Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 5. Turbofan design problems April 26, 2024
- Airbus 1Q2024 results: Airbus CEO: “A350 in-service experience drives positive reputation and orders” April 25, 2024
- A350-1000 or 777-9? Part 3 April 25, 2024
- Boeing CEO promises company is turning around…again April 24, 2024
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
IAE launches Pure V engine plan for V2500s on A320 family and MD-90s
International Aero Engines has launched
Jon Beatty, President of International Aero Engines
a program called Pure V program for the V2500 engine used on the Airbus A320ceo and the Boeing MD-90, leveraging OEM-provided maintenance and parts that will offered extended warranties and potential better residual values.
The announcement was made at the Dubai Air Show 17 Nov. local time.
IAE president Jon Beatty said the project was driven by customer input, particularly that of lessors, who own a large number of A320s powered by the V2500. Lessors in particular are concerned about residual values, which affect lease rates as they re-lease the aircraft after short-to-medium terms at lessees.
“Engines with 100% IAE-approved parts and repairs enhance the on-wing service, fuel economy and residual values,” Beatty told us in an interview.
Beatty said that qualifying in-service engines—and 60% will immediately, and the rest may be retro-fitted—will see improved on-wing time by an estimated 20% after going through the program. A Pure V engine will also see a return to original fuel burn specifications after normal degradation, and these will have about a one-half percentage improvement over non-IAE maintained and serviced V2500s not using IAE OEM parts.
More than 50% of V2500 owners and operators are already signed up to IAE’s power-by-the-hour program, called Fleet Hour Agreement (FHA). Beatty said 80% of the new customers choose FHA.
Non-OEM parts under the Federal Aviation Administration’s Parts Manufacturer Approval program won’t qualify for the Pure V program, extended warranty or other benefits.
For lessors, who own more than 50% of the V2500-powered A320ceos, expect to benefit from higher residual values by being able to pass through this value in their lease rates, Beatty said. Appraisers, who forecast RVs, need to become familiar with the program, and IAE plans a data base they can consult.
Odds and Ends: 787 teething; IAM-777X continues; Boeing in Puget Sound; Dubai Air Show
787 teething issues: Flight Global has this report from the Dubai Air Show in which it quotes Boeing as saying there will be another six months of teething issues on the 787. We hear it will be longer than this.
IAM-777X: These stories will continue for some time. The latest: Reuters has this exclusive interview with IAM International President Tom Buffenbarger, posted Friday. But a Boeing official later denied Buffenbarger’s claim.
Buffenbarger said the IAM won’t make a counter offer; Boeing previously said it has “no plans to re-engage” the IAM. As we noted in our posting Thursday, both sides retreated to their corners in a testosterone posture. Buffenbarger screwed this up. It’s up to him to come up with a counter-proposal.
This from the Dubai Air Show via Twitter:
Boeing exec’s lament quick timing of IAM vote on 777X labour deal, believe members did not “digest” all info completely.
This is more evidence of the completely botched effort. If Boeing is lamenting, then it, too, ought to come back to the bargaining table.
Reuters has this article from Dubai, quoting Ray Conner, CEO of Boeing Commercial Airplanes, saying the ball is now in IAM’s court.
Boeing in Puget Sound: After the IAM vote debacle, the Tacoma News Tribune has a long article (picked up in the Everett Herald) about the future of Boeing’s Frederickson plant, which makes stuff for a variety of 7-Series airplanes. It would have been a participant in the 777X program.
Dubai Air Show: This opens tomorrow; follow on Twitter at #Dxb13 and @Dubaiairshow
Some key articles:
Odds and Ends: Volcano protection; Airbus trims guidance on A350; More on Boeing
Volcano protection: No, we’re not talking about any eruptions from IAM 751. Instead, Airbus and Europe’s easyJet created some man-made volcano ash to conduct tests for detecting the real thing.
Airbus trims guidance: EADS/Airbus trimmed its financial guidance on A350 development costs, according to The Financial Times (free registration required). According to The Times, the entry-into-service of the A350–slated for 3Q2014–“is at risk.” We have EIS in 1Q2015. EADS for now is sticking with the 2014 EIS.
Boeing 777X: As might be expected, there continues to be a lot of news on the 777X.
- Reuters: Boeing vote brings out rivals
- Los Angeles Times: Long Beach seeks 777X
- Wall Street Journal: Boeing moves to evaluation sites
- KING5 (NBC-Seattle): Has a number of stories at this link.
- Seattle Times: The morning after
- Fox Q13 (Seattle): Can Washington lawmakers save the day?
- Puget Sound Business Journal: 777X alternatives hotter climate but cheaper housing
- KUOW (NPR Seattle): What rejection means for unions
IAM 777X vote: the day after
The IAM 751 membership last night handed Boeing and the IAM International a major defeat, rejecting the proposed 777X contract with a 67% vote.
What happened?
This was the classic cluster-fuck* from the get-go. IAM International, for reasons we have yet to figure out, drove this train. IAM 751 local leadership was largely a by-stander in the negotiations, and it got mugged in the process. International sprung this package on the 751 membership by surprise and Boeing gave the membership one week to make a decision. The contract terms and conditions called for huge take-aways (as the membership sees it), little time to absorb the data, or to communicate to the membership from the IAM’s own leadership.
The governing council of 751 voted not to even present the package to the members, reportedly by an 18-10 vote (a 64% margin, which as it ultimately turned out, wasn’t far off from the 67% membership rejection of the contract). The Local was overruled by International.
Local leadership, and its media team, were put on ice, with all communications being handled by International. 751’s leader, Tom Wroblewski, was sidelined but his pique hit the public domain a week ago when at a meeting he called the contract proposal “crap,” tore it up and vowed to see if he could cancel the vote and return to the bargaining table. International overruled him on all counts.
Boeing management, as it has in the past, completely misread the mood of the union, thinking jobs would trump dismay over the give-backs. Instead, the members were pissed at Boeing for what they perceived as a take it-or-leave it ultimatum; they were pissed at the IAM International; they were pissed at the Local leadership (whom they understandably believed were complicit); they were pissed at the time line; they were pissed at the terms and conditions and they were pissed at the surprise.
If Boeing management should have learned anything through the years, it should have been you don’t want to piss off the IAM membership.
*This language violates our own standards for this blog, but sometimes there simply is no other way to put it.
It’s official: IAM rejects Boeing contact by wide margin: 67%
The IAM 751 local thumped Boeing and the IAM International with a stunning rejection of the 777X contract by a margin of 67% to 33%.
IAM International aerospace coordinate Mark Johnson made the announcement. Tom Wroblewski, 751 president, had been sidelined by the International in negotiations and throughout the balloting process after the 751 council reportedly voted 18-10 not to put the contract to the membership for a vote. The International overruled the local. Wroblewski was absent from the announcement and the press conference was cancelled.
Boeing is expected to issue a statement shortly affirming previous threats to put the 777X site location out to bid.
We expect Boeing to come under great pressure from Washington politicians to reconvene negotiations with the IAM to come up with a new agreement. The question is, if Boeing agrees, which IAM will be back at the bargaining table: International or Local 751?
Update: Boeing’s statement:
Boeing Commercial Airplanes has issued a statement from President and CEO Ray Conner after a long-term contract extension was voted down by the International Association of Machinists & Aerospace Workers District 751.
“We are very disappointed in the outcome of the union vote. Our goal was two-fold: to enable the 777X and its new composite wing to be produced in Puget Sound and to create a competitive structure to ensure that we continue market-leading pay, health care and retirement benefits while preserving jobs and our industrial base here in the region. But without the terms of this contract extension, we’re left with no choice but to open the process competitively and pursue all options for the 777X.
I’d like to thank Governor Jay Inslee and the Washington state legislature for all their efforts in this process. We had hoped for a different outcome.”
IAM 751 Local rejects Boeing contract, say many members; still awaiting word
We’re at the IAM 751 headquarters with ballot-counting continuing. Media is excluded from the counting room, but many members with access tell us waiting here that the contract is being rejected, probably by a wide margin.
We are told to expect official word around 9pm.
See our previous posts for additional commentary pre-dating the vote but which remain valid in the wake of it.
Tonight’s IAM 751 vote on the Boeing 777X contract
The IAM International, which has put the local 751 leadership and media team on ice and which is running today’s election, says the results will be available around 9pm PST. International has announced that no media will be allowed in to watch the counting, except for a five minute photo op. Otherwise media will be kept in the parking lot.
We’ll be down there to follow the vote. Let’s hope there are some burn barrels in the parking lot to keep us warm.
Follow us tonight on Twitter @leehamnews
Update, 3pm: Now International has banned media altogether; no photo op even.
Today’s the big day for Boeing, IAM, WA State and rivals
Today is Wednesday, Nov. 13, and it is the big day for Boeing, IAM, Washington State and rival states wanting to build the Boeing 777X.
IAM 751, the local union that provides the “touch labor” to assemble all the 7 Series commercial jetliners except those assigned to Boeing’s South Carolina plant, has a hard choice: accept deep givebacks in its pension plan, health care benefits and wages in exchange for the 777X work, or roll the dice, reject the Boeing contract proposal and challenge Boeing’s statement that it will put the 777X assembly out to bid.
Rival states are salivating. The Seattle Times reports that internally, Boeing’s facilities in Long Beach (CA), Huntsville (AL) and Salt Lake City (UT) are the top possibilities outside Washington. Interestingly, Charleston (SC) is not on The Times lists because the Boeing plant there still doesn’t have the 787 assembly under control yet. It had been widely assumed Charleston would be the first choice outside Washington.
Neither is Boeing’s San Antonio (TX) facility on The Times list.
Political officials in South Carolina and Texas have already expressed interest in bidding on the 777X. We’re told Utah has already submitted a proposal, but this is unconfirmed.
Long Beach is a major Boeing facility that was part of McDonnell Douglas prior to the merger of the two companies. All DC and MD commercial jets were built there, and the last remaining vestige of McDonnell Douglas, the C-17 military cargo transport, is slated to end production in 2015. But California is a heavily unionized state and the business climate there is widely considered poor. The other states are right-to-work states.
Texas Gov. Rick Perry reportedly Tweeted he hopes the IAM rejects Boeing’s contract offer and invited Boeing to Texas.
The IAM votes until 6pm. IAM 751 officials have historically been open and transparent during the counting process, allowing media to observe. IAM International, which has muscled out the 751 officials and which is overseeing counting, has decided to bar the media during counting except for a five minute photo op.
Odds and Ends: Right to Work; Middle East influence; latest on Boeing-IAM
Right to Work or Right to Worse: One of the more controversial issues in the relationship between Boeing and the IAM is Boeing’s continuous threat of removing work from union-heavy Washington and putting it in Right to Work states. South Carolina, of course, is at the top of this list.
KIRO Radio (CBS-Seattle) has a story about a Seattle transplant to Boeing’s Charleston plant who finds some interesting differences between the two locations.
As the IAM prepares to vote Wednesday whether to accept a contract extension that includes significant give-backs in exchange for landing the 777X Final Assembly Line and wing production, Boeing holds the prospect of locating the work in Right to Work states. These have been assumed to be or identified (though not by Boeing) as South Carolina, Texas and Utah. Boeing has facilities in each of these states.
As Readers know, we have suggested Washington needs to become a Right To Work state, which labor characterizes Right To Worse. It’s not that we favor RTW per se (though we do but not dogmatically), it’s more driven by the fact that Washington’s competition is RTW–and Boeing is very effectively using this as leverage over the Washington unionized labor force, and to extension, over the Washington Legislature when it compares our state’s cost of doing business with other states.
Meantime, Boeing has launched its website with its view of the contract proposal.
This is the letter Ray Conner, CEO of Boeing Commercial Airplanes, issued last week.
Middle East Influence: Aviation Week has a good piece about the evolution of the influence of the Middle Eastern airlines on aircraft design. Flight Global has this analysis of the Airbus A350-1000 vs the Boeing 777X in advance of the Dubai Air Show (free registration required).
Boeing IAM-Update: The Seattle Times has the latest from IAM 751 and from Boeing pending the vote tomorrow. Ray Conner, CEO of Bo9eing Commercial Airplanes, said Boeing is “under siege” from foreign competitors, including the Japanese, Chinese and Russians.
Maybe so, but Boeing has been helping these countries and their aerospace industries by outsourcing to them.
We also find it difficult to have sympathy for Boeing at a time when it is posting record profits and undertaking billions of dollars in stock buybacks instead of plowing the cash flow back into research and development instead of designing derivative airplanes.