Boeing’s transition in supply chain management aims to save hundreds of millions of dollars

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Introduction

Oct. 8, 2018, © Leeham News: As Boeing moves toward more automation, digital twins and 3D printing to streamline manufacturing and reduce costs, behind the scenes another major initiative has been underway for more than a year.

It’s the shift from its decades-old Enterprise Resource Planning system to a new, expanded one called Systems Applications Projects.

ERP manages parts and inventory. SAP is an evolution of ERP, important as Boeing plans to up production of the 737 and 787 and nears a decision whether to launch the New Midmarket Aircraft (NMA).

The transition is complex and will take years to fully accomplish.

Synergizing scores of old processes covering a billion parts, requiring meticulous data entry, is a daunting task. In fact, after running into problems in June, Boeing Commercial Airplanes’ transition has been delayed, reports the aerospace analyst for Cowen & Co.

A glitch in the system can have ramifications that interrupt production and create traveled work that can delay airplane deliveries to customers.

A system that works as it should streamlines delivery of parts and reduces costs for Boeing—and, theoretically, also its suppliers.

It’s a delicate balance where one misidentified entry into the computer can create problems.

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Pontifications: Amazon’s quiet plans to grow its airline

By Scott Hamilton

Oct. 8, 2018, © Leeham News: Amazon, the giant on-line retailer, continues to move quietly to expand its Amazon Air cargo carrier, with plans to grow the airline to a size that could rival FedEx, market sources tell LNC.

Amazon’s contracting with Atlas Air, ATSG and others for Boeing 767F services is well known.

So are plans for a $1.5bn cargo center at the Cincinnati (OH) airport (which is really across the state line in Kentucky). This expansion will support more than 100 airplanes. Operations are targeted to begin in 2020.

Prime operates about 40 through its airline partners and is in the market for 10 more, LNC is told.

But this is just the tip of the iceberg. Read more

Huge surge of A320 orders greatly exceed near-, mid-term A320 retirements

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Introduction

Oct. 4, 2018, © Leeham News: The huge surge of orders for the Airbus A320 family far outstrips the aging aircraft statistics, an analysis shows.

Airbus has a backlog of more than 6,000 A320 family members, with more than 1,700 sales potential just for retirements.

There is a backlog of more than 6,000 A320neo family members, with the near- and mid-term delivery schedule far exceeding A320 retirements. Photo credit: Airbus.

There are more than 4,300 A320s scheduled for delivery from 2019 through 2025.

There are just 765 A320s that hit 25 years old during the same period.

The surge in A320-family aging aircraft begins in 2030, just as the bulk of the current backlog ends, according to data bases maintained by Ascend and Airfinance Journal’s Fleet Tracker.

Summary
  • Useful lives of A320s in passenger service historically have been 25 years. Till now, no P2F programs existed to extend the useful lives.
  • But, some passenger airlines are returning A320s off lease in 12 years or less—accounting for some of the surge in orders vs aging aircraft.
  • Supply-demand imbalance in the secondary markets could emerge.

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Suppliers are paying more, waiting longer for aluminum and other materials

By Dan Catchpole

 danieljcatchpole(at)gmail(dot)com

An infographic highlights the role of aluminum in commercial aircraft production. (Image via Google Images)

Oct. 3, 2018, © Leeham News: United States-based aerospace suppliers say lead times and prices have significantly increased for aluminum, steel and other high-grade materials used to make commercial and military aircraft. But, they say, they have taken the increases in stride.

Aerospace suppliers based outside the U.S. generally have been less affected by the increases in lead times and prices for high-grade aluminum and steel, which President Donald Trump slapped tariffs on in March.

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What costs dominate an airliner’s operation? Part 4

By Bjorn Fehrm

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Introduction

September 27, 2018, © Leeham News.: Over the last week’s we have looked at the costs for a typical Mainline and LCC airline operating in the US, Europe and Asian markets. The costs have been Direct Operating Costs (DOC) for the average routes operated by these airlines.

Now we finish the series with a look at the seat-mile costs so the Narrowbody and Widebody aircraft economics can be compared on routes both can serve.

Summary:

  • When comparing seat-mile operating costs between Narrowbody and Widebody aircraft one must use the same cabin standards.
  • Doing so will show the apples to apples operating costs of the two types when operating on sectors out to the maximum practical range of the Narrowbodies.

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Assessing 737 production rate interest to 70/mo

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Introduction

Sept. 27, 2018, © Leeham News: Boeing hasn’t gone to a production rate of 57/mo for its 737 and studies have long been underway looking at a rate of not only 63/mo but also 70/mo, supply chain sources tell LNC.

Rate 57, up from 52, is scheduled for next July. Sixty-three has long been considered the maximum allowed for the current Renton (WA) factory, the sole location where commercial 737s are assembled.

But Boeing, in yet another step in its drive for more efficiencies, is analyzing how to push 70 airplanes a month through the same facility.

Summary
  • MAX 8 remains the staple of the 737 family.
  • MAX 10 helps family, stems bleeding, but A321 still outsells 737-9/10 by about 2:5:1.
  • 9/10 MAX represent 17% of MAX backlog. A321neo is 34% of neo backlog.
  • Boeing has more sales replacement potential than Airbus.

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Pontifications: Time for Odds and Ends

Sept. 24, 2018, © Leeham News: This week we catch up on Odds and Ends.

Boeing catching up on 737

By Scott Hamilton

Boeing has reversed the number of 737s piling up at Renton Airport and Boeing Field and is starting to burn off the “gliders” and other aircraft plagued by traveled work.

Although some aerospace analysts came away from the investors day this month skeptical that Boeing would clear the backlog by year end, barring another hiccup of size, it looks like the company will do so.

Spirit Aerosystems said it had caught up on the delivery of fuselages while Boeing told aerospace analysts at its investors’ day this month that delays were still causing issues.

How does this conflict of information converge?

It’s a matter of sequencing the fuselages back into the system, I’m told.

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What costs dominate an airliner’s operation? Part 3

By Bjorn Fehrm

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Introduction

September 13, 2018, © Leeham News.: Last week we looking at the costs for a typical Mainline airline in our series about the airliner cost equation. We discussed the operating costs of Mainline airlines and how these would be affected by the operating area.

Now we calculated the different costs for a Low-Cost Carrier (LCC) operating either in the US, West Europe or Asia.

Summary:

  • Fuel costs are the dominant costs for an LCC, regardless of geography.
  • Airport fees and crew costs are other costs which differ between LCCs, Legacy carriers and Geographies.

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Assessing A320 production rate interest in >70/mo

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Introduction

Sept. 17, 2018, © Leeham News: With the supply chain under major stress and Airbus and Boeing trying to recover from scores of “gliders” sidelined at airports without engines, each company nevertheless continues to study production rate increases for the A320 and 737 families.

Airbus publicly has said it’s looking at rate 70/mo. Boeing publicly acknowledges it’s looking at rate 63/mo.

Supply chain sources tell LNC Airbus is studying an even higher rate, into the “70s,” at early as 2020—a date that most consider out of the question.

Boeing is known to be considering a rate of 70/mo for its most profitable program.

Today, LNC looks at the A320 scenario. A future post will examine the 737.

Summary
  • Airbus is scheduled to deliver more A320 members in 2019 than production capacity. Some of these may be parked backlog airplanes.
  • 2020-2021 sold out at rate 60/mo, 2022-2023 nearly so.
  • Rate increase to 70/mo opens opportunities for Airbus, pressure on Boeing.

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Pontifications: Musical chairs at Airbus

By Scott Hamilton

Sept. 17, 2018, © Leeham News: The surprise resignation last week by Eric Schulz as Chief Commercial Officer for Airbus re-opened the door for the man who should have been named in the first place, Christian Scherer.

Scherer spent the last two years as CEO of ATR, which is 50% owned by Airbus, but his lineage is pure Airbus.

His father, Gunter, was one of the original Airbus pioneers. He was a flight engineer on the early A300B2 test flights when Airbus was formed. Gunter died in May.

Christian joined Airbus in 1984. Since then, he was Head of Contracts, Leasing Markets and Deputy Head of Sales as well as Head of Strategy and Future Programmes. At Airbus Defence and Space, he headed Marketing & Sales. He was named CEO of ATR in October 2016.

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