By Scott Hamilton
June 1, 2023, © Leeham News: Boeing CEO David Calhoun remains upbeat about the company’s future despite occasional setbacks and a struggling defense unit.
But in a media briefing on May 30 in advance of the Paris Air Show, he was resolute that progress is being toward a full recovery from the “existential” threats posed in recent years by the 737 MAX crisis and the COVID-19 pandemic.
Boeing is still recovering from these events, as well as a delivery pause of nearly two years of the flagship 787 and political tensions with China that began in 2017 when President Donald Trump imposed trade sanctions, thus beginning a trade war with one of Boeing’s most important markets.
China still has not resume deliveries of the MAX, a combination of the MAX grounding from 2019-2021, the trade war and a slow recovery from COVID. Boeing has an inventory of about 230 MAXes from the grounding; 140 of these are destined for China.
There is also an inventory of about 90 787s, the residual from a production quality issue that Boeing discovered. Officials forecast that it will be the end of 2024 before both inventories are cleared.
At a separate investors conference last week sponsored by the boutique company Wolfe, CFO Brian West reaffirmed free cash flow forecasts of about $10bn by the 2025 time frame. Guidance for production rates of 38 a month for the 737 by the end of this year and 50 by around 2025 and 5/mo for the 787 by year end and 10/mo by 2025 remain intact.
At its height, China accounted for between 25% and about 33% of Boeing global deliveries. All of Boeing’s financial and delivery guidance for now excludes China. Calhoun said that while Boeing of course wants to resume deliveries to China, the company can get along without this big market.
His media briefing came the day after China’s COMAC C919 finally made its first scheduled passenger flight, with China Eastern Airlines. Entry-into-service is about seven years later than planned for China’s competitor to the 737 and Airbus A320. COMAC had design, development, production and flight-testing setbacks. Nevertheless, Calhoun said the 919 will be a good airplane. Although COMAC officials set a production goal of 150 aircraft a year in five years—a ramp up that LNA believes is highly optimistic—even at this rate, the 919 will pale to the combined estimated production rates of the 737 and A320 family of more than 1,000 a year.
However, Calhoun dismissed any perceived threat to the 737-8 if Airbus launches a stretch of the A220 into the -500 sub-type. Airbus says this is a matter of “when,” not “if,” and there is speculation Airbus could do so later this year.
The prospect of a direct competitor in the A220-500 to the 737-8, the most widely sold model of the MAX family, doesn’t give Calhoun “heartburn,” he said.
Nor does the smaller A220-300, which competes directly with the 737-7 MAX, the smallest member of the MAX family. Calhoun said there are no plans to develop another airplane smaller than the 146-seat 7337-7.
While the MAX was grounded and the 787 deliveries were paused, Airbus began to runaway with market shares–something that actually began during the days of the 737 NG and throughout the painful gestation of the 787. But as Boeing recovers today, in part because Airbus production lines are sold out in some cases to the end of this decade, Boeing’s sales are going gangbusters.
Can Boeing recapture a 50-50 market share? Calhoun is blunt.
“No,” he said simply to this question. Pressed, he elaborated, “Most of the share losses that occurred over the last four years was through the ones that are really measurable are because we couldn’t deliver airplanes.
“With respect to the [recent and current] competitions I’ve been involved in, I don’t feel disadvantaged at all. I’ve been to pretty much all of them. What do you see when you’re in negotiating something? [The 737] Dash-8, Dash-10 whatever, Dash-7? I’ve never felt disparaged. Not for a minute, and I don’t think we’re in pressure to rush here.”
Calhoun said that Boeing won’t make up lost market share from the dark days. Competitions going forward with Airbus give the advantage to Boeing, which has earlier delivery positions available than does Airbus.
At the Nov. 2 Boeing investors day, Calhoun said the company won’t introduce a new airplane until the middle of the next decade. Technology, he said, was ready neither for the airplane nor the engines.
GE and Safran, partners in CFM International, are developing the CFM RISE Open Fan engine. GE, at its pre-Paris Air Show media briefing on May 15, reaffirmed that the installed economics benefit will be more than 20% better than CFM’s LEAP on the MAX and the A320neo families.
But what will the next airplane look like? Will it be a single-aisle or twin-aisle aircraft? Will it be a conventional tube-and-eiong design? What materials will be used? Will it be a trans-sonic truss-braced wing (TBW) design Boeing is researching with NASA?
Unsurprisingly, Calhoun wouldn’t say.
“My view of the single aisle/twin decision is a decision for later, not for now. I say that because if I say to my team, ‘Make that choice now,’gGuess what happens? We develop that airplane just like middle of the market, everybody runs full speed. Can you imagine what our life would be like if we had a middle of the market airplane in full development right now without any of these new technologies embedded in them? Imagine what that would look like,” he said.
“You have to be patient, you have to get ducks lined up, the technologies lined up and matured. Then whatever they cater to with respect to that next airplane, it’s got to be a big enough market to satisfy our investors. I really don’t want to get to that question until other things are ready.”
But Calhoun did give a hint about what the next Boeing airplane will look like.
“That middle of the market airplane, we’re not going back to whatever that design was. I’ve never even looked at it. We’re simply going to continue to progress with the technologies that we have available to us. Composites. It’s hard for me to imagine us not taking full advantage of everything in the 787 and its composites. I have no doubt that will play a pretty significant role. All things with respect to the autonomy and flight controls that runs full speed and it’s transonic. Trust brace wing is also a very important technology once we get forward.
“[But] that would not lend itself to something at the high end of the seat capacity. That’s the best I can tell you. I know everyone would like me to stand up here and design the new airplane for you. That’s not going to happen.”