Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 5. Turbofan design problems April 26, 2024
- Airbus 1Q2024 results: Airbus CEO: “A350 in-service experience drives positive reputation and orders” April 25, 2024
- A350-1000 or 777-9? Part 3 April 25, 2024
- Boeing CEO promises company is turning around…again April 24, 2024
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
Pontifications: Catching up on the KC-46A, KC-30A
By Scott Hamilton
April 11, 2016, © Leeham Co.: The Government Accountability Office (GAO) concludes that the Boeing KC-46A aerial refueling tanker for the US Air Force has “challenging testing and delivery schedules” ahead in its annual review of the program.
It’s been a long, long time since I wrote about aerial refueling tankers. Having delved into this topic during the long-running saga of the USAF recapitalization effort, and the competitions between Northrop Grumman/EADS and later Airbus alone and Boeing, the topic had been beaten to death.
But as we who follow such things know, Boeing’s current effort to build the winning KC-46A for the Air Force has run into more than a few problems. These have led Boeing to be at least eight months late and write off $1.2bn pre-tax on the program.
And the problems aren’t over.
Pontifications: Boeing’s 8,000 employee reduction isn’t nearly enough
By Scott Hamilton
April 4, 2016, © Leeham Co.: Boeing’s plans to reduce head count at Boeing Commercial Airplanes by 8,000 jobs this year dominated the news last week. Comparing employment figures with Airbus Commercial shows this reduction isn’t nearly enough.
BCA has 22% more employees per airplane than Airbus. BCA is a bloated organization. Some of this undoubtedly is inherent to being a 100 year old company, compared with Airbus being less than 50. Airbus is more automated than Boeing as well.
Airbus only one reason for Boeing cost-cutting
- The bigger danger at Boeing is not Airbus pricing, but the potential for up to 15,000 early retirements this year by engineers, technicians and touch-labor. See Scott Hamilton’s column at Forbes online.
- Job cuts drive margin at Boeing, analyst concludes.
March 31, 2016, © Leeham Co.: Boeing has to cut costs. So it’s cutting 10% of its work force.
The reason?
Ray Conner, CEO of Boeing Commercial Airplanes. Photo via Google images.
Pricing pressure from Airbus, says Ray Conner, the CEO of Boeing Commercial Airplanes (BCA). The Seattle Times, which reported March 30 that it obtained an internal memo citing the 10% number, quoted Conner extensively from a Feb. 10 internal webcast that Boeing is losing orders to Airbus over price.
Declining market share, especially for the 737, is a major concern, The Times quotes Conner.
“Their biggest weapon that they’re using in the competitions today is price,” Conner told employees. “They are attacking us with price in every single campaign. And as a result of that, you know, we’re being pushed to the wall,” Dominic Gates of The Seattle Times wrote, citing a transcript of Conner’s internal comments.
Gates went on to write that “In justifying the anticipated cuts to employees in last month’s internal webcast, Conner was unusually frank as he invoked a dire threat from Airbus.
“He said that Airbus winning 63 percent of single-aisle sales last year with its A320 jets going against Boeing’s 737 jets was ‘alarming … because the 737 is the biggest contributor to the earnings of the Boeing Company.’”
Gates went on to extensively quote Conner in his article and the defensive posture Boeing is now in vis-à-vis Airbus.
Pontifications: Dissecting Boeing’s 2016 delivery guidance
By Scott Hamilton
Feb. 8, 2016, © Leeham Co.: Boeing’s surprise guidance for 2016 for fewer deliveries on the 737 and 767 lines raised as many questions as officials answered on the Jan. 27 earnings call.
The lower guidance led to about a 9% drop in stock, from $128 to $115. As of Friday, the stock had recovered some, trading in the low $120s.
Boeing’s explanation about the lower guidance for 737 deliveries—12 fewer this year than in 2015—seemed, on the surface, reasonable. As the 737 MAX entered production, both with test aircraft and the first production airplanes, officials said this will lead to fewer deliveries of the NG.
But as stock analysts digested the information, skepticism arose. David Strauss of UBS issued a note last week in which he concluded the real reason for the lower deliveries is a likely production gap—not enough NG sales were achieved to bridge the gap from the NG to the MAX.
Pontifications: A sea change at Boeing
By Scott Hamilton
Jan. 18, 2016, © Leeham Co. The surprise announcement last week of a tentative contract agreement between Boeing and its engineers union, SPEEA, was the best news coming out of the company that I’ve heard in years.
Boeing 737 rate hike factors
Boeing 737 factory in Renton (WA). Boeing rendering.
Subscription Required
Introduction
Nov. 30, 2015, © Leeham Co.: As Boeing ponders whether to increase production rates of the 737 line beyond the previously announced 52/mo rate effective in 2018, there are other important considerations besides whether the market can sustain another rate increase and whether the supply chain can gear up to the higher rates.
It is widely known that Boeing is considering rates as high as 63/mo, the maximum capacity at its Renton (WA) plant. Airbus has already announced it plans to go to rate 60/mo for the A320 family in 2019. But a higher rate is being explored, and a relationship to the future of the 747-8 is a factor.
Summary
- Market share protection, backlog clear considerations.
- Termination of the 747-8 program, its effect on suppliers and a Boeing write down are factors.
- Cash flow going into the 2020 decade is important.
KC-46A refueling boom, drogue testing
Oct. 13. 2015: The US Air Force and Boeing released photos of the KC-46A aerial refueling tanker with the boom and the drogue deployed. Photos by John D. Parker. Click on images to enlarge.
Boeing KC-46A first flight
Sept. 30, 2015: Boeing Friday launched the first flight of the USAF KC-46A aerial refueling tanker. The event was seven months late and all the program margin has been eaten up by the delays, but this was a milestone nonetheless.
The flight continued for four hours.
An additional video may be found here. Boeing’s press release is here. Boeing’s video with narration and test pilot reaction is here.
Bjorn’s Corner: USAF Tanker program
By Bjorn Fehrm
25 September 2015, ©. Leeham Co: When Scott Hamilton asked me to give my view on his article “Pontifications: Duelling refuelling tankers” I accepted. I was not involved in the project and was only following it casually over the years.
I will also not give my view on what would have been the most suitable tanker for the US Air Force. I simply don’t have the relevant military competence for that, having never operated my fighters with aerial tanking nor been in an aerial tanker aircraft.
Where I have relevant competence is in writing military specifications for important aircraft procurements and the excerpts I have seen from the tanker RFQ on key specification points don’t impress. Let me explain.
Pontifications: Dueling refueling tankers
By Scott Hamilton
Sept. 21, 2015, © Leeham Co.: This Friday, Sept. 25, is the date that at long last, Boeing and the US Air Force expect the first flight of the KC-46A that is equipped with the fueling system.
A “bare” KC-46A made its first flight last December. Then it spent the next six months or so on the ground. First flight of the second KC-46A, the one with the fueling system, has been delayed several times. All the program margin is gone and it’s going to be a challenge for Boeing to stay on schedule to deliver 18 combat-ready KC-46As to the USAF by 2017–two short years away. To try and stay on schedule, Boeing started production of the the airplane concurrent with the flight test aircraft, a risky proposition that could result in major rework or other difficulties if Murphy’s Law comes into play.
The KC-46A is the successor to the KC-767 International tanker program, which was an industrial disaster. Only eight airplanes were produced, four for Italy and four
Boeing KC-46A makes its first flight Sept. 25, 2015. Photo via Google images.
for Japan. It ran years late and hundreds of millions of dollars over budget. There were flutter and design issues. These problems became part of the risk assessment by the USAF in the KC-X competition evaluation between Boeing and Northrop Grumman/EADS–and one of the reasons why the Air Force selected the Northrop KC-330 offering (later named the KC-30).
Boeing successfully challenged the contract award and won the next round with what became known as the KC-46A. Boeing claimed it benefited from lessons learned from the KC-767 International program.