Boeing’s special needs in the next decade may be solved by Embraer

Subscription Required

Introduction

Jan. 8, 2018, © Leeham Co.: Key factors may play into the prospective business venture, however it’s defined, between Boeing and Embraer that have gotten little notice.

Boeing’s need for engineering talent from Embraer has been touched on by many media, including LNC. But a detailed analysis hasn’t been forthcoming, that we’ve seen.

Not discussed yet is the fact that new airplane programs at Boeing and Embraer wind down in 2021-22, leaving both companies in danger of facing the next decade without new products at a time when competition will be emerging.

The lack of new airplane programs endangers the engineering talent pool. For Boeing, this is already going to be critical as more than 5,500 engineers and technicians reach age 65 in the next 10 years.

Boeing’s New Midmarket Airplane, if launched, will address part of the company’s new product requirement after 2020. On the other hand, Embraer has no new product, although officials have discussed potentially launching a turboprop program.

Summary
  • Boeing’s 787 and 737 programs wind down this year and in 2020.
  • Embraer’s EJet-E2 program winds down in 2021.
  • Boeing faces talent drain as engineers and technicians age.
  • Boeing NMA needs engineers and Embraer can supply them.

Discussion

In the context of this analysis, “winding down” means the research and development and peak engineering is winding down.

Boeing programs winding down

The last derivative of the 787, the -10, enters service this year. Except for performance improvements and potential minor upgrades, such as the rumored increased gross weight versions of the 787-9 and 787-10 for more range, this program is pretty well wrapped up.

The 737 MAX is over the hump. The 737-8 entered service last year. The -9 enters services this year, followed by the 7 MAX next year. The EIS of the final version, the 737-10, is in 2020. Then this program will largely be over, likewise with continuing efforts to improve performance and range in upgrades.

777X

The 777X enters production this year, flight testing next year and has its EIS in 2020 with the -9. The smaller -8 follows by two years, in 2022.

At this point, Boeing doesn’t have any new airplane programs—unless it launches the New Midmarket Aircraft for the Middle of the Market sector. The NMA is already unofficially called the 797 on the expectation Boeing will green light the program.

EJet program wind down

Like Boeing, Embraer’s current crunch on its new commercial airplane program is fast approaching the downhill slide.

The E190-E2 enters service this year. The larger E195-E2 enters service next year. The smallest member of the family, the E175-E2, was postponed from 2020 to 2021 to give US airlines more time to renegotiate scope clauses that lift the weight restriction. The E175-E2 is too heavy to be operated by partner airlines.

However, at this point, labor unions don’t appear willing to lift the restriction. The current E175-E1 appears to be the future of this sub-type for the medium-term.

Embraer doesn’t have another commercial project to follow the E2. There’s been talk of a new turboprop, but this market is highly limited—just 2,500 airplanes over 20 years. And re-entering the turboprop market is, essentially, a step backwards for the innovative Embraer.

EMB’s future is brighter with a Boeing hook up.

New Midmarket Airplane

The NMA, the 220-270 seat, twin-aisle aircraft with a range of 4,500nm-5,000nm, is widely considered to be Boeing’s next new airplane. Launch is generally expected this year, perhaps at the Farnborough Air Show in July, but LNC is increasingly hearing launch may not come until early 2019.

Coincidentally—and this seems to be what it is—the prospective business tie-up with Embraer reportedly would take about a year to consummate.

The type of tie up is a matter of speculation. News reports range from a minority stake, a joint venture or a full take-over by Boeing. The companies aren’t commenting.

But a combination, in whatever form it takes, provides Embraer with the opportunity to get a major position on the NMA. Boeing’s been looking for industrial risk-sharing partners, without much success, Wall Street analysts say.

Importantly, Embraer has a key resource—engineers—at a time when Boeing is facing thousands of retirements by engineers and associated technicians.

Boeing retirements

Boeing has long known it’s facing an exodus of engineers and technicians from its white collar ranks as the workforce ages. (It faces a similar exodus with its touch-labor union as well.)

The talent departure was exacerbated by Boeing itself, however. Since 2013, Boeing laid off thousands of engineers and technicians from its Washington State operations, simply cutting jobs and transferring others to lower cost working environments in right-to-work (ie, non-union) states.

But the cuts have been too deep. Thousands of tasks on the 737 and wide-body lines have been incomplete as the airplanes rolled out the doors, LNC is told. Boeing’s had to scramble to complete the jobs on the ramps to maintain delivery schedules.

Boeing has been hiring back retired and laid-off engineers and technicians as contractors to rebuild the force.

But this doesn’t help fill the thousands of jobs coming up through retirements and the emerging labor pool isn’t going to be enough, either.

Turning to Embraer for this highly skilled engineering force could be the savior.

NMA, NSA

Figuring out where to get key resources for the NMA isn’t Boeing’s only concern for the next decade. The 737 MAX line, the first airplanes of which entered service only last year, remains under pressure from Airbus.

The A320neo is holding its own against the slightly larger 737-8. The A321neo continues to dominate the 737-9 by a wide margin and the new 737-10, a band aid at best, isn’t the answer.

Delta Air Lines chose the A321neo over the 737-10 in an order and options just before Christmas for up to 200 aircraft. This order was the only lump of coal in 2017 for what otherwise was an outstanding year for Boeing.

Last week, the first A321neo in Alaska Airlines colors rolled out of the Airbus factory in Europe. Although Alaska hasn’t said anything officially about the 30 A320neo and 10 A321neo orders inherited from the acquisition of Virgin America Airlines, it’s now clear the Airbuses will be in Alaska’s fleet for at least the next decade if not beyond.

This will be a blow to Boeing. Alaska has been an exclusive Boeing 737 operator since retiring the McDonnell Douglas MD-80 from its fleet in 2008. The airline painted “Proudly All Boeing” on the noses of its 737s to tout the relationship.

Airbus’ tie-up with Bombardier, taking a 50.01% stake in the C Series program, adds to the pressure on Boeing and puts new pressure on Embraer in the process.

The pressure on MAX be well be ratcheted up soon. Airbus is expected to announce this year its long-discussed A320neo Family Plus development, adding range and other key features to the flagship A321neo but also perhaps applied across the entire family.

Boeing needs a New Small Airplane, or NSA. With attention and billions of dollars at stake for development of the NMA, the Embraer resources may well be a helpful solution toward developing an NSA.

 

8 Comments on “Boeing’s special needs in the next decade may be solved by Embraer

  1. Boeing might not need as many engineers if they run their engineering departments well, diciplined and well intgrated digitally. Many engineers shuffle data and recreate models for their special analysis, reports and designs. Smaller well trained engineering teams can be more effective as they know what is going on in each department. Just look at Space X staff size vs. its competition. Correctly run the new design, analysis and optimization tools are quite powerful, but not perfectly correct used will drive the design off the road (F-35…) making restarts needed. The question is how much Embraer engineering inside Boeings design organisation will help speed up the work and reduce cost, they might design a new max 200 seat NSA more efficient on their own.

    • My question as well.

      Boeing tried to use Russian “expertise” open the 747-8 and had to redo all the work.

      At best this is a long term tie in, short term it would just be a mess.

      Strategically what does Boeing want to do with Business Jets?

      They never wanted to do regional pax other than incidental to the 737.

      The A390 is a niche market and not a C-130 competitor (it does not have the rough short bad airfield capability)

      Tucano? Boeing wants jet trainers not turbo props.

      • What is an “A390” ?

        “Moskow Bureau” was IMU a case of “trash in , trash out”

  2. In regards to the Ak Aiien A321.

    AK had to take these as there was a contract in place. While I don’t know if there were any options for someon else to pick it up, it gets AK capality they need now and far better than the 737 of any type.

    Its been clear to me that they would have Airbus for the length of the contract and very possibly longer if they fit in.

    The only caveat is that having worked around aircraft mechanics a electronic equipment (as well as my own work with European equipment ) European approach and thinking is often annoying for someone used to US standard odd wiring diagrams and technical approach and data.

    Suddenly having to work on European equipment usually has a negative associated with it. Sometimes its just weird logic we never get, sometimes its badly done and its always a mind twister.

    I have a VW Passat Diesel. Great car in many respects.

    The oddity though was they have a chain driven oil pump/balancer assembly down in the oil pan.

    That chain drive system runs at twice engine speed, so it moves really fast (upward of 8000 rpm)

    For the most part the Passat meets that superior to US feel in driven, handling and performance

    But that chain drive system fails 30k to 350k and blows the engine apart when it does.

    And its not they made a mistake, I have the old chain (since converted to a upgrade gear drive system)

    They have not made such a crude chain since the Model T. I had no rollers, its fixed pin. Of course its going to wear out prematurely.

    You look at it and its, that’s superior German Engineering?

    What were they thinking?

    In 55 years of working on chain driven equipment, I have NEVER seen that type chain. I had to look it up. You would have to go back to the 30s (maybe before ) to find a chain that crude.

    They no sooner came out with it than they realized it had to have a roller on the pin and they did it.

    The only difference is it a simple roller or a more exotic roller.

    So US mechanic and techs will give feedback and its how hard is it to maintain and work on with your work force and does it fit in and can you learn it or?

    As the 737 is a simple 60s era system, the curve would be steep for those used to MD, Boeing and not Airbus.

    • VW also have designs done abroad that gets thru the design reviews in Wolfsburg. The Saabs in the 70’s had a chain driven gearbox…

      The Airbus’es are designed in inches and use massive amount of US Components/systems.

      Try work on a Dassault Rafael fighter with almost no US content designed in mm and French manuals probably fully Electronic in Catia CAD computer system. Most likely very elegant designed but different. If the Canadians buy them you should take a look.

      • Claes: The point was on a highly sophisticated car, they used the worlds earliest chain design.

        I think you will find all US products are now designed in MM, civilian and military.

        I work on diesel engines (US companies) (generator and fire pumps) – all the fasteners are now metric.

        Kind of a stealth thing, we still have our English system but a lot of it has gone metric as its sold world wide and they don’t want that US fastener thing (and I don’t blame them)

        • “they used the worlds earliest chain design. ”

          looked around. that chain isn’t really a “regular” issue. i.e. it does its thing. KISS.
          Roller chains tend to break up their rollers.

  3. Does Embraer have the type of engineers Boeing needs?

    They don’t have a lot of experience in composites.

    Does Boeing g even care?

    This has shade of the 787 debacle written all over it.

    Not one dime to the union or the good engineers but we will piss away 10s of billions on some wild scheme.

Leave a Reply

Your email address will not be published. Required fields are marked *