Nov. 10, 2021, (c) Leeham News: Today’s episode is 10 Minutes About Boeing Future. With LNA today is a special guest, John Plueger, the president and CEO of Air Lease Corp., one of the leading and most influential lessors in the business. Normally this podcast is 10 Minutes. Because of the topic and the participation of Plueger, we go 27 minutes.
Interesting interview, thanks for posting this. Please improve on the clarity of the recording and on the clear pronounciation from your side, I sometimes have troubles understanding you.
It was interesting indeed. I also agree with you on the lack clarity in Scott’s voice on this recording. It sounds like it was compressed down to a very low bit rate. It was easy for me to understand what John Plueger said, but at places not at all easy to understand what Scott said (the fact that I’m not a native speaker of English may add to the problem, though).
Glad I’m not the only one. It’s the same for me and actually the reason I stopped listening.
I think a different microphone and a sound absorbing environment might help.
I too have a hard time with Scotts voice, I think its its spectrum vs anything. Also I fully admit damaged hearing from a lifetime of work in loud environments.
I did have the hearing aids in and that helped
Also I used ear muffs (it works out better for hearing though that is not why I started using them). I use a headset for any extended talking on the phone.
That said I always listen all the way through.
Some interesting involves from people we don’t get sans Leeham.
It was adequate for me. I find a good quality laptop is usually the best. My wife & I use a Dell XPS15 and the sound on TEAMS and ZOOM meetings is brilliant. PC makers use anechoic chambers to characterise the laptop and cancel out feedback from the speakers. If you step away from inbuilt mic/speakers one needs to invest in some very good audio product. Mic is much more important than headphones.
These anechoic changers are apparently eerie. People can hear the pulsing of their blood flow in the ear canals.
Mr Plueger asks what should Boeing now do and answers the first thing Boeing must do is re establish credibility with it’s customers, he means airlines
This is to forget the primary role of the regulators, not only in the US, not only in Europe, but particularly in China, and hence world wide
To understand how and why Boeing came to build such very badly designed and built airplanes and manage sell them to over eager and gullible clients, airlines, one of the first places to look is the corruption of the US regulator, along with the corruption of the US industrial environment and practices
To re build a sane and efficient regulator and industrial system is not solely down to Boeing, but, if the Max and the 787 disasters are reliable indicators, Boeing is showing very little improvements in any of their practices, industrial, commercial, legal or financial, and no sign that they have learned anything, their PR is the same old nonsense
It would be more reassuring to Boeing’s customers, by which I mean other countries, and passengers, if Boeing and the FAA worked together to produce an efficient critical method to evaluate design and production
I think Boeing (congress) & FAA already worked together to produce an efficient critical method to evaluate design and production 2012-2018.
2012 FAA re-authorization kicked it off. A series of efforts to Streamline certification, delegate and exempt US industry from requirements to make it more competitive against Airbus were the results. https://www.commerce.senate.gov/services/files/D7F21720-CB43-4E46-B25E-D59C283D2F60
Congress, Boeing and the FAA standing shoulder to shoulder to strengthen US Aerospace,. proved a disaster. Delegation & grandfathering of requirements & design was fully (re-)adopted with the 777x and 737MAX.
Meanwhile credibility was bought by using free cash flow to buy back stock and boast share price & dividends. With everyone cheering the champion.
FAA should work with EASA to produce an efficient critical method to evaluate design and production. It took JATR to surface what had happened.
We all recognize that its been a massive failure.
But where was the EASA on the grandfather issue? They bear culpability in that situation.
I have seen EASA decisions that were bogus as well. I think its far past time for other regulatory agencies (as well as their associated citizens) to step up and accept they too failed.
EASA’s only “culpability” was that it assumed that the FAA was doing its job properly; unfortunately, as we all now know, that wasn’t the case.
The chain failed because of a weak and rotten link: the fault lies with the link, not with the entire chain.
I believe they have no idea why badly run FAA was, and they have reciprocal agreement:
Can’t believe our commentator is not aware of this.
The 2017 GAO report I linked addresses FAA – EASA cooperation.
“FAA has continued efforts to address challenges that selected U.S. aviation companies reported facing when seeking foreign approval of their products. In April 2015, GAO testified on these challenges, which included the length and uncertainty of some approval processes, difficulty with communications, and high fees. FAA’s efforts to address these challenges include working with its counterpart in the European Union to develop a “roadmap,” approved in February 2016, of various initiatives aimed at reducing the time and costs of European approval of U.S. aviation products. According to FAA, completed changes have already eliminated approval and associated fees for all approved aircraft parts and reduced the approval time for simple low-risk modifications of product design from weeks to days. FAA plans to use this roadmap as a template for working with other countries on these issues.”
Basically Congress is pushing FAA to make sure EASA rubberstamps FAA decisions faster & cheaper. Mindboggling knowing Ïndustry stakeholders” /congress had the FAA firmly in the pocket at that time using budget re authorizations. Industry stakeholders were complaining about EASA having another look.
I’m surprised nobody addresses the decisive role congress/ senate played in streamlining FAA aircraft certification since 2012. I saw senate publicly going after Boeing leadership, but little self reflection. Who’s keeping an eye on congress?
It seems the Aircraft Certification Process Review and Reform
Aviation Rulemaking Committee (ARC) has gone quiet and nobody wants to seen as involved.
Two pilots are convicted & the rest is settled with company budget. I agree a strong independent oversight should be the high court of aircraft certifications. You can’t leave this up to nations / industry stakeholders. They have different interests.
All I see is Whataboutism in response.
The usual, oh, the sky is falling, we can’t do anything, woe is us.
Well the reality is that EASA is an independent agency and when the pressure is high enough, they will act (grounding MAX etc)
But the defenders then say it can’t do anything because of an agreement that they easily violated (and rightfully so)
Yea, Right Mel. Yesirre, Co Dependent and proud to blame someone else rather than accept responsibility.
Brazil authorities at least were cognoscenti (TI) enough to see the change and made Boeing put MCAS back in the manual. .
After twin crashes and CAAC acted first to ground the MAX, Indonesia, Singapore, Australia and Britain all followed.
FAA acted last after EASA and Transport Canada.
How would Boeing/FAA react if EASA unilaterally torn up the reciprocal agreement??
All I can see is a whining baby.
I take your point about the FAA and their very corrupt ‘captured’ past behaviour, authorised and incentivised by Boeing, with the connivance of the US political/financial élites
FAA should be reformed, learn from and co operate with EASA, and other country regulators, elsewise their light hearted certifications will not be accepted in the greater world
Boeing, nonetheless, must learn to co operate with the FAA, and Congress and WS need to be involved – to help BA reform industrial and financial practices
If not – GE Hell : irreversible decline and breakup
The point is the airlines went along with and encouraged the low quality product Boeing was selling – they still are – reform is not going to come via pressure from the airlines, au contraire
Looks like BA is headed for the dumpster, PE waiting in the wings to pick over the cadaver, pick up a brand name cheap
Great chat but that audio is trash – makes for a really hard listen and is super easy to fix.
Very strange suggestion of M. PLUEGER: to cover plane bodies with solar panels!
Somebody should tell him that if the orientation is right (a big if for an airplane!) the output is around 100Watts/sq meter.
In the best of cases, the output should be less than 10% of the airplane requirements .
a non starter definitely!
As I understood him the idea is only supplementation to replace electric power from APUs, not for solar to be the main energy source of the aircraft.
The much higher altitudes does make an appreciable difference in solar panel power output. But its still tiny in terms of the tradeoffs and they still have the fan engines running anyway which are tapped for electrical power.
Better to put panels on roof of terminal and feed power in that way for on ground supply of electrical load.
APS 3200 is the APU of AIRBUS A320
Power is 90KVA
required solar panels area to provide this power 900 sq meters
Output in altitude might be optimal, but orientation (perpendicular to sun rays) is far from optimal, so 100Watts per sq meter is very optimistc
a non starter definitely, for replacing the APU (@walter Faber)
In the EC we see active prevention of greenwashing in new legistation. You have to mention the relative contribution and bottom line effects of innovations, short term. Sobering for everyone.
He only floated it as an idea and he noted he was not an engineer and did not know.
I wonder how frequent those panels have to be replaced??
Indeed…all those damaging cosmic rays…
I read a paper by Siemens about 25 years ago before their solar division was taken over by BP. Siemens offered a serious 25 year warranty on their monocrystalline cells. (i.e. someone will get in a truck and fix it warranty). They made the point that the payback period was about 10 years already back then but also that their cells would still be producing 80% output after 80 years and most would still be producing after 100. No one wants to wait 10-12 years for payback. Things have improved since then of course.
Monocrystalline cells are made out of a single crystal, usually a 8-12 inch diameter billet that is cut into wafers by ganged diamond wire saws that waste over half the material. The process seems to have improved massively in the last few years. Lasers and electron beam cutting?
Amorphous (deposited in layers ) and polycrystalline cells were much cheaper but didn’t last as long but now monocrystalline has caught up in cost.
Incidentally much of the shortened lift was from installation mishandling with people walling on them and dropping them on trucks.
Once photocells can be applied in conformal appliques we will see them in aircraft if only to keep the battery alive while on the ground but might provide meaningful bit of power in an engine out situation or offload a generator. Will still need a RAT.
At present monocrystalline photovoltaic cells are becoming main type installed in utility scale solar because of their very long life. They are 21.3% efficient, latticed to avoid the effects of shadows and are very long lasting. A 21.3% efficiency means you will get about 210 watts per square meter. Perhaps more in the stratosphere. Amorphous thin film cells are not as robust but are nearly as efficient and certainly lighter and can be made in curves to fit an aircrafts contours. Certain polymer based cells could potentially be 40% to 60% efficient.
A solar powered battery backed drone will certainly be able to provide indefinite on station endurance.
A small electric 2 seater aircraft such as a pipistrelle alpha electric with its wings covered in solar cells should recharge its batteries in 1 or 2 days completely and allow a 85knot 100nmi flight. Some battery electric launching sailplanes have solar cells and can accumulate a useful and meaningful charge in flight. (Enough to find a more distant thermal or get out of trouble)
My take is that Boeing has 3 aspects.
1. Get the house in order. Nothingis going anywhere until that is done.
2. I disagree with Mr. Plueger on tech. Widebody tech vs narrow body and the mission are two different aspects. The air frame form very likely is not going to cross (materials might)
Truss Braced or some of the internal braced options might well work best for the current single aisle market even if they are twin aisle.
Blended wing might well work better for the current wide body market. And there is no reason you can’t have windows, you just won’t have windows as close. But you sit in the middle of a 777 and do you get a window? You don’t even get the window sitting one seat out, the person at the window seat blocks it.
So, what tech you pursue is driven by choosing a market. One tech size does not fit all now and will not in the future.
3. Execute the plan.
Looking forward to many more 10 minutes, Randy on Airbus, Scherer on the A220, Jim Albaugh on the launch of the MAX and John Leahy on the A380..
When you consider how much Boeing has lost (or is out) on 787, MAX and the 777X, the few billion with Embraer makes not difference.
Airbus is paying a lot more for the A220 and its got restraints on existing contracts that were lucrative for the risk share suppliers it can’t get out of (sans some kind of trade off).
I don’t know that Embraer was the answer but I think they should have had the guts to go through with it and investing in the future.
Ex GE beancounters have very little interest in investing in the future. Their priority is to extract cash from legacy programs, not invest in the future. They are willing to ride that dwindling market share down to the bottom.
Right now that is spot on. At some point someone is going to realize they killed the golden goose and the management will be swept out.
Forbes has suggested a GE type breakup. That would get some attention.
I am hoping for a sea change at the top, obviously I could be smoking dope on that one.
They did the same thing with Douglas Aircraft back in the 80s. Their reward for killing Douglas was to be given the keys to Boeing. The old adage is appropriate: treatment successful, patient dead.
This is a management focused on extracting cash from legacy programs without investing enough for sustainability.
It’s like a parasite, that invades a healthy corporate organism and kills it from the inside.
Soon the flow of blood (cash from legacy programs) will slow and the parasite will begin the search for a new host.
For sure no disagreement. I am hoping to see a change forced though it may be further meltdown before that occurs.
I think a break up of Boeing would be helpful. Commercial aviation and Defense/Space are radically different businesses. In Commercial the OEM makes an upfront investment of $15 or 20 billion to design a new plane. Defense executives see this as a crazy level of financial risk. In Defense the OEM has a huge committed customer upfront with much less financial risk.
If you put Defense executives in charge of commercial aviation they are likely to never launch a new plane.
The problem in breaking Boeing up is that its then going to cause BCA to fail.
What is holding Boeing overall and BCA specifically is the defense side. In past years BCA held up[ defense .
None of the current or past leadership that has lead to this debacle is from the defense side.
Clearly the reason for the issues is the Loot and Pillage GE philosophy.
As a whole Boeing has a lot of commonality vs GE that was many split entities that had zero to do with each other.
Now if Calhoun and gang could see his way to doing it and get another 20 million bucks I am sure he would do it.
Whats to breakup. GE was into completely different lines of business.
Healthcare and Turbine engines ?
Boeing is 3 major divisions . Commercial aircraft, Defense Space & Security and Global Services ( mostly aviation related and finance of planes
The most diverse group DSS is :
#Autonomous Systems – Develops and produces remotely piloted aircraft and submersibles. Manages Boeing’s Insitu and Liquid Robotics subsidiaries.
#Commercial Derivative Aircraft – Develops products for global military and government customers based on proven commercial platforms
#Missile and Weapon Systems – Manages Boeing’s portfolio of strategic missile and defense systems and weapons systems
#Space and Launch – The division houses more than 60 years of space exploration expertise, Boeing’s satellite portfolio and manages Boeing’s share of United Launch Alliance and United Space Alliance.
#Strike, Surveillance and Mobility – Manages Boeing’s current and future portfolio of fixed-wing military and surveillance aircraft, including fighters and commercial derivative platforms
#Vertical Lift – The world’s largest provider of military rotorcraft
Many observers will note Airbus too has moved beyond a simple commercial aircrfat line to resemble some of Boeing aviation related businesses
Military lift and fast jets..check
A key difference is that Airbus is a functioning corporation — just like Samsung or Microsoft, for example.
Boeing, on the other hand, has become a dysfunctional and debt-ridden mess, which keeps getting in its own way.
What does one do with a beached whale carcass on the promenade? Cut it up and remove the pieces.
The cash strapped has to sell family heirloom, or time for jail.
Don’t forget the over priced Jet Trainer for Spain! Which would be well served by the very economical Boeing T-7!
Boeings ‘work in progress’ at $70 bill exceeds their $60 bill debt.
They easily sell their bonds , so not cash strapped at all.
Boeing’s “work in progress” has to be actually delivered before it generates available cash; cancellations not only deprive it of this cash, but generate negative cashflow in the form of restituted prepayments. In the meantime, the “work in progress” costs money in tbe form of interest payments, storage costs and re-fitting expenses.
@Bryce. It’s a bit of a miracle that Airbus is still around. There was the A400M cost and time over runs, the 3 year certification delay of the TP400 engine due to paper work and checklist issues and of course the A380. Is Airbus any better than Boeing? To an extend one Airbus weakness is also its strength: several different companies are independently critical of each other this protecting against a monoculture goon system. Since the A380 issues. Current CEO Faury is an engineer helicopter test pilot. He’s got big Bonaparte brass ones, still the structure probably could reign him in. I always though Enders with his make sure everyone has got what they need to do the job properly style was easier to get along with,
Finished jets that can’t find home even by early 2024 sound more like a drag. Staff have to look after them year round, incurring extra cost bore by BA.
BA is a financial zombie, unable to earn enough to dig out from under its obligations, ties up assets but can’t afford to invest and rebuild its businesses.
Strange that one can simply ignore that Boeing has over $80 b bills to pay in addition to debts!!
So called $70 b inventory includes:
787 program cost $17 b, of which over $5 b has to be recovered from orders not received yet;
777X tooling over $3 b ;
737 MAX program cost $2.3 b ;
and early issue sales consideration $3.2 b
i.e. over $25 billion sitting on BA’s balance sheet not going into cash.
One aspect is while you look at technology, you can pick paths that make sense.
For all the dissing of the GTF, it was a well proven system on smaller engines.
Gear technology existed for some really big Turbo Props.
It was a doable tech and PW had the need to do it or fall out of the commercial jet engine business.
RISE has all the issue its always had and time has not changed them. Prop off is an issue but so is the heavy aft structure, one off mounting that binds you to a single engine offering.
Dangling something 15 years down the road does not cut it.
I like that he mentioned blended-wing. From what I understand the only thing holding back blended-wing is evacuation times. Seems to me this technology would require less power and less gas per seat mile.
He mentioned the motion aspect. If you are 50 feet from the center of the aircraft, you would move up or down 50 feet for every foot near the center.
While I think that would be fun you could have motion sickness issues as well as public not liking it. Really need to build a test unit on the ground and see how it works out.
Its been floated for USAF freighter as freight does not care and soldiers take what they are given (having seen a Blackhawk Chopper turn 90 deg on its side its clearly a hoot for the soldiers – though its supposed to be against regs)
But instead of talking about it lets build a simulator and do some damn testing. NASA money would be well spent on that vs the stupid supersonic transport garbage.
GE management erased billions of dollars of “value”, and Calhoun hires only GE people as top executives.
Thanks for this link
There has been an amount of similar speculation (that BA will be broken up) by commenters here in the past
When WS loads up a company with debt it is often to the purpose of taking control, breaking it up – instituting costs savings factory closure and the usual off shoring
WS dislikes investing in long term manufacture in the US
Interesting point raised by Mr. Plueger w.r.t. de MAX 10, i.e. to what extent will the certification procedure for this MAX variant uncover gremlins that previously remained undiscovered in other MAX variants?
2012-2018 Boeing / congress had the FAA running, to speed up / keep their jobs after the $25B 787 cesarean section.
That’s the period the 777x and 737MAX largely were designed, tested and certified. The better one takes a look with the stricter certification requirements at those aircraft, the more boils up. Some 737 shortcoming date back to previous 737 versions.
So far Boeing often was successful in putting on pressure, blaming the pilots & doing $ettlement$, avoiding costly corrections. https://www.nytimes.com/2020/01/20/business/boeing-737-accidents.html
“November 10, 2021
A key difference is that Airbus is a functioning corporation — just like Samsung or Microsoft, for example.”
To be fair, this is only true since A380 wiring fiasco provided enough of a shock to rebuild a dysfunctional collection of nationally-oriented parts into an actual corporation. Programs like A320 and A330 prove that even a hot mess of a company can create great products.
Yes, the wiring fiasco was a major screw-up — absolutely!
But it only affected one program, it didn’t cause any accidents or groundings, it didn’t involve any wrangling with regulators, and it didn’t precipitate multiple lawsuits or Congressional/Senate hearings.
Although sub-optimal at the time, the Airbus situation was insignificant compared to the monumental mess that Boeing has gotten itself into.
Its still a Government sponsored corporation. We do it with ludicrous tax laws and they hand out cash. They are more honest about it.
On the subject of sustainable aviation (mentioned in the podcast):
“Biden urges net-zero aviation by 2050 in huge leap beyond cars”
Regarding the stubborn 737MAX inventory problem:
“Boeing 737 MAX Deliveries Still Haven’t Taken Off”
“Boeing appears to have delivered the majority of the 737s it has built in 2021, while most of those that were sitting in its inventory at the beginning of the year continue to languish there. As of Sept. 30, the aerospace giant still had about 370 completed 737 MAX planes in its inventory.
This week, Boeing reported that it delivered 18 737 MAX jets in October. Based on its recent production rate, that means it didn’t make progress on inventory reduction last month. Even if delivery activity picks up a bit over the next two months, Boeing won’t clear even a quarter of its 737 MAX inventory in 2021 (let alone half).
…if it boosts output to 31 per month in “early” 2022, it would potentially build about 350 737s next year. As a result, even if it were to deliver 500 737s over the course of the year, Boeing would still end 2022 with roughly 200 737 MAX jets in inventory: not much better than where it wanted to be at the end of 2021.
Why it matters:
Airlines pay the bulk of a jet’s purchase price upon delivery. Meanwhile, Boeing has already incurred all the cash costs of production for the jets in its inventory. As a result, the company stands to generate a substantial amount of cash flow by delivering these completed 737 MAX jets to customers.
The slow pace of handovers is delaying this cash influx. That has prevented Boeing from reducing its debt load, which stood at $62.4 billion as of Sept. 30 ($42.4 billion net of cash). Four years ago, Boeing had less than $1 billion of net debt.
Boeing’s extra debt is driving up interest expense and could potentially lead to underinvestment in new products. Additionally, the longer that deliveries are delayed, the greater the risk that they fall through altogether. Until the aircraft manufacturer shows that it can sustain much higher 737 MAX delivery rates than it has achieved recently, investors should probably continue to avoid Boeing stock.”
I had a look at Planespotters to see where hose recent 18 deliveries came from. Only 6 came from deep in the pile. 6 were right of the line and 6 were maybe 6 months old or less.
Someone is going to be taking some creaky old sitting aircraft…
The customer who paid the lowest price is probably getting the oldest parking-lot birds.
Don’t forget that the old inventory needs to undergo wiring re-routing. I can imagine that that involves partial removal/stripping of interior fittings.
> Boeing’s extra debt is driving up interest expense and could potentially
> lead to underinvestment in new products.
We’ve not talked about the currently projected higher inflation. If borrowing costs go up by 1% or so that will definitely eat into free cash.
“Remarks by Ralph Nader regarding the filing today in federal district court in Chicago of the deal between the lawyers for Boeing and the lawyers for the bereaved families.”
What these ex-GE and ex-hedge fund managers call “unlocking value” others might call an unsustainable business plan of under investment in the future.
Boeing’s best chance of success is to throw out Calhoun and the entire mafia of ex -GE beancounters. They have destroyed more “value” than they’re created.