Aircraft production woes stretch far beyond Boeing

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By Judson Rollins

June 17, 2024, ©. Leeham News: Estimating airplane delivery rates isn’t much more than a guessing game nowadays.

While many headlines point fingers at beleaguered Boeing and Spirit AeroSystems, aviation’s production woes are much more complex. Even in 2024, the labor shortage legacy of COVID-19 and raw material shortages exacerbated by the Russia-Ukraine war loom large over the industry.

Airbus struggles to deliver airplanes on time, and engine makers also see their deliveries constrained by supply chain issues.

Source: AFP via Aviation Week Network.

Summary
  • Boeing commercial production is far below advertised rates.
  • Airbus deliveries suffer from shortages of seats, other parts.
  • Embraer says deliveries would be higher without supply chain issues.
  • COMAC’s disruption opportunity is dampened by likely trade conflict.
  • Pratt and GE Aerospace slowly ramp up delivery of redesigned components.

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Bjorn’s Corner: New engine development. Part 10. Airframe integration

By Bjorn Fehrm

May 24, 2024, ©. Leeham News: We do an article series about engine development. The aim is to understand why engine development now has longer timelines than airframe development and carries larger risks of product maturity problems.

To understand why engine development has become a challenging task, we need to understand engine fundamentals and the technologies used for these fundamentals.

In the last Corner, we looked at the nacelles used for a turbofan engine and for an open-rotor engine. Now, we go one step further and look at the integration of modern engines on an airliner.

Figure 1. Boeing 737NG (left) and MAX (right) nacelles compared. Source: Leeham Graphic from Boeing 737 images.

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Southwest, the “legacy LCC,” part 2: Bloated labor expense, difficult fleet strategy result in uncompetitive cost structure

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By Judson Rollins

Introduction

May 20, 2024, © Leeham News: Southwest Airlines was founded on the principles of high employee productivity and low labor costs. But 53 years after beginning operations, its labor cost as a percentage of expenses — and per seat-mile — is now the highest among US airlines.

Boeing 737 MAXes parked after the 2019 MAX grounding. Source: Getty Images via AFP.

LNA studied Southwest’s and its US competitors’ 2023 annual reports to comprehensively understand their relative profitability. The resulting picture is less than flattering to the Dallas-based carrier. Southwest is increasingly a “legacy LCC,” with LCC-like unit revenue but a legacy cost structure.

Summary
  • Labor costs are dramatically worse than legacy or LCC competitors.
  • Fleet and route strategy are crimped by overreliance on the Boeing 737.
  • Southwest’s insular management team and culture may be its greatest obstacle to business model innovation and continued profitability.

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Southwest could solve its MAX 7 woes … by buying Breeze?

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By Judson Rollins

Introduction 

May 6, 2024, © Leeham News: Southwest Airlines, still awaiting the certification and delivery of the Boeing 737 MAX 7 as a replacement for its aging 737-700s, might have an unorthodox alternative: acquire startup Breeze Airways for its Airbus A220 fleet – and, more importantly, its order book.

Source: Orlando International Airport via Simple Flying.

Launched in 2021 by serial airline entrepreneur David Neeleman, Breeze operates 23 A220-300s, 10 Embraer E190s, and six E195s to 47 airports across the US. It focuses on connecting larger airports to smaller cities, including a handful of transcontinental routes.

Ironically, the Utah-based airline achieved its first-ever monthly operating profit in March. It recently announced plans to operate the A220 exclusively by the end of this year.

According to a January update from database provider Cirium, Breeze has between 11 and 13 A220s scheduled for delivery each year through 2028. No options are listed.

Market intelligence says Airbus Commercial Aircraft CEO Christian Scherer visited with Southwest executives in Dallas and Breeze leadership near Salt Lake City in mid-April. This was well after Breeze’s February order for 10 additional A220s.

Summary
  • To deliver or not to deliver the MAX 7?
  • Southwest’s aging 737-700 fleet has few replacement options
  • How a Breeze acquisition might play out
  • Azorra Aviation is likely a key partner in helping Southwest get A220s

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Bjorn’s Corner: New engine development. Part 3. Propulsive efficiency

By Bjorn Fehrm

April 12, 2024, ©. Leeham News: We have started an article series about engine development. The aim is to understand why engine development now dominates the new airliner development calendar time and the risks involved.

To understand why engine development has become a challenging task, we need to understand engine fundamentals and the technologies used for these fundamentals. We started last week with thrust generation, now we develop this to propulsive efficiency.

Figure 1. The base engine in our propulsive efficiency discussion, the CFM56-7 for the Boeing 737ng. Source: CFM.

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When does a larger airliner pay off

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By Bjorn Fehrm

March 7, 2024, © Leeham News: Over the last decades, the choice of domestic market airliners has gone from the typical 120-seater to today 200 seats or more. We will look into what drives these decisions and where the cross-over points are from, say, an Airbus A319 to A320 and then to A321. We will limit the investigation to the Airbus range as the Boeing 737 MAX range has still not their MAX 7 and MAX 10 in service.

We will use our Airliner Performance and Cost Model (APCM) to model typical sectors and investigate what load factors favor a switch.

Summary:
  • The typical domestic cabins have gone from 120 to 150 seats to now 200 seats or above.
  • As airliner types grow, their trip costs increase. At what load factors can you motivate an A321 instead of an A320?

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Pontifications: Boeing violated previous FAA ODA, SMS demands—Been there, done that

March 5, 2024, © Leeham News: The Federal Aviation Administration (FAA) last week gave The Boeing Co. 90 days to come up with a real program that has measurable results to fix safety and quality shortcomings.

By Scott Hamilton

The move follows the release on Feb. 26 of a year-long safety audit by a panel of 24 industry experts appointed by the FAA. More than 50 recommendations were made. Much of the focus was on failures in Boeing’s Organization Designation Authority (ODA), the Safety Management System (SMS), and pressure and fear of retaliation of employees who came forward with alerts about safety issues during aircraft production at Boeing Commercial Airplanes (BCA).

ODAs are employed by Boeing but represent the FAA. The FAA is considering establishing an independent ODA system at Boeing.

In giving Boeing 90 days to come up with a solid safety program, Administrator Mike Whitaker was blunt: “Boeing must commit to real and profound improvements. Making foundational change will require a sustained effort from Boeing’s leadership, and we are going to hold them accountable every step of the way, with mutually understood milestones and expectations.”

Boeing is the top aerospace company with the most fines and number of records, according to the website Violation Tracker. This is for all types of fines, including aviation safety, environmental, worker safety (under the USA’s OSHA), etc. Detail of Boeing’s aviation safety violations is below. Boeing’s number above includes the $2.5bn fine for the 2018-19 MAX crisis. Airbus includes a $500m settlement to the US Department of Justice for ITAR violations. Click on image to enlarge.

But Boeing and the FAA have been down this road before. Boeing and the FAA established the ODA systems ago and the SMS was created in 2019. The FAA previously fined Boeing for failing to follow through on elements of both programs.

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Boeing’s program accounting reduce future profits

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By Bjorn Fehrm

February 29, 2024, © Leeham News: Boeing published the results for 2023 on the 1st of February. It reported a loss of $2.2bn, compared with a loss of $5.0bn for 2022.

Experienced industry analysts know these results do not reflect the company’s state, neither for 2023 nor for 2022. The reason is Boeing uses so-called program accounting for the production costs of its Commercial Aircraft programs. Based on Boeing data, the loss for 2023 would have been at least $3bn higher using classical accounting methods.

The program accounting idea is to average the high initial cost per produced unit of a new aircraft program with the lower production costs of units later in the program. Thus it smooths the reported profits for a new aircraft program.

It has recently been used to “smooth” reported results of troubled aircraft programs, like the 737 MAX. The drawback is that once the troubles are gone, the negative effects on the company’s future profits are not. We will use the 737 MAX troubles to show the effect of this variant of program accounting.

Picture of a 737 MAX production experiencing problems. Source; Boeing and Leeham Co.

Summary:
  • Boeing increased the 737 Max deferred production cost pushed to future payment by 730% between the end of 2018 and the end of 2023.
  • The result of this way of using program accounting to reduce what is shown today is that future profits of the 737 MAX program will be reduced by almost a billion dollars per year during the next 10 years.

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Boeing’s safety improvement since the 2018-19 MAX crisis needs more work

Editor’s Note: This story was written before the release yesterday of an independent Expert Panel appointed by Congressional mandate to review Boeing’s safety culture. The report may be downloaded here: Boeing Safety Study by FAA Panel 2-26-24

By Scott Hamilton

The interior of the Alaska Airlines Boeing 737-9 MAX at Row 26, where the emergency exit door plug separated from the airplane at 16,000 ft.

Feb. 27, 2024, © Leeham News: The safety culture at Boeing Commercial Airplanes (BCA) came under fire again following the Jan. 5 Alaska Airlines Flight 1282 accident in which an emergency exit door plug separated from the plane on climb out from the Portland (OR) airport.

The plane, a 10-week-old 737-9 MAX, fully depressurized at about 16,000 ft. Nobody died and injuries were slight. Damage throughout the cabin and into the cockpit occurred when the door plug, at row 26, blew out. Pilots landed the plane safely at Portland 14 minutes after the decompression.

Within days, quality “escapes” were determined to have occurred at Spirit AeroSystems, which built the fuselage and door plug, and at Boeing during final assembly. Since Boeing had the fuselage last and its employees completed the final assembly, Boeing’s ultimately responsible for the quality escapes.

Boeing Co. CEO David Calhoun was quick to accept responsibility for the company. Such life-threatening escapes should never happen, he said. Calhoun appointed an independent safety committee headed by a retired Admiral, Kirkland Donald, with a nuclear submarine safety background.

The appointment of a special safety committee is reminiscent of a board-level safety committee appointed in September 2019 by then-chairman and CEO Dennis Muilenburg in the aftermath of the MAX crisis following the October 2018 and March 2019 fatal accidents of two 737-8 MAXes. These accidents killed 348 people and led to a 21-month grounding of the global MAX fleet from March 13, 2019.

Jon Holden, the president of Boeing’s largest union, the IAM 751, said neither he nor others from the union had any contact from the 2019 committee. Boeing’s engineering and technicians union, SPEEA, declined comment. But a source familiar with the situation said the union didn’t see any changes implemented from the 2019 committee at its level.

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Breaking News: Congressionally-mandate safety study finds flaws at Boeing (Updated with Boeing comment)

Feb. 26, 2024, © Leeham News: A Congressionally-mandated safety review study of Boeing Commercial Airplanes (BCA) dropped this morning. The 50-page report of a committee appointed by the Federal Aviation Administration found serious flaws in Boeing’s safety culture despite years of attempts to improve.

LNA is still absorbing the study, which may be downloaded here: Boeing Safety Study by FAA Panel 2-26-24

The Executive Summary is synopsized below.


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