More delays for 787, A380: German magazine

Reuters picked up a report from a German magazine saying Boeing and Airbus are notifying customers of new delays in the 787 and A380 programs. Here’s the report; we’ll try for comment ourselves.

New, 1045 AM PDT: Reuters has a follow-up report, quoting Yvonne Leach, a Boeing 787 spokesperson, denying the German magazine story. According to the new Reuters report, Leach says there’s been no change to the basic 787 schedule announced last month, in which a 15-month delay for initial entry-into-service was identified. Reuters reports Leach said that on average, delivery delays will be about 20 months.

Note the phrase “on average” in the Reuters story. This doesn’t specifically discount the 27 month figure reported by the German magazine while affirming the 15 months EIS delay.

Monarch Airlines, in an internal memo, reportedly told employees its 787s will be 30 months late; Monarch has not confirmed (to us, anyway) the authenticity of this memo. This was followed by an interview by Royal Jordanian Airlines in which it expects 787 delays of up to 30 months; and Lan Chile, which anticipates a 24 month delay for its 787s.

So how could this be, when Boeing announced a 15-month delay for EIS?

It’s because there will be a much slower ramp-up on the production schedule. Boeing’s original plan was to be at 10 per month by 2010; now this won’t happen until 2012, Boeing said in its April program update. The ripple effect is what’s at hand here.

As for the same original report by the same German publication that there is another delivery delay in the offing for the Airbus A380 2009 schedule, we’re still trying to nail this one down.

New, Sunday, 800 AM PDT: The European news agency AFP picks up a report from another German magazine saying that Airbus will “nearly” deliver 13 A380s this year (which by our interpretation means Airbus “won’t”) and that it will miss its target of 25 deliveries next year. Here is AFP’s story. Our inquiry of Airbus produced this response, quoting directly:

Airbus and in particular Airbus President and CEO Tom Enders have said on several occasions that our delivery schedule has always been and will continue to be a major challenge for the company until the ramp-up is completed.

Currently, the A380 is in the critical phase of steep production ramp-up and the changeover from the recovery wiring installlation (Wave1) to the ramp-up mode with full industrialization (Wave2) .

A major review of the programme at this transition phase is standard practice.This includes amongst other things an analysis of the progressive shift of the experienced work force from Wave1 to Wave2 aircraft, the ramp-up readiness of the supply chain and the status of the delivery schedule. It confirms the continues tight management attention the A380 programme and its delivery schedule are receiving in order to satisfy our customers.

So far, no A380 customer has specifically revealed new delay timeframes although the Reuters report indicated that the first German magazine said Airbus has notified customers.

New, Monday, 715 AM PDT: Airbus spokespersons, reached Monday by European media, decline to comment on the reports of the German publications that it won’t deliver 13 A380s this year or 25 next year, causing EADS stock to fall.

A380 lease rates

Commercial Aviation Online (CAO), the subscription-based news service owned by the company that owns Flight International, Airline Business and other publications, reports that Singapore Airlines completed financing of its third Airbus A380 with a lease structure in Europe. The purchase price by the lessors is reported to be $198.6 million with a lease rate of $1.7 million a month, for what’s know as a lease-rate factor of 0.85%.

Before people jump to conclusions about the purchase price, comparing it to today’s list price of more than $300 million for the A380, remember that Singapore ordered the A380 years ago and received launch customer pricing for it. (Business Week reported at the time that launch customer pricing was in the $140 million range, something neither Airbus or Singapore ever confirmed.)

The lease rate factor for an airline of Singapore’s quality is also fairly standard.

Disclosure: We write for CAO, but did not write this story.

More A380 delays or not

In a confusing set of stories, reports suggest that there may be a new round of delivery delays for the Airbus A380. These generated from comments made by Airbus CEO Thomas Enders, who said Airbus is engaged in a major review of the A380 production to assess the delivery schedule of 13 A380s this year and more in succeeding years.

This apparently was interpreted to mean that Airbus might not deliver the 13 airplanes promised this year. A spokesman immediately denied that’s what was meant.

We’re told by two sources–one inside Airbus and one a former Airbus executive–that program reviews are normal and there’s much ado about nothing on this one. The former Airbus executive told us he was puzzled why Enders even made the remarks.

Given the A380’s delay history, any hint of delays–whether founded or unfounded–are bound to cause concern and questions such as expressed in the news reports. This is similar to the trials now experienced by Boeing with the 787 program and fears by 777F and 747-8 customers of knock-on effects to these programs.

The 777F program appears to be on track now that there is no conflict in flight testing schedules between the 787 and 777F, as emerged on a previous 787 revised schedule. Some customers remain concerned–and are predicting–delays of several months in the 747 program, however, because of the level of engineering resources previously diverted to the 787. These customers believe Boeing won’t have time to catch up on the 747 to keep this program on track. Boeing previously pushed back roll-out by three months, according to reports, but has vowed to keep to the delivery schedule even if it means initially delivering a plane that’s about 1% overweight, according to Flight International.

New, 2:00 PM PDT: Speaking of A380 delays, Reuters has this report about Airbus penalty payments to Emirates Airlines for the delays. An excerpt: DUBAI (Reuters) – European plane maker Airbus paid Dubai’s Emirates EMAIR.UL as much as $110 million during the last year in compensation for the late delivery of the A380, of which the Arab carrier is the largest customer, Emirates said.

To fuel or not to fuel

Here are a couple of items about the refueling capability of the KC-30/KC-330 tanker, which is one point of controversy in the continuing saga of the Boeing-Northrop Grumman tanker contract award.

Boeing likes to point out that Northrop’s KC-30 hasn’t passed gas through its bloated airplane (sorry, we couldn’t resist the puns) and that there are delays in the EADS/Airbus KC-330 program to Australian. The KC-330 is the basis for the KC-30.

Aviation Week has this story about the KC-330 and some issues with the refueling boom. Northrop Grumman provided a link to this video showing fuel transfer on an Airbus A310 test-bed aircraft.

Northrop likes to point out that Boeing’s sixth generation boom proposed for the air force hasn’t been built, nor has the airplane to which this boom will be installed.

New, 0920 PDT: A Reuters report published in London’s The Guardian raises precisely the issue we raised weeks ago: that efforts by the US Congress to overturn the tanker award based on jingoism can potentially do more harm do Boeing in the global market than letting the USAF award stand, assuming the GAO reject’s Boeing’s protest.

Tanker wars, continued

Boeing and Northrop continue their tanker public relations war. Boeing fired off this press release about the KC-767’s “survivability” vs. the Northrop KC-30.

Northrop fired off a release about jobs, steering people to a 3 1/2 minute National Public Radio report.

Northrop partisans also made sure we saw this biting cartoon.

(For the record, we previously have asked Boeing to send us any similar cartoons supporting the KC-767, but were told none existed. If there are any, we’ll post them.)

Here’s a pro-Boeing cartoon, which for some reason we can’t insert the image, so here’s the link.

New A380 customer

We understand there is a new A380 customer in Asia. It’s currently a Boeing 747-400 operator and the order is for eight plus four options. We haven’t yet learned which airline but it’s not in China.

Boeing’s IDS struggles

This story by Dominic Gates of The Seattle Times paints a grim picture for Boeing’s Integrated Defense Systems. He points out that IDS “can’t boast even a single prime contract to supply the US military’s next generation of fighters, bombers, tankers and transport planes.”

Here’s an article from Aviation Week discussing China’s plans to build a plane that directly targets the Boeing 737 and Airbus A320 lines and another in The Australian about the engine competition between GE and Rolls-Royce that’s developed concurrently with the rivalry between Airbus and Boeing.

Derivatives not always good for military

Steve Trimble at Flight International has an interesting piece about commercial derivatives for the military. The theory is that this saves money. Tain’t necessarily so, says Steve. You can find the story here.

Where does Boeing turn?

With delivery delays of around 15 months now expected for the Boeing 787 program, where does Boeing turn to help its customers?

One suggestion was upping the production of the 767, currently at one a month. This won’t work–it takes about two years to do so, according to Boeing. By then the 787 program should be more or less back on track.

A blogger suggested that the 777 could be the answer. Not likely, either, because the 777 has a four year backlog and is being produced at the rate of seven a month, its highest ever.

The used airplane market is very tight. Boeing is looking for 777s, 767s and even Airbus A330s and A340s with little luck.

Boeing and the airlines will have to cope as best they can.

Here’s the backlog chart for Boeing. The production rates are:

737: ~30/mo

747: 1/mo

767: 1/mo

777: 7/mo

787: planned–initially 3/mo, increasing to 10/mo within 18 mo

Unfilled Orders by Model Through February 2008
Model Series Orders Deliveries Unfilled
Total Unfilled Orders 3544
737-700 1474 921 553
737-700BBJ 115 94 21
737-700C 12 11 1
737-800 2705 1348 1357
737-800BBJ 17 13 4
737-900BBJ 6 0 6
737-900ER 227 15 212
Total Unfilled for 737 2154
747-400ERF 40 31 9
747-400F 126 116 10
747-8 26 0 26
747-8F 78 0 78
Total Unfilled for 747 123
767-200ER 121 120 1
767-300ER 538 523 15
767-300F 82 49 33
767-400ER 38 37 1
Total Unfilled for 767 50
777-200ER 433 405 28
777-200LR 47 17 30
777-300ER 354 130 224
777F 78 0 78
Total Unfilled for 777 360
787-3 43 0 43
787-8 642 0 642
787-9 172 0 172
Total Unfilled for 787 857
Total Unfilled Orders 3544
Model Series Orders Deliveries Unfilled

Congressional move ill-advised

A move in the US House to adopt legislation to overturn the USAF tanker award to Boeing is ill-advised on a number of levels.

According to a story in The Seattle Post-Intelligencer,  Boeing supporters in the House, incensed over the award by the Air Force to Northrop Grumman and Airbus parent EADS selecting their A330-based KC-30 for the KC-45A tanker, are thinking about adopting legislation to block the award. The details, according to the news story:

  1. Prohibit the award of a US government contract to any company found by the US government to be receiving illegal subsidies;
  2. Direct the USAF to reconsider the competing tanker proposals and “factor in subsidies;”
  3. Direct the USAF to reopen the bidding and allow Boeing to propose a tanker based on the 777;
  4. Cancel the NGC contract outright.

There are so many things wrong with this approach.

  1. The World Trade Organization hasn’t ruled on the US complaint, so the USA’s interpretation of what constitutes “illegal” subsidies may or may not hold up before the international body charged with adjudicating these things. Apparently this minor legal detail doesn’t matter to the members of Congress who are behind this one. Furthermore, following the same concept, the EU has “found” Boeing to  be receiving “illegal” subsidies (also a complaint before the WTO). If Congress adopts this clause, then the EU would be perfectly justified in retaliating against Boeing by adopting a similar rule. Bad idea all the way around.
  2. We’ve written on this one before. The USAF has no expertise to factor in anything about the subsidies. It needs to stay away from this topic.
  3. Boeing had the option to offer a “KC-777” alone or in tandem with the KC-767. Boeing says it was discouraged from doing so, but as far as we know hasn’t presented written evidence to support this, at least publicly. Presumably this element is detailed in the protest filed with the Government Accountability Office. If so, then the GAO can determine whether the USAF improperly steered Boeing away from offering the KC-777 and equally presumably, this might be grounds to send the competition back to the drawing board (so-to-speak). Congress doesn’t need to be involved on this element.
  4. This is the worst possible interference in Congressional meddling. It sends a message to any foreign defense company, and any domestic company partnering with a foreign company, that it’s a waste of time to compete for Defense business. As we wrote March 22, Britain’s BAE Systems was the sixth largest DOD contractor in 2006. What kind of message would this Congressional action send to BAE? Boeing partnered with Italy’s Alenia to offer the C27J twin-engine turbo prop for light cargo operations. It so happens the Alenia airplane won this contract. The Congressional action proposed on canceling the Northrop deal has all sorts of horror-ramifications.

Let the GAO deal with this, like the law allows. If the GAO upholds Boeing’s protest, so be it. But if the GAO rejects the protest, Boeing and its supporters need to let this one go. In fact, Boeing would be better off calling off the dogs on this Congressional fight. Boeing might win the battle but lose the war. The EU won’t sit back idly if Congress interferes, and Boeing will be the one to pay the penalty, not some member of Congress with a few district jobs to protect.

As we previously said, Boeing would be far better off to devote its engineering resources to fixing the 787 program and developing the Blended Wing Body for the KC-Y competition scheduled for 2020. A KC-BWB, and subsequent commercial applications of the BWB, would be far more advanced than the KC-30 or anything else Airbus has to offer, and superior to the KC-777. Go for this gold, and the advanced technology that comes with it. Don’t stick with an airplane originally designed in the late 1970s-early 1980s. Think ahead. Be bold.

Blended Wing Body test model. Source: Boeing