Bjorn’s Corner: New aircraft technologies. Part 51. Wrap up

By Bjorn Fehrm

March 22, 2024, ©. Leeham News: Last week we did the first part of the Wrap-up of our 50 article series about the New Aircraft Technologies that can be used when replacing our present single-aisle airliners.

Now, we summarize the last 25 articles in the series, which covered how to develop, produce, and support a new airliner.

Figure 1. The Program Plan for a new airliner. Source: Leeham Co.

Developing, producing, and supporting a new airliner generation

The development and fielding of a new airliner generation is a mammoth undertaking of about 100,000 Workyears in total, Figure 1.

The program covers at least seven years of aircraft development, often more, then another seven years of loss-making early production, and then about 50 years of operational support.

In the last 25 articles, we discussed the different phases of this mammoth work:

  • We discussed the efforts to shorten the development time, which has been around nine years for the last clean sheet programs. While there are methods like Agile that enable faster development, it’s difficult to use such methods to the full in a program that spans several organizational boundaries, such as OEM, Consultants, Tier 1 to N Suppliers, and Regulators.
  • Boeing worked a lot on methods for shorter development cycles and a more effective production ramp-up phase in the NMA project. But this requires a very tight and flexible work method with the Regulator. If this thrust is not there we see the result in the 737 MAX and 777X incremental developments, which are having time overruns never seen before for such programs.
  • The development and certification of a new airliner type is a program with a total cost of around $15bn. But the strain on program costs doesn’t stop with the development of the aircraft. Early production until around 400 aircraft have been produced costs money as well.
  • The reason is the learning curve that increases costs for early production units (Figure 2) combined with the early adopter pricing a new airliner has to offer for launch and early customer to give subsequent customers the security these will not buy into a program that risks stopping early and leave them with orphans.

Figure 2. The production cost versus revenue curves of a new aircraft program. Source: Leeham Co.

  • The cost of early production can be 50% of development costs or more, depending on how successful the project is in achieving a smooth supply of the around 4 million parts needed to produce each airliner.
  • The development, certification, and production of an airliner interests the airliner industry, its stakeholders, and aircraft enthusiasts. However, for aircraft customers, the program phases around putting the aircraft into operation and its lifetime support are more essential.
  • Buying a new airliner type is a multi-decade operational commitment that is 100% dependent on perfect support from the aircraft OEM. The supply of a new spare part within a day or two is a must when there are Built-In Test (BITE) failures or other reasons an airliner part must be changed. Where the airliner is parked in the world must not matter.
  • Aircraft On the Ground (AOG) for more than the odd day is not acceptable for whatever reason (safety reasons, engine durability issues, etc.). An airline is a low-margin business, and all its aircraft must fly at least seven times a day for an airliner type that shall replace the 737 and A320 series.

So, while the discussion around aircraft development with all its facets is the more exciting one, excellence in the operational phase is more critical for the airline industry.

Our next Corner series will dig deeper into this. Why does engine development fail to produce durable engines when we have developed bypass turbofans for the last 70 years?

30 Comments on “Bjorn’s Corner: New aircraft technologies. Part 51. Wrap up

  1. It used to be that you make money on the streches -300ER’s and F’s, not the basic -200.

  2. [Comment deleted. Entirely political and not on point to the post.]

    • The American reality is that we only pay Boeing in methods that are hard to fathom and don’t benefit the tax payer.

      So, Share Buy back and dividends (even if you have to borrow to pay it) are fine.

      Setting Boeing up with 15 billion is just not acceptable. After all we are the rough, tough tootin , free cowboys by gum. We don’t need no goberment help (unless you are a big corporation and have your lobbyists *, out in force.

      * Ie, the people who tell you how to vote because you are beholden to them, not the people that voted you into office.

      Well it should be noted that crop subiside are ok as are oil company subsides and that does not mean Social Security or Medicare (among many programs) are not free American rights.

      • And of course unless you tied 15 billion up tight, Boeing would throw it away.

        And bound tight they would not accept it.

        At least right now. The story has a ways to play out, there is a lot in motion and right now none of it gives Boeing any wiggle room.

        Or as they say, Plausibly Deniability is not there. Not that it really ever was but Fig Leafs are often made and Boeing has hidden behind the fig leaves or the Emperor being naked.

    • The point was that Bjorn made 2 points.
      Developing an airliner is actually extremely cheap when compared so many government programs and it takes a long time to get them up and running
      Also by reading Bjorn and Scott’s articles,I’m guessing that we are leaving at least 10% fuel efficiency (not financially for the airlines or the manufacturers)on the table by not developing new narrow bodies with existing technologies.Would you agree with that number?

  3. The huge cost of designing and building a new airliner in the US or EU will push new airliner development to China, with its massive subsidies and disregard for ordinary market forces.
    However, Chinese certification processes will always be suspect until they allow Western certification bodies full transparent access to all their manufacturing facilities, which won’t happen under their present form of government.
    Airbus is up to date on its fleet design while Boeing has squandered 100 years of experience and basically forgotten how to make airplanes, so it looks like the planes we have now are the planes we will be flying in for a good while.

    • Jan:

      Its the ponderous nature of the Chinese mandated and owned programs by the Government that are the impediment.

      Russia previously had build authority per certification that the FAA and EASA had agreed with, to and on.

      They did not build a single modern aircraft.

      Now of course they are attempting it, and suddenly massive Government money infusion that will go to a great deal of corruption the same as China.

      Airbus is a one off that succeeded due to where they were, the people and organization that melded together and the hands off nature of the Governments involved.

      And they still hold their hands out when they do a program. The idea was it became self sufficient but the knee jerk is impossible to overcome.

      Share buy back while holding out your hand.

      Granted what we have in Boeing is far worse but still………………

    • “Chinese certification processes will always be suspect”

      Current and recent FAA certification are extremely suspect…and, yet, we’re supposed to believe that they represent some sort of “gold standard”?

      “…full transparent access to all their manufacturing facilities,…”

      You think that Boeing’s manufacturing processes/facilities are in any way “transparent”? You might want to ask the NTSB about that…

  4. Just some numbers on a napkin:

    BCA & Airbus look to get about a 10% margin (give or take) on their commercial deliveries.

    If it costs you $15 billion to develop the thing in the first place(starting 8-10 years ago) you probably need to sell some $200 billion (at 10%) to cover that amount (assuming the cost of money).

    If it’s a NB that goes for $50 million a pop, you’re looking at ~4,000 units.

    Even if you threw out the time value of money and said you have to sell for $150 billion, it’s still 3,000 airframes.

    —————————————————————

    How fast can you ramp up production?

    Airbus just crossed the 3,000 mark in deliveries with the Neo family in 2023. It took them 8 years to do it. And this was for a derivative, not a clean sheet.

    You can see why derivatives are all the rage – cheaper, quicker ramp up and a faster ROI.

    • This is the point I was trying to make Boeing has amortised the cost to such a degree that it’s impossible for efficiency improvements to beat the the capital expenditure for the airlines and manufacturers,until one day it suddenly isn’t.

    • Frank P:
      Don’t forget subsidies!
      The WTO is dead: protectionism and subsidies are now the name of the game. Just invoke the concept of “national security” and any rule can be broken.
      Consider all the money being thrown around by the US Chips Act…Intel alone was awarded a grant of $9B just the other day. Imagine what Boeing or Airbus could do with a sum like that?
      It looks likely to become a new norm, now that competition with non-Capitalist countries has acquired greater urgency.
      Of course, in the background, it’s being going on all the time: for example, the Boeing Subsidy Tracker has now notched up over $90B in grants, tax breaks, bank guarantees, etc.

      • ‘Consider all the money being thrown around by the US Chips Act…Intel alone was awarded a grant of $9B just the other day. Imagine what Boeing or Airbus could do with a sum like that?’

        More buybacks and dividends?

        Thing about subsidies for commercial aircraft, is that there usually has to be some (perceived) benefit to the giver (like a plant opening in a state, with jobs for residents) which they can sell to the public.

        Boeing isn’t opening any new plants or new planes now – it can’t get the ones it has to work properly. The whole TBW/Open rotor thing for me is pure hogwash. They can’t get their derivatives certified, they going to get that thing past regulators?

        For Airbus, the problem is the supply chain; great to have all this excess capacity, but if Pratt & CFM engines are still the bottlenecks (or other suppliers)…it means nothing.

        ——————————–

        As far as the Chips Act goes (my 2 cents):

        Since microchips today, are in every blasted thing we have (just looking around my kitchen – stove, fridge, toaster, dishwasher, microwave, my beloved Keurig, range hood, kettle, ceiling fan…I think the damn pod lights in the ceiling have chips in them)…they truly are a strategic asset.

        Take them away and we’re in trouble.

        If Boeing were to cease to exist, yah it would hurt the US economy, but pretty much everything they make can be taken over or made by another US company. In the meantime, all those parked jets could be hauled out of storage and put back into service (albeit at a higher cost to the consumer) until an OEM is back, up and running.

        (Yes, it would be easier and better to let them go Ch 11, wipe out the shareholders, replace the BoD & Mgmt and keep production going, I’m just saying…)

        • “Thing about subsidies for commercial aircraft, is that there usually has to be some (perceived) benefit to the giver”

          Well, both Boeing and Airbus have defense/space divisions — so there’s an oven-ready national security argument. Also, one can argue that commercial aircraft are an essential part of modern society, so there’s an oven-ready “vital industry” argument. And, one way or another, there’s an oven-ready “mass employment” argument.

          Most of the chips in your house/car are low-end devices that are already manufactured in the US or Europe (by companies like Broadcom/Infineon). The real purpose of the Chips Act is to try to onshore the manufacture of cutting-edge chip processes à la TSMC — before the sh#t hits the fan in Taiwan.

          There are plently on Capitol Hill who would easily fall for the argument that Boeing deserves further/bigger subsidies.

          • From about a year ago:

            Focus: Ford’s pain underscores uneven impact of two-year auto chip shortage

            https://www.reuters.com/business/autos-transportation/fords-pain-underscores-uneven-impact-two-year-auto-chip-shortage-2023-02-03/

            DETROIT/SAN FRANCISCO, Feb 3 (Reuters) – Ford Motor Co’s (F.N), opens new tab disappointing quarterly results underscored that disruptions caused by the global semiconductor shortage are still bedeviling automakers, but some are suffering more than others.
            Ford said on Thursday it left billions of dollars on the table that were within its control and blamed a 100,000 vehicle shortfall in its fourth-quarter volume mostly on the inability to obtain enough chips.

        • Frank P
          Since you bring up finances (and Ch. 11), have you any theories as to how Boeing proposes to pay for whatever parts of Spirit Aerospace it may eventually be allowed to acquire…including any penalties levied for reneging on existing contracts for Airbus?

          -Cash? It doesn’t have any.
          -Floating new shares? Investors won’t like that.
          -Selling some of the shares it bought back in the past? Can one assume that those are still on the balance sheet, and haven’t been expunged?

          • @Abalone: Boeing CFO Brian West said they’d pay for SPR with cash and debt, at the recent Bank of America conference.

          • There was a study done here on Leeham awhile back which analysed the purchase price of the buybacks which showed BA in the black on them (I think the stock was at $200 when it was done).

            I am pretty certain that mgmt is loathe to sell those shares, which would dilute shareholders and drive down the price.

            However – Scott also reported a couple of years ago that BA has quietly gone to the money people in New York to sell about $30 billion in stock, but wanted something like $275 a share. The money said no thanks and walked.

            ————————-

            Spirit; market cap is about $4 billion.

            BA’s Q4/2023

            Assets
            Cash and cash equivalents $12,691
            Short-term and other investments 3,274

          • Per various remarks above:

            Yes, Boeing has cash (if you can call it that)…but it can’t really afford to spend it on an acquisition, can it?
            It hasn’t generated a profit in years, and is expected to burn through $5B in 2024. Any positive cash inflow for the past 5 years has come from receipt of PDPs (and crafty deferral of expenditure)…not from earnings. And it will need cash to fix up the mess at Spirit, if the acquisition goes ahead.

            I’m interested as to how Brian West thinks he can take on more debt without triggering a credit rating downgrade — particularly seeing as Boeing’s outlook has only worsened in recent months. He’ll also be paying a hefty interest rate on it.

          • ‘It hasn’t generated a profit in years, and is expected to burn through $5B in 2024. ”

            You clearly dont understand major business financials do you.
            The ‘door flew off’ on your claims

            They can what they want with their money and clearly Spirit is an easy acquisition regardless of the uninformed opinion

  5. This is interesting:
    “A Boeing 737 Mechanic Explains Why The FAA Is Clamping Down On United Airlines”

    The mechanic in question is Scandanavian, and he asserts that the panel that recently blew off an older 737-800 became detached as a result of shoddy MRO at United. A notable quote:

    “I could go on further about this particular accident but it simply comes down to piss poor maintenance by United. Anyone with a set of eyes can see elongated holes on panels. The visual cues are impossible to miss. Usually black streaks from the fastener holes follow the airstream hope this brings you some insight.”

    https://viewfromthewing.com/a-boeing-737-mechanic-explains-why-the-faa-is-clamping-down-on-united-airlines/

    The mess in the US aviation sector just keeps on growing: Boeing, Lockheed Martin (F35), RTX (PW GTF), FAA (5G, ATC, certification), NTSB (being stonewalled by Boeing), Southwest (recent scheduling meltdown) and now United (MRO).
    What’s causing this implosion?
    Can an industry in this state ever manage to produce and certify a new commercial aircraft again?

  6. Bjorn,

    Good job on this series.
    I’m puzzled with this last statement:
    “Why does engine development fail to produce durable engines when we have developed bypass turbofans for the last 70 years?”

    Where are you going with this? As a former engine planner in engineering and maintenance operations manager I can say that todays engines are 90% or more durable and RELIABLE compared to the P&W JT8’s and CF6’s…,of yesteryears. all good engines but compared to what’s currently in service today – amazing engineering and reliability. Especially when we consider ETOPS. The data supports my position.

    Are there problems today such as the Trent 1000 or P&W GTF, yes of course. But we need to consider the immense pressure these engineers have for designing durability with new technologies e.g. ceramics. Should they have done more on FMEA? Probably. The learning curve is so compressed today. But the performance of today’s HBF jet engines is simply stunning.

    Look forward on the next series.

    • It’s arguable that we are already trading maintenance costs and reliability for emissions and the environment.Should we go further?

      • @Grubbie

        Totally agreed. That was my point referring to the challenges these engineers are dealing with.

  7. Analogous to the mining industries where often, new technologies & techniques in the context of higher prices for the metals makes exploiting previously uneconomic or obsolete mines and even the “waste” from mines a worthwhile prospect, there are numerous legacy aircraft which could be rendered highly economic by application of new processes, materials and use cases that would make those aircraft where, like mines, all the sunk costs have long been written off, competitive.

    This business model is more attractive than the current one of the two incumbents.

  8. @Duke

    “Wheres does it say Boeing wanted to sell off some of its Treasury shares ( bought through buybacks) but *Wall St wasnt interested* .”

    Right here:

    https://leehamnews.com/2022/04/11/pontifications-catching-up-dhc-extends-dash-8-life-737-10-777x-a321xlr-certifications/

    ———————————————–

    I’m not a fan of New York City at all but going there has its advantages. I was at the Wings Club on March 30 for a book signing of Air Wars, The Global Combat Between Airbus and Boeing. Here’s the buzz from New York:

    A $30bn equity offering to pay down debt is apparently off the table. The stock is trading around $180 vs $250-$300 wanted for the offering.

    ————————————————

    You even made a comment on it (in typical fashion):

    Dukeofurl
    April 11, 2022
    The technical and financial acumen of experienced analysts ( who do this for a living) far outweigh the uninformed and nebulous words of the amateurs seen on this blog

  9. Following the news in the airline industry and the new tech articles, it seems like there is a gap after the 747 and A380, both for freight and passengers, that the 777 and 350 does not fill. Boing is a basket case for now, so the only one that has the funds is Airbus if they can make a business case for it.
    I think that the flying segment in many places is taking off, as someone pointed out, there are often not enough airports to serve them, and building new ones is expensive.
    At the same time as we saw with Heatrow’s 3rd landing strip, adding new ones to congested airports are not always possible, benefiting the airline with the biggest capacity plane. With the rise of China, India and Africa, this will only become more normal, and Tim Clark wants a 380 replacement for Emirates.
    So could Airbus build a new one with perhaps only 2 engines else 4, folding wings, and the ultra fan or similar engine, some of the other new tech, and possibly even also that could be a freighter, so the numbers would add up to repay the investment?

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