April 4, 2016, © Leeham Co.: Boeing’s plans to reduce head count at Boeing Commercial Airplanes by 8,000 jobs this year dominated the news last week. Comparing employment figures with Airbus Commercial shows this reduction isn’t nearly enough.
BCA has 22% more employees per airplane than Airbus. BCA is a bloated organization. Some of this undoubtedly is inherent to being a 100 year old company, compared with Airbus being less than 50. Airbus is more automated than Boeing as well.
In response to The Seattle Times story last week about the Boeing head count reduction, Steve Trimble of Flight International Tweeted that Airbus Commercial employs 55,000 people, compared with 82,000 at Boeing Commercial Airplanes, a 49% difference. The math means Boeing has 107 employees per airplane delivered last year; Airbus has 87. Boeing delivered 762 airplanes vs 629 for Airbus.
Boeing has made a lot of strides in becoming more efficient. As Flight International notes, in 2000 BCA had 93,000 employees and delivered 492 airplanes. This equated to 189 employees per airplane. Lean manufacturing has been a major, long-term initiative that has led to efficiencies. The 777X wing production and assembly will be more automated than the 777 Classic. (It’s also probably why Boeing refused to give Washington State job guarantees in exchange for $8.7bn in tax breaks for the 777X.) The 737 MAX has more automation than the 737 NG. But Boeing still lags Airbus on automation. Three of four A320 plants are highly automated. The A350 is state of the art. The A380 line is far more modern than the 747-8. The A330 line trails the 787, but the latter program was executed so badly that Boeing has $29bn in deferred production costs and the highest program accounting block in aviation history.
Inefficient production is why Boeing discontinued the 757; the last was produced in 2004. A former Boeing salesman told me years ago that it cost Boeing more to build the 757 than it was selling for. This is probably why VP-Marketing Randy Tinseth repeatedly says restarting production of the 757 is off the table. The question of the market demand is probably less the issue when it comes to a 757 restart.
As LNC noted last week, there are many other reasons Boeing’s costs are such as to make it hard to compete with Airbus. One of these is the corporate commitment to billions of dollars a year in share buyback. Steve Wilhelm of The Puget Sound Business Journal noted that last year Boeing spent more in buybacks–$6bn–than it posted in profits at $5.2bn.
In the wake of The Times story, I received emails from former Boeing employees, who left on their own accord, who criticized the bloated organization and government-style of budgeting in which if the departments spent last year’s allocation, they’d get more the next year; and the bloated management in which multi-layers wound up approving the same plan over and over and over. Ray Conner, CEO of BCA, has a well-articulated disdain for these endless meetings and appears frustrated little progress has been made in curbing them.
Airbus is a favorite whipping boy at Boeing (and its outside shills), and Airbus certainly is doing all it can to make life miserable for the 100-year old company. But Boeing needs to look into a mirror for the root of its problems.
737-9 MAX: Richard Aboulafia, the consultant with The Teal Group, published an article with Aviation Week giving his opinion of the issues Boeing faces whether to proceed with the Middle of the Market airplane. What caught my eye, however, was his statement that Boeing has more than 400 orders for the 737-9 MAX. At year end, Boeing confirmed to me that the count was 270–so I asked Rich, where did these orders come from?
Aboulafia wrote back and said Wikipedia assigned all TBD MAX orders for Lion Air to the MAX 9, although he said he knew some were 8 MAXes. Indeed, Ascend shows Lion Air set to receive deliveries of MAXes next year, and these will obviously be the 8 MAX.
I checked the current Lion Air 737 NG operating fleet and order book and the math indicates that the 737-800 comprises 29% of the NG data. On the logical assumption that a similar ratio will be true for the MAX, this means 29% of the 201 orders will be for the 8 MAX and 71% (143) will be for the 9 MAX.
Adding this up to the 270 MAX 9s at year end and this is 413 orders for the 737-9.
This compares with 1,112 for the competing Airbus A321neo. The math then means Boeing has 27% of this market sector, up from 20%.
A400M: More issues arose with the Airbus A400M, according to this report. Airbus probably should rename the plane from The Grizzly to The Albatross.
KC-46A: Speaking of Albatross, the KC-46A Pegasus might also be better named Albatross. The feds note that a key supplier for the refueling system isn’t up to snuff, which could lead to more delays and more costs to Boeing.