Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Teamsters, Boeing have a new contract April 29, 2025
- Boeing wants to remarket China’s airplanes. It’s costly and time consuming. April 28, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 19. April 25, 2025
- How good is the C929? Part 2. April 24, 2025
- Boeing First Quarter Results Update: China is 10% of the backlog, with 500 in “Unidentified” April 24, 2025
Airbus to cut new airplane R&D, focus more on derivatives
Airbus is going to cut back its new airplane research and development spending and redirect efforts more toward derivative airplanes, EADS CEO Tom Enders told aerospace analysts at the EADS Global Investors Forum.
Buried in a Bloomberg News report of the GIF is this:
Enders also wants to curb cash-hungry development efforts in favor of milking existing products for higher returns. At Airbus, he backed the re-engining of the A320 narrow-body over building a new plane. No new jets are planned at Airbus beyond the A350, which is due to commence deliveries late next year.
“Why should we spend large amounts of money when we can make significant incremental improvements?” he said. “This principle can be applied outside of just civil aircraft.”
Airbus, like Boeing, suffered under the strain of new aircraft programs, notably the A380 and A400M. As yet, the A350 doesn’t seem to have been a black hole, with normal development costs.
Richard Aboulafia of The Teal Group was critical of Boeing for years for starving R&D for new aircraft and over-relying on derivatives while Airbus invested in new aircraft programs. He had this to say about Enders’ news:
This is only possible as a percent of sales. Airbus is at a twin aisle product line disadvantage relative to Boeing, so this isn’t the time for them to rest on their laurels. Some kind of response to the 777-9X is essential, even if it arrives a few years after the Boeing jet. Whether it’s an A350-1100 or a clean sheet, it requires a significant investment right after A350XWB-800/900/1000 spending winds down. Thus, in absolute numbers, the company would be advised to keep spending high for the next ten years. But on the positive side, since Airbus’s revenue will grow with A350 (and incrementally with the A320 neo), the company’s percent of revenue spent on IRAD will decline.
Enders’ comments reflect the changing nature of Airbus’s shareholder relations more than anything else. They’ll need to focus more on profitability rather than new product development over the next ten years; they may wind up looking more like Boeing.
IAM, Boeing talks fail; 777X site selection evaluation continues; Update: Members to vote on deal
Update, 11:30pm PST: KIRO TV (CBS Seattle) quotes Boeing spokesman Doug Alder as saying the Boeing offer has not been withdrawn, contradicting the IAM 751’s understanding.
Update, 9:10 PM PST: The Seattle Times reports the IAM 751 membership will get to vote on Boeing’s counter-contract offer after all.
Original Post:
Talks between Boeing and the IAM 751 machinists union failed to reach an agreement when Boeing presented a counter-proposal to the union’s offer that did’t budge on the pension issue, according to The Seattle Times.
KING5 TV (NBC Seattle) has this story.
Boeing’s statement is here.
IAM 751’s statement is below the jump (there isn’t a unique link to it).
The Boeing and IAM 751 statements paint a very different picture of the offers.
Our take:
Although both sides now have said talks have ended, we fully expect political pressure on both sides to resume talks before Boeing makes a final decision on the 777X assembly site.
Boeing said it will make a decision early next year; our sources suggest this timeline is the end of January.
This leave a small window for a third try, but we’re not optimistic.
We believe that barring an agreement, Boeing Chicago will elect to put the 777X assembly site and wing production somewhere other than Washington.
We believe that those within the IAM membership who believe Boeing is bluffing are mistaken. One need look no further than the events leading to putting 787 Line 2 in Charleston. Members believed Boeing was bluffing then, and it wasn’t.
As we have written many times, while Boeing Commercial Airplanes is understood to want to assembly the 777X in Everett, headquarters in Chicago has a very different view–and in the end, it’s only that view that counts.
One item in the Boeing statement stands out like Braille to us as well:
In addition, a separate agreement committing final assembly of the 737 MAX at the Renton, Wash. site would have been extended through 2024.
For those who think it impossible Boeing wouldn’t start another 737 assembly line elsewhere, we understand from two sources close to Boeing that a study is underway about opening a 737 assembly line in Charleston. Some 737 MAX work has already been assigned there, and Boeing continues to buy land there.
We firmly believe that the industrial logic–and all other logic–demands that the 777X (and the 737 MAX) assembly be in Puget Sound. But Boeing CEO Jim McNerney is clearly intent on moving work away from the unions (and from Washington State) absent dramatic changes in contracts and the cost of doing business.
Boeing offered terms and conditions in the IAM contract that were sure to be rejected.
The PR war of who is responsible will continue for some time to come. But just as we firmly believe the 777X should be built in Washington, we also firmly believe it won’t be without some last minute agreement.
Washington politicians need to step up their effort to look Beyond Boeing for the future of the state’s aerospace industry.
Odds and Ends: Airbus’ 5th quarter; 777X RFP responses
Airbus’ 5th quarter: John Leahy, COO-Customers of Airbus, is so well known for announcing a whole bunch of orders at the company’s annual review press conference (January 13 this time) that Boeing dubbed it the “5th quarter,” and the quip has stuck. Aeroturbopower has a wrap up of how many orders could be announced at the 5th quarter.
Boeing, IAM Meet: Dominic Gates of The Seattle Times reports that Boeing and the IAM met for the first time since the 2-1 vote rejection November 13 of the contract offer in connection with the 777X site selection.
777X responses to RFP: The following news articles try to detail some of the responses by states to Boeing’s 777X site selection RFP:
California and another California
Missouri: The county votes to add $1.8bn in tax breaks to the State’s $1.7bn.
Washington: The State adds Spokane to the list of alternative sites, according to Glenn Farley at KING5 (NBC, Seattle). (No link available.)
New York Times: Losing 777X would start a death spiral for WA State.
On Tuesday, the day the RFPs were due to Boeing, the Washington Congressional delegation released a letter to Boeing CEO Jim McNerney urging that the 777X be assembled in the state. The letter is below the jump.
This follows an Open Letter to Boeing on December 6 from Snohomish County officials (Everett is in this county), published in The Everett Herald.
777X saga, continued: KING5 speaks with rank-and-file in 45 minute interview
777X saga, continued: KING5 (NBC, Seattle) has a 45 minute panel interview with several rank-and-file members of the IAM 751 Machinists Union to talk about the contract and the Boeing 777X site selection.
As of this moment, the interview follows a commercial from Roto-Rooter. With our warped sense of humor, we could come up with all kinds of ribald comments. But we won’t.
Separately:
- Los Angeles Times: Boeing families in Seattle feel spurned.
Audacity and hypocrisy: the Boeing 777X RFP
We received an email from a Reader, who works for Boeing, about the details that emerged last week of Boeing’s Request for Proposals for the site location for the 777X:
I went to your site today to see what you had on the leaked RFI, and I have to say the whining by your crowd of Airbus fanboys is just astounding. Given all of the support given to Airbus for the A380, with Hamburg filling in a protected wildlife sanctuary, giving billions of euros of infrastructure. Changing laws so they could snatch land for Airbus. The hypocrisy just makes me puke. Not one of your posters, nor you, even bother to look at what the over guys got. Nope, just bad, evil Boeing. You could do better, you know.
We replied to this Reader that shortly after the details emerged and we posted links to the newspapers that had them, our power went down for the next 16 hours. When it was restored, we had moved on to other things. The email prompted us to go back, look at the comments and ponder the Reader’s premise. Here is what we came up with:
Airbus, engine OEMs make the case for A340 future
Airbus held a summit December 4 for stakeholders in the A340 to explain how there continues to be life after production ended and despite being a four-engined airplane in a two-engine world.
Key to the future of this out-of-production airliner is increasing the capacity of the A340-600 to an exit-limited 475 seats and for Rolls-Royce to alter its Total Care engine maintenance Power-by-the-Hour terms and conditions to reduce costs.
Airlines, financiers, appraisers and the engine makers were invited by John Leahy, chief operating officer-Customers of Airbus. Engine providers CFM International, Rolls-Royce, Lufthansa Airlines and Hi Fly, a small European airline, made presentations in addition to Airbus.
Airbus produced 246 A340-200/300s and 131 A340-500/600s; 227 and 131 respectively are in operation or parked.
|
Status |
A340-200 |
A340-300 |
A340-500 |
A340-600 |
|
In Service |
19 |
175 |
20 |
90 |
|
Stored |
6 |
27 |
14 |
7 |
Airbus guaranteed the residual value on an unknown number, and has strong motivation to see these airplanes continue in service, according to one person familiar with the situation.