Leeham News and Analysis
There's more to real news than a news release.
Pontifications: Tombstone mentalities and Fantasy Land
By Scott Hamilton
Analysis
By Scott Hamilton
April 30, 2024, © Leeham News: David Calhoun, the CEO of The Boeing Co., put this right at the top of an employee message and the
1Q2024 earnings call last Wednesday:
“Since Jan. 5, more than 70,000 of you have participated in Quality Stand Downs across more than a dozen Boeing sites. From those, we’ve received more than 30,000 ideas on how we can improve. And this year, we’ve seen more than a 500% increase in employee Speak Up submissions compared to 2023. We are taking all ideas collected and prioritizing them as we further enhance our factory disciplines and overall quality standards. Our people know better than anyone the actions we must take to improve, and we are listening and acting on their feedback.”
It’s obviously a statement intended to assure everyone interested in Boeing that it’s taking positive steps to increase safety protocol and listen to employees.
I had two reactions.
First: Why was this necessary? Supposedly after the 2018-19 737 MA X crisis, Boeing upped its safety protocols, its employee Speak Up program, and it was forced into a new relationship with the Federal Aviation Administration (FAA).
The Jan. 5, 2024, accident involving Alaska Airlines flight 1282 made it crystal clear that the post-2019 MAX crisis changes were largely window dressing.
Second: Reading Calhoun’s statement reminded me of a long-held axiom in commercial aviation of what’s derisively called the Tombstone mentality. This is tied to the belief that the FAA doesn’t take drastic safety action until after someone dies in an accident.
Unfortunately, recent history renders this parallel to The Boeing Co.
Sadly, failure to assure safety is indeed Boeing’s No. 1 priority will go down as David Calhoun’s legacy as CEO of The Boeing Co.
Related articles:
- SPEEA, Boeing at impasses over safety proposal
- Boeing unlikely to meet the FAA’s 90-day deadline on safety plan
- Boeing defends against whistleblower allegations
- Boeing must meet FAA quality plan before raising production rates (Reuters)
Boeing Financial Analysis – Inventory Q1 2024
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By the Leeham News team
April 29, 2024, © Leeham News: The Boeing Co (BA) released its financial results on April 24 for the first quarter of this year. BA relies heavily on Program Accounting to determine what amount of expenses are to be deducted against income, which is a major feature of the system.
The company also reveals the latest information about deferred program balances. This is closely related to Program Accounting.
A Quick Primer
Boeing describes program accounting in its financial statements:
Boeing Commercial Airplanes (BCA) develops, produces, and markets commercial jet aircraft principally to the commercial airline industry worldwide. Revenue on commercial aircraft contracts is recognized at the point in time when an aircraft is completed and accepted by the customer.
With respect to each of our commercial aircraft programs, inventoriable production costs (including overhead), program tooling and other nonrecurring costs, and routine warranty costs are accumulated and charged as cost of sales by program instead of by individual units or contracts.
Source: Boeing Financial Statements
As such, expenses reported for the sale of aircraft during the reporting period are not what was paid, but what BA estimates the average cost will be over the remaining orders and aircraft to be sold. Any overages are noted as an increase in Deferred Production Costs and are held in Inventory.
A350-1000 or 777-9? Part 3
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By Bjorn Fehrm
April 25, 2024, © Leeham News: We are doing an article series comparing the capabilities of the Airbus A350-1000 and the Boeing 777-9. We looked at the development history of the aircraft and compared their size and payload capacity.
Now, we use our Aircraft Performance and Cost Model (APCM) to fly the aircraft on a typical route and compare their performance. We also look at their stage of development and the potential for future upgrades inherent in the design.
Summary:
- The A350-1000 has got its Maximum TakeOff Weight (MTOW) increased four times since entry into service.
- The latest MTOW hike to 322t gives the A350 a clear payload-range advantage over the 777-9. Any increase in the 777-9’s MTOW will have to come after type certification.
Boeing CEO promises company is turning around…again
By the Leeham News Team
April 24, 2024, © Leeham News: Boeing burned about $3.9B in free cash and posted a loss of $1.13 per share during the first quarter, the company reported on Wednesday. It also reported its first quarter-over-quarter revenue decline since 2022.
Even so, the bleeding was substantially less than expected by Wall Street, which had a consensus forecast of -$1.63/share (and a range of -33 cents/share to -$3.16/share). Boeing Commercial Airplanes’ financial performance suffered from the downturn in 737 MAX production since the Jan. 5 accident involving Alaska Airlines Flight 1282, when an emergency exit door plug blew out as the plane climbed out of Portland.
The company’s quarterly finances were bolstered by Boeing Global Services and Boeing Defense.
Boeing CEO David Calhoun continued to assert that company executives are proactively cleaning up an inconsistent safety culture and addressing production woes from their corporate offices on the Potomac. The company’s planned acquisition of Spirit AeroSystems is taking longer than expected, and it could be wrapped up by mid-year, he told investment analysts during a conference call on Wednesday.
Fuselages for the 737 MAX program from Wichita have fewer and fewer defects, and the program’s production rate will increase in the second half of the year, Calhoun and Boeing CFO Brian West said during the call.
SPEEA, Boeing at impasse over safety program, union says
By Scott Hamilton
April 23, 2024, © Leeham News: Boeing and its engineers/technicians union, the Society for Professional Engineering Employees in Aerospace (SPEEA) are at an impasse over the proposed creation of a safety program widely used by airlines and other companies, the union says.
The Aviation Safety Action Program (ASAP) is already in use by Boeing for flight testing. And the touch-labor union, the International Association of Machinists and Aerospace Workers (IAM) District 751 and Boeing recently adopted an ASAP that is in its early stages of implementation.
ASAP is a program, used across the airline and aerospace industries, by which employees may pass safety concerns to the regulators, in this case, the Federal Aviation Administration (FAA), without fear of retaliation or retribution.
“The ASAP program was designed for FAA-certified airmen—pilots, mechanics, dispatchers,” said a former Boeing employee whose duties at one time included safety. “In the airline world, nothing gets pre-screened. For a reason! The ASAP program is set up for Boeing flight tests. Production pilots at Boeing operate this way.”
- SPEEA internal memo with its safety concerns: Safety culture memo 041024
“We have offered SPEEA the same agreement we signed with the IAM and the FAA to strengthen safety, quality, and compliance,” a Boeing spokesperson said in an email to LNA. “We believe it will make a difference in ensuring product safety. This tri-party agreement is modeled after the longstanding and proven Aviation Safety Action Program (ASAP) which is used in the airlines and elsewhere in Boeing.”
Better transparency needed on Boeing’s 1Q earnings call
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By Scott Hamilton
Analysis
April 22, 2024, © Leeham News: Boeing reports its first quarter financing results on Wednesday. It’s not going to be pretty.
But how “transparent” will CEO David Calhoun and CFO Brian West be?
These days, “transparency” seems to be Boeing’s buzzword. It used to be “safety is our number one priority.” As we’ve seen about safety since the 2018-2019 737 MAX crisis, “safety” seemed more rhetorical than the Number One priority. “Safety” came under question again following the Jan. 5 accident involving Alaska Airlines Flight 1282. That’s the flight in which an emergency exit door plug blew off the airplane at 16,000 ft. Luckily, nobody was sucked out of the airplane. There were minor injuries and damage throughout the cabin. The plane was a 10-week-old 737 MAX 9. A new crisis was underway.
The National Transportation Safety Board (NTSB) quickly determined that four bolts that hold the door plug on 12 brackets were missing after what Calhoun euphemistically called a “quality escape” weren’t reinstalled during the final assembly of the accident airplane.
Subsequent information, including a special six-week audit by the Federal Aviation Administration (FAA) and a year-long study that was released within a month of the Alaska accident concluded Boeing failed to meet dozens of safety standards. Even safety procedures announced by Boeing after the first MAX crisis were not being met.
Calhoun and others within Boeing vowed transparency. However, the expert panel that conducted the year-long study noted their work was inhibited by non-disclosure agreements limiting access to documents. They also noted that some Boeing employees met with company lawyers before being interviewed.
Transparency over latest charges
Boeing last week made two engineers available in a special media conference to refute charges by a whistleblower that safety failures continue to occur in the final assembly of the 777 and 787. The technical presentation was detailed and thorough. Assuming the information was not cherry-picked, Boeing painted a picture that the complaints were either unfounded or that Boeing had corrected many of the issues already. The in-service 777 and 787 fleets are safe, they said.
LNA’s Bjorn Fehrm, an aerospace engineer who remains active in this capacity in our consulting business, reviewed the Boeing presentation and our raw transcripts. He backs the safety of the airplanes.
There has been a “growing trend of quality erosion,” wrote aerospace analyst Ron Epstein in an April 11 note, citing the 787 industrial debacle and its three-month grounding by the FAA in 2013. “A lack of oversight has plagued the MAX program since inception.”
But transparency issues don’t stop there. And here’s something for Calhoun and West to address on Wednesday (not that they will take our urging to heart).
Advertised production rates on the 737 and 787 lines are far higher than the data suggests. But Boeing has failed to be forthcoming about the true rates—and it hasn’t for months. Cash flow data may be affected by a recurring practice that some call an accounting trick to distort this picture.
Boeing unlikely to meet FAA’s 90-day deadline for new safety program
By Scott Hamilton
April 18, 2024, © Leeham News: Boeing appears unlikely to meet a 90-day deadline to submit a comprehensive plan to address safety concerns, insiders tell LNA.
The Federal Aviation Administration (FAA) on Feb. 28 gave Boeing three months to address “systemic quality-control issues,” a move sparked by new safety concerns following the Jan. 5 accident of Alaska Airlines flight 1282. A 10-week-old 737-9 MAX was minutes into climb-out from the Portland (OR) airport when a door plug blew out, prompting explosive decompression of the cabin. Nobody died but there were injuries and damage throughout the cabin.
“FAA Administrator Michael Whitaker told Boeing that he expects the company to provide the FAA a comprehensive action plan within 90 days that will incorporate the forthcoming results of the FAA production-line audit and the latest findings from the expert review panel report, which was required by the Aircraft Certification, Safety, and Accountability Act of 2020,” the FAA said in the Feb. 28 press release.
- Boeing firefighters union rejects contract again; free to strike May 3. See below.
- SPEEA, Boeing’s engineer and technician union, tells members to start saving for a strike. See below.
“The plan must also include steps Boeing will take to mature its Safety Management System (SMS) program, which it committed to in 2019. Boeing also must integrate its SMS program with a Quality Management System, which will ensure the same level of rigor and oversight is applied to the company’s suppliers and create a measurable, systemic shift in manufacturing quality control.”
Now 45 days later, LNA is told Boeing is unlikely to meet the deadline. Furthermore, Boeing’s engineering and technicians union has had no outreach from Boeing seeking its input into the plan.
Boeing defends 787, 777 against whistleblower charges
By Scott Hamilton
April 17, 2024, © Leeham News: A whistleblower appeared before the US Senate today recommending that the entire fleet of Boeing 787s be grounded until inspections can be performed to assure safety.
The whistleblower, Sam Salehpour, is a Boeing engineer who worked on the 787. He claims he was moved off the program by Boeing in retaliation for raising safety concerns about the 787 and the 777. Boeing denies this charge.
Salehpour went public with his safety charges a week ago. He focused on the small gaps between fuselage sections and other areas on the airplane that failed to meet Boeing’s own specifications. Production gaps, where parts of the airplane are mated, are common. Boeing and other manufacturers use shims to fill these gaps.
This illustration, which is not to scale, shows how gaps develop, how joins are pulled together and how shims fill gaps that remain. The gaps are 0.005 to 0.008 inches wide–about the thickness of a piece of paper. Source: Boeing.
In 2020, Boeing revealed that in some cases, the gaps were greater than the 0.005 inches of its own specifications. Gaps of 0.008 inches were found. The gaps are the thickness of a piece of paper. Boeing initially grounded eight 787s for inspection.
In October 2020, Boeing suspended delivery of the 787 for what would eventually be 20 months. Deliveries already had been deferred by customers because of the COVID-19 pandemic. Ultimately, Boeing has 110 787s parked that were completed. After a lengthy process with the Federal Aviation Administration, the FAA approved Boeing’s fix. The fuselages of the 110 airplanes have to be inspected and measured. If repairs are necessary, it takes longer (5-6 months and in some extreme cases, 7-8 months) to complete than it does to assemble the airplanes in the first place. There are about 40 787s still awaiting rework.
Dissecting Boeing CEO’s statement next new airplane will cost $50bn
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By the Leeham News Team
April 15, 2024, © Leeham News: It was a stunning number.
Boeing CEO David Calhoun said his successor will have to decide on whether, or how, Boeing will proceed with its next new airplane. The price tag, he said, will be $50bn.
The Bombardier C Series was the last all-new, widely used single-aisle jetliner design completed and in service today as the Airbus A200. China’s C919 has only a handful of aircraft in service and Russia’s MC-21’s EIS is uncertain. Credit: AP Canada.
No airplane program at Boeing, except for the 787, ever came close to this cost. No program at Airbus did, either—and certainly none came close at Bombardier or Embraer.
The 787’s cost was a financial and industrial nightmare. Design, production, and industrial snafus combined to create delivery delays of 3 ½ years. Deferred production and tooling costs reached a peak of about $32bn. Customer compensation and other factors are believed to have boosted the total cost to around $50bn, a figure Boeing never confirmed.
On March 25, Boeing announced Calhoun will retire no later than Dec. 31. Chairman Larry Kellner won’t stand for reelection to the Board of Directors at the annual meeting (date TBA). Stan Deal, the CEO of Boeing Commercial Airplanes (BCA), retired immediately. He was replaced by Stephanie Pope, the former CEO of Boeing Global Services and current EVP and COO of The Boeing Co. Pope’s new role at BCA is in addition to her corporate position.
Shortly after the Monday Morning Massacre, Calhoun appeared on the financial network CNBC and, among other things, made his stunning price tag prediction. It’s a figure he referenced in passing before—but this time it caught the attention of broader media.
Single-aisle airplane programs historically cost between $10bn and $12bn. Widebody programs cost between $15bn and $20bn, excluding cost overruns. Bombardier’s C-Series, the most recent all-new, widely used single-aisle airplane, cost an estimated $6bn before Airbus took over.
Boeing hasn’t done an all-new new single-aisle airplane since 1982’s 757. Airbus hasn’t done an all-new single-aisle airplane since 1984’s A320.
LNA explains Calhoun’s number below.
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.