By Scott Hamilton
May 11, 2020, © Leeham News: Boeing killed development of its alphabet soup of airplane concepts for now.
“For now” is a relative term. When Boeing will be ready to show concepts to customers as a prelude to a program launch depends on how quickly the industry recovers from the COVID crisis.
But research and development of a streamlined production system, once key to new airplane projects, continues.
CEO David Calhoun said on the 1Q2020 earnings call that the New Midmarket Airplane (NMA) is essentially dead. He said in the following media call that the “differentiators” for the next new airplane from Boeing or Airbus will be manufacturing and engineering.
“We’re not out of the product development business,” Calhoun said on the earnings call. “We are invested in capabilities with respect to manufacturing and engineering that we believe will offer a very differentiated product in whatever strategy we choose. We’re fast at work at that stuff. We continue to be at work on it.
“It will probably not be applied to an NMA, and I think we’ve conveyed that to the marketplace,” Calhoun said. Boeing’s pursuit of advanced design and manufacturing processes are well known in aviation and supplier circles and on these pages. Elements of advance production techniques were implemented long ago across the 7-Series products. Advanced wings for the 777X. New wing production for the 737 MAX. Various processes on the 787 and even the 767.
Boeing Defense combined advanced design and production into the T-X trainer project and the unmanned MQ-25 aerial vehicle.
The NMA was to be the first 7-Series airplane where all these would converge into one commercial airplane for the first time.
“We’re going to continue to invest in it, and I believe at the moment that’s probably our biggest priority,” Calhoun said on the earnings call.
On the follow-up media call for the 1Q earnings, Calhoun made it clear this direction wasn’t just at Boeing.
“I believe that the true differentiators on the next airplane for either one of the parties who does that is going to be largely built around the way we manufacture and the way we engineer, as opposed to the point design of the airplane itself,” he said.
“We have not let up on the investments that we’re putting into those capabilities. We’re going to continue forward with those. It might take us a little more time and in light of this major market event that has occurred to get to the next point design. We’re still in the development business and we continue to invest in it. Yes, it’s the right question because it’s exactly the thing we focus on the most during these difficult moments. I think we’re going to get to the other side and we’re going to have our engineering intact, our capabilities intact. We’re going to have some real weapons with which to work on the next point design of an airplane.”
Boeing plans to restart 737 production this month, despite the COVID crisis upending demand.
But it won’t be smooth sailing.
Spirit Aerosystems makes the fuselages. It announced in its earnings call last week a revised agreement with Boeing. Last February, Spirit said it would deliver 216 fuselages to Boeing this year. Last week, this was trimmed to 125. This includes 18 delivered in January before production shut down at Boeing’s Renton plant.
This is new production. Spirit previously built more than 120 fuselages that are now in storage near its plant in Wichita (KS). Inventory will increase to an unspecified peak in July and August before returning to current levels by the end of the year.
Spirit said it will be about two years before the inventory is burned off.
Boeing plans to reach a rate of 21/mo by year-end and 31/mo next year, but this may be a challenge. Already under strain from the production shutdown, suppliers—especially smaller ones—face added pressure on survival due to COVID.
It’s unclear how this will impact Boeing’s 31/mo goal. One lessor predicts there is “no way” Boeing will achieve this.
AerCap, one of the world’s largest lessors, noted in its 1Q2020 federal filing that recertification of the MAX is uncertain.
“Boeing currently expects that the necessary regulatory approvals will be obtained in time to support resumption of the Boeing 737 MAX deliveries during the third quarter of 2020,” AerCap said in its federal filing. “It is uncertain, however, when and under what conditions our Boeing 737 MAX aircraft will return to service and when Boeing will resume making deliveries of our…MAX aircraft on order. As a result, we expect to incur future delays on our scheduled…MAX deliveries….
“Certain of our…leases have now been cancelled, and we expect additional leases to be cancelled in the future. In cases where leases have been cancelled, we have the right to cancel our corresponding orders for delivery of those aircraft,” AerCap said. An industry source said 30 MAXes are subject to lease cancellations at AerCap.
On the earnings call, AerCap CEO Angus Kelly said, “However, I do think it is likely that there will be additional delivery delays due to the challenges that the OEMs will have in their supply chains as they restart production.”
Air Lease Corp, another major lessor, also said some of its MAX orders can be canceled because these passed the 12-month trigger point.