbished, line changes are introduced and new production lines/segments are installed and debugged.
    Comes the next “working season” and most issues and problems are solved/fixed. Manufacturing starts up in a well oiled state, focus is on getting up to speed and not having to delve into technical issues like “now why is that panel press going sour”.
    I’d like to offer that planned lumped maintainance on a standing line is much more productive than doing the same spread out and on machines were the regular workers has to twiddle his thumbs and unproductively wile the time away.

  3. 3~4week shutdown at Boeing plant “downunder” over Christmas…

    • Do they still have 1 ”rostered day off” RDO, per month to bring the standard working week to 37.5 hrs ?

      • What’s left of the manufacturing industry (Boeing included), maintain the monthly RDO which leaves a yearly average of 19 working days per month.

  4. As far as I know the Hamburg FAL is not closing so you have to take only the portion of the A320 production at the Toulouse FAL into account. That’s why A320 has around 11.5 production months where all widebodies with FAL in Toulouse have only 11.

    • What about the chinease fal? Does that close too
      and will mobile also have a summer break?

        • You’d be surprised, there are 7 days holiday from 1 Oct for National Day- Golden week.
          2 days Dragon Boat in late July, 3 days from May 1 for May day/labour day.
          7 days in Feb for Chinese new year, and 2 days jan 1 for calendar new year.
          These are only major nationally observed holidays, so there may be short periods of ‘working holidays’ for larger plants

  5. Does that mean Leahy quits talking for that time?

    As for me, I just divide 12 into the yearly production for Airbus and come up with what I call (to myself) equivalent monthly rate to compare to Boeing.

    Last check it was within a couple per month (single aisles) so regardless of who says what they are making almost exactly the same numbers per year.

    I do think Boeing has a week shutdown around Xmas and New Years but need confirmation .

    • Either Leahy hasn’t said much publicly in recent times or someone realised that kicking of a s*tstorms over anything Mr. Leahy offers to the press or anyone else at that is counterproductive.

      Elsewhere the usefulness of B overstating their product capabilities has finally waned ( more like turned against .. )
      and o wonder they discontinue doing it .. accompanied by some conjured up reasoning why this is now much better ..

  6. Boeing production is also shut down for the week between Christmas and New Year, that’s why there were so many complaints from IAM members about the timing of the 3 Jan, 2014 vote on the 777x concessions………

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