Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 21. May 9, 2025
- Does an A220-500 need a new wing and engines? Part 2. May 8, 2025
- Embraer downplays tariff impact on 2025 results May 6, 2025
- JetZero readies effort for private equity fund raising May 5, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 20. May 2, 2025
KC-46A contract “restructure,” Blue Angels grounded in Sequestration (very local to Seattle)
The US Air Force will have to “restructure” the USAF KC-46A tanker contract with Boeing if Sequestration hits on March 1, according to a new document issued today. The document doesn’t indicate what “restructure” means, but we’d guess the fixed price deal that won Boeing the contract will eventually become a lot more expensive to taxpayers.
Very localized to Seattle, Sequestration also means the Blue Angels will likely be grounded by the Navy as well. This aerobatic group has been a staple of the local Sea Fair for decades, and has been a key in public relations for the Air ForceNavy. While we acknowledge the Blue Angels have nothing to do with readiness, since we live in Seattle, and this is our blog, we get to be highly provincial once in a while.
787 to cost Boeing $6bn in cash-UBS; more on lithium-ion batteries
Update, 7:30am PST: Headline: DJ Boeing 787 Probe Results ‘Probably Weeks Away’ -NTSB Chief
We’re trying to track this down, which we received in an email. (We don’t get Dow Jones.) This seems to us like good news–“weeks” instead of “months”–but we caution about reading too much into this until we get the context.
Update, 7:50am PST: AP has this brief report. “Weeks” instead of “months” does seem encouraging but this sounds like a statement of facts rather than any hint at a breakthrough.
NTSB will have a press conference tomorrow at 11am Eastern.
Here is a story from the Christian Science Monitor yesterday on the batteries.
Original Post:
787 to cost $6bn in cash: So forecasts UBS Securities in a research note today, and this doesn’t really consider the Boeing 787 grounding yet. Writes UBS:
- See 787 as $6B cash drag in 2013: Even assuming a relatively quick solution to battery issue, we still see 787 as a worse cash drag in 2013. We estimate 787 is a ~$6B cash drag in 2013 with ~$7B inventory build more than offsetting ~$1B advance draw assuming Boeing learns like it did on 777. Our forecast is worse compared to Boeing’s outlook for a similar 787 inventory build in 2013 as in 2012 ($5.7B) while extended 787 grounding would result in an even bigger cash burn.
- Cash drag could be worse if battery issue lingers: As long as 787 remains grounded, Boeing is faced with the choice of either slowing production or building physical inventory. It will build inventory for now and we see risk to its $4B+ FCF [free cash flow] guidance on this. Boeing plans to deliver 60+ 787s this year, while we estimate every missed delivery adds $100-120M to our baseline forecast for a $6B 787 cash burn.
Retrospective: Here is the press release from 2005 announcing the selection of lithium-ion batteries for the 787.
Boeing presentation about lithium-ion batteries: In November 2012, a Boeing official made this presentation about these batteries in the context of transporting them in cargo holds.
Among the information on the slides:
Energetic failures (fire and/or explosion) of lithium type cells can occur for a number of reasons including:
- Poor cell design (electrochemical or mechanical)
- Cell manufacturing flaws
- External abuse of cells (thermal, mechanical, or electrical)
- Poor battery pack design or application
- Poor protection electronics design or manufacture
- Poor charger/system design or manufacture resulting in Overcharging of battery
Independent Study: We’ve now linked Airbus and Boeing presentations about lithium-ion batteries. Here is an independent study–all 126 pages of it–about the topic. This is not about aircraft batteries but the principals are the same.
Odds and Ends: FAA outsourced to Boeing; responding to fires-land within 15 minutes
Update, 4:15pm: From Twitter–Glenn Farley is the aviation specialist for KING 5 TV, Seattle:
Looks like Boeing test airplane ZA005 is being readied to carry out battery related test flights. Lots of activity
Original Post:
FAA Outsourced to Boeing: The Seattle Times has a story about how the FAA outsourced certification work to Boeing. Coming from The Times’ Washington bureau, the story notes that “few people” realize this happened. For those of us who follow the industry, this is not new. We also wrote about this shortly after the FAA announced a program review. As our post notes, the FAA’s reliance on OEM representatives has been happening since the agency was formed and by its predecessor.
Responding to fires: Airbus, at its annual safety conference in March 2012, noted that fires can get out of control in as little at eight minutes and aircraft may have as little as 15 minutes to make an emergency landing. These conclusions were unrelated to lithium ion batteries, but referenced fires generally. All we can say is, Holy smokes! Airbus Smoke and Fire Analysis
787 test flights sought: Seattle Times
The Seattle Times is reporting that Boeing is seeking FAA permission to begin test flights.
This, of course, will be good news and it reaffirms reports by others and by us that Boeing and investigations appear to be narrowing the focus of the investigation.
Odds and Ends: Airbus’ frustration over A350 fallout–blame yourself; DC-10 grounding retrospective
Airbus’ frustration: Airbus says it has a Plan B for its lithium ion battery design and the CEO says he’s frustrated over the attention the A350 is getting as a result of the Boeing 787 issues.
Airbus has only itself to blame for any frustration: it’s stonewalling all questions about the design and fire protections of its lithium-ion batteries. The absence of answers from Airbus leads to the conclusions that it doesn’t have fire suppression as it’s commonly thought of.
Boeing remarked after the JAL fire that thermal runaway can’t be suppressed with in-flight fire fighting techniques. The presentation we detailed from Airbus makes it clear Airbus has the same conclusion. Although Halon can be used to suppress small fires, a thermal runaway can only be suppressed by water, and plenty of it. It took firefighters more than an hour to put out the blaze on the JAL airplane, according to the NTSB timeline.
The Airbus slides suggest there is Halon designed into the A350 and we are told the design has venting that the Boeing design does not. But Airbus won’t say what its design is. Does it take the containment approach The Seattle Times wrote about in connection with Cessna? Airbus won’t say. But we know from a well-placed source that venting overboard is part of the Airbus design.
See KING 5’s report below-Boeing is working on its own Plan B.
“We have a robust design,” Reuters quotes Airbus CEO Fabrice Bregier. “I’m not going to give any lessons to Boeing. At the same time, I don’t have to take any either, when I think we have done well and have a plan which allows me to have aircraft flying with batteries that don’t catch fire,” he said, according to Reuters.
We find this second statement to be a load of crap. Where safety begins, rivalry should end. For the good of the industry, Airbus ought to share its thoughts with Boeing. The rivalry perpetrated between the two companies is often childish (both sides are guilty of this) and unworthy of two world-class companies. We find the statement above to be appalling.
Airbus has told us its battery-from a different supplier than that of Boeing’s-meets FAA standards, something that weren’t in place when Boeing selected the lithium-ion batteries in 2007. The FAA issued Special Conditions for Boeing’s use of the new technology batteries.
Aviation writer Christine Negroni has a post that expresses a great deal of frustration with Boeing’s corporate attitude toward the lithium ion issue. Frustration seems to be catching. But Airbus has the opportunity here to take the high road for safety and share its approach with Boeing–and to assure the aviation world publicly that its airplane will be safe.
Bregier says his design is safe and there’s a Plan B if regulators say more is needed. Tell us what is safe about the design and tell us what Plan B is.
Meanwhile, KING 5 (NBC-Seattle) has further information on Boeing’s Plan B, which is to build a containment box around the battery (similar to the Cessna approach).
DC-10 Grounding: The last time the FAA grounded a commercial airliner was in 1979, when American Airlines lost a McDonnell Douglas DC-10-10 at Chicago O’Hare International Airport. Aviation Week linked its report at the time and we link this article here.
Space Shuttle: The Seattle Times has a story about the space shuttle Columbia, which broke apart 10 years ago. It’s interesting reading.
SPEEA Boeing may have battery fix: King 5
KING 5 TV (NBC Seattle) reports Boeing may have a fix for the battery issues on the 787.
Flight Global’s Steve Trimble has this historical perspective on battery technology over the decades. Free registration is required to Flight’s silly “Flight Pro” and then you have to navigate an incredibly annoying home page to find the bloody story. Good luck.
Boeing conference call with 787 update
Boeing held its 2012 earnings call, and with it officials offered an update on the 787 situation.
Jim McNerney (CEO) (JM)
Greg Smith (CFO) (GS)
JM: 787 Update–
Job one on 787 is supporting the investigation on the 787 battery incidents. We rigorously support the process. We do believe good progress is being made in narrowing down the cause. Assigned hundreds of experts within Boeing, brought in outside experts, supporting NTSB, JTSB. We will get to the bottom of this and in so doing restore confidence in the 787. Thanks engineers and all others in investigation. We’ve seen the airplane in service for 15 months and it delivers on promises.
- Progress continues on 787-9, with assembly beginning in mid-2013. First customer delivery on schedule in early 2014.
- The case for the 787-10 has strengthened with a potential launch this year.
- We have more work to do on 777X and this is a big part of the focus this year.
GS:
- Our 2013 guidance assumes no significant financial impact due to 787 issues.
- Expect 635-645 deliveries this year, including 60 787s via rate hike and the reworked airplanes. Deliveries from Everett Mod center will decline.
Q&A
Boeing 2012 results; and comments on 787
BOeing released its 2012 financial results, provided guidance for 2013 and talked about the 787 issues in its press release here.
The webcast is at 10:30 ET and the launching page is here.
“Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers. At the same time, we remain focused on our ongoing priorities of profitable ramp up in commercial airplane production, successful execution of our development programs, and continued growth in core, adjacent and international defense and space markets,” CEO Jim McNerney said in the release.
On January 16, 2013, the Federal Aviation Administration (FAA) issued an airworthiness directive that resulted in all in-service 787s temporarily ceasing operations. The company is committed to working with the FAA and other applicable regulatory authorities to return aircraft to service with the full confidence of customers and the traveling public. While production continues on the 787, the company is suspending deliveries until clearance is granted by the FAA, Boeing stated.