Airbus has hit the news this week with a series of stories about jobs and cost-cutting.
International Herald Tribune: No job cuts, just more US$ purchases.
Reuters: From Tunisia, with love.
Business Week: Airbus seeks new cost cuts.
Forbes: Airbus aided by strong dollar.
Flight International: Airbus to offer A330HGW to take advantage of 787 delays.
If the IAM didn’t have enough reason before to be concerned about out-sourcing, here’s another: Mitsubishi just announced it’s entered a deal with Boeing for its support in building the MRJ regional jet.
The so-called Japanese Heavy is an industrial partner with Boeing on the 787 program, building the composite wings. The 70-90 seat MRJ regional jet will have composite wings. Boeing is shying away from planes with less than 150 seats in the future. If the MRJ is a success, we think it likely Mitsubishi will grow the airplane up to 150 seats, particularly since Kawasaki Industries, another 787 partner, has announced plans to create a 100-150 seat jet.
From there it’s only another step to grow into 200 seat jets and a full family. It took Airbus 14 years to create a family and 34 years to have a full product line.
This is not good for American industry. And in our view, Boeing is creating its own future competitor.
DOD Buzz has this interesting report on the prospect of a split buy for the tanker competition.
AFP, the European news agency, reports DOD/USAF officials are worried another tanker protest will be filed, no matter who wins Round Three.
Reuters has this report on a USAF general urging quick action.
Update, 12:50 PM PDT, Sept. 4: In true military fashion, it’s hurry up and wait–the final RFP for the tanker has been delayed another week, according to this report in The Hill newspaper.
Update, 4:45 PM PDT, Sept. 5: DOD has tough decision on tanker
A few interesting stories today on the USAF tanker saga:
Business Week: Boeing’s tanker challenge.
Reuters: US arms buyer faults Boeing. This story quotes a Jacques Gansler of the University of Maryland who now sits on the Defense Science Board. If memory serves correctly, Northrop Grumman partially funded a study at the U of M Gansler oversaw on the tanker. No mention of this is in the story.
Note: Be sure and check out updates to posts below on the 787 and the best-and-final offer.
Update, August 31:
The Tacoma News Tribune has this long analysis on the tanker and whether Boeing should press on.
Boeing has dominated the news in recent weeks because of the tanker and the IAM contract negotiations. At long last, here’s some news about Airbus.
The company is actively talking about stretching the A380-800 to a -900, 1,000 passenger version. A new intereview with Louis Gallois, CEO of Airbus parent EADS, looks at 2010 as when this program might be launched. The story is here. Meanwhile, delivery of Emirates Airlines’ second A380 is delayed.
For all those Airbus-Northrop critics who whine about the prospect Northrop (the prime contractor, let’s remember) won’t protect and honor US restrictions on selling the KC-30 or its components to nations hostile to US interests, here’s a Reuter’s story about how Airbus won’t sell airliners to Syria as long as sanctions are in place.
Pratt & Whitney shipped its P1000G Geared Turbo Fan engine to Airbus for installation on an A340 test bed, according to this Flight International story. Airbus is considering offering the GTF on its A320 family.
Update 8:40 AM PDT, Aug. 29: EADS says there are no current discussions underway with Syria for a large Airbus order. The operative word in the statement is “currently.”
Northrop Grumman’s opposition to granting Boeing’s request for a six month response time instead of 45-60 days for the re-bid on the KC-X competition is predictable and disappointing.
Boeing also threatened to no-bid the contract if it doesn’t get its way on the request.
As readers know, we have always felt the KC-30 was the more capable airplane for the KC-X than the KC-767 offered by Boeing. We’ve sided with Northrop on any number of issues during the competition. But not this one, as we opined on August 22.
Northrop believes that Boeing is stalling on the bet that the Democrats will increase their majorities in the House and the Senate in the November election, and that this will increase Boeing’s sympathy in Congress. We have no doubt this is part of the Boeing calculus. So what? EADS decided to locate the KC-30 production facility in Republican Alabama at a time when the Republicans controlled Congress. That was hardly a coincidence. Politics have permeated this process from the start and while there is plenty of reason to stop now, that’s not going to happen.
Boeing, in its political gambit, is taking a risk that falls into the “be careful what you ask for category,” however. While it seems certain Democrats will increase their majority in Congress, it’s hardly a sure bet today that they will win the White House. Sen. John McCain is giving Barak Obama a run for his money and if McCain wins, this won’t be good news for Boeing.
We see no harm in giving Boeing the six months. We think both sides will produce a better bid, and that’s good for taxpayers.
Meantime, Steve Trimble at Flight International has an interesting take on his blog about how the re-bid can flip-flop some of the suppliers.
Update, 09:15 AM PDT Aug. 26: Innovation Analysis Group does a six minute podcoast with an Israeli reporter discussing Israel’s plan to update its aerial tanker fleet. The air force could use the KC-135/707 for another 20 years if necessary, but it really wants to buy the same aircraft used by the USAF.
Update, 2:30 PM PDT Aug. 26: So far, no final RFP has emerged from DOD; it was thought that it might be issued yesterday. We’re picking up rumblings that it may not come out this week.
Update, 350 PM PDT Aug. 26: Reuters now reports the final RFP may be issued next week.
Update, 12:00 PDT, Aug. 27: The St. Louis Post Dispatch has this piece looking at the strategic implications of the tanker competition.
(Updated 0730 AM PDT with references to EADS North America COO John Young and the “KC-35.”)
Giving Boeing six more months to come up with a revised bid is a prudent and reasonable thing to do. Here’s why.
Giving Boeing another six months will likely produce better pricing, perhaps a better plane and perhaps better life cycle costs. DOD should grant Boeing’s request.
Update, 2:00PM PDT: IAG has a new podcast with Boeing IDS spokesman Dan Beck on the Boeing request for six more months.
(Due to technical difficulties, our update on the Corporate Website was temporarily requiring a password to access this week’s Commentary. This was resolved at 0900 PDT.)
Our Corporate Website has been updated for the week of August 19. Today we talk about–what else, these days–the USAF KC-X program.
With all the talk about the prospect of Boeing offering a tanker based on the 767-400 or 777-200F, we pull together thoughts about this and a table comparing the KC-135, KC-767AT, KC-30, a “KC-764,” a KC-777 and the KC-10.
We also talk about the prospect of Boeing doing a “no-bid” in response to the Amended Draft RFP, or filing a protest against the Final RFP, which is expected this week. And there is more.
Byran Corliss of the business magazine Washington CEO (as in Washington State, not that “other Washington,” as we say here on the West Coast) has a short commentary that is inflammatory to locals but absolutely true. He writes that Boeing doesn’t need the tanker business. (Boeing has acknowledged that, financially, it would be small potatoes, but officials do want the business.) Corliss also comments on the current labor negotiations. Corliss used to cover Boeing for The Everett Herald before joining CEO.
Bloomberg just moved this story, reporting the Italy will fine Boeing for its late KC-767 tanker, following penalties assessed by Japan.
Update, 1145 AM PDT: We’ve been on the phone with reporters this morning discussing the tanker competition and what Boeing might do–the latter in the wake of the Aviation Week story that Boeing is considering adopting a no-bid position following the revised RFP that will give extra credit for extra fuel off-loading capability. We thought we’d recap our thoughts.
Update, 345 PM PDT: The Financial Times is reporting that Boeing is sticking in the competition, at least for now, after its meeting with the USAF. The FT reports that Boeing is continuing dialog with the Air Force to refine the Draft RFP for a final RFP. Here is the story, though a subscription may be required.
Reuters reports that Boeing remains “discouraged,” however, in this story, citing defense analyst Loren Thompson.
Update, 800PM PDT: Business Week has this piece about Boeing staying in the competition, probably plans to ask the USAF to extend the timetable and some discussion about a “KC-777.”
There are numerous reports today that the US Trade Representative may look at the proposed launch aid for the Bombardier CSeries airplane. This one does a good recap.
The CSeries is proposed to carry 110-149 passengers, which directly encroaches on the Boeing 737-600/700 and Airbus A318/A319 series. The USTR doesn’t care about the potential impact on Airbus, of course, but since the USTR filed a complaint against Airbus and the EU about launch aid to Airbus (the case is still pending), it’s only logical that the USTR and Boeing complain about launch aid to the CSeries.
But does Boeing truly care?
There were strong hints at the Farnborough Air Show by Boeing Commercial President Scott Carson that Boeing just might cede the market of 150-seats or below, though Carson declined to confirm to us that that’s specifically what he meant.