Leeham News and Analysis
There's more to real news than a news release.
Federal 787 review adds new dimension to Boeing-SPEEA talks
The formal Federal Aviation Administration review adds a new dimension to the stalled contract talks between Boeing and its engineers’ union, SPEEA.
Talks Thursday didn’t go well, with SPEEA issuing a short press release laste yesterday afternoon:
SPEEA negotiations with The Boeing Company continued Thursday with little progress on key issues.
Our teams reminded Boeing that with record profits, a completely funded pension, 4,200 airplanes on backorder and $20 billion of cash on hand, it doesn’t make sense to cut wage growth, cut pension growth, eliminate the pension for future hires and raise medical costs for everyone.
Signifying the importance of our efforts to secure a respectful contract with Boeing, IFPTE President Greg Junemann, visited the teams at the hotel and then attended today’s SPEEA Council meeting to reiterate the support of our international union.
Negotiations are scheduled to resume at 9 a.m., Friday.
Boeing’s press release was even more terse:
For the second day in a row, negotiations teams from Boeing and SPEEA held contract talks with the assistance of federal mediators.
The mediators adjourned the meeting late this afternoon. Talks will continue Friday morning.
Boeing will have to rely on its engineers to sort through the review of the electrical system, which has now had four or five glitches, including the well-publicized fire in Boston on a Japan Air Lines 787.
With contract talks going nowhere fast, the prospects of a total breakdown in talks appears more and more likely, perhaps as soon as today. If this happens, look for a strike voted early next week. A walk-out could occur in early February.
If a strike happens, work by SPEEA engines on any 787 system review will stop or at the very least slow to a crawl. Boeing will have to rely on out-sourced engineers, if this is feasible. Engineers at the subcontractors responsible for the systems obviously would continue work, but at best the system review will be complicated by a SPEEA strike.
Clearly, the latest 787 problems add headaches to the contract talks that aren’t needed.
FAA, Boeing 787 review press conference 9:30am ET
MORE to come….
787 electrical system review to be ordered: Seattle Times
Late Thursday night, The Seattle Times reported that the FAA will on Friday order a full electrical system review of the Boeing 787. The story is here.
Jon Ostrower has this short report.
Here is a long report in the Wall Street Journal (subscription required).
More bad headlines
The New York Times has this story about more nettlesome problems with the 787. Although the issues related in this story–cracks in the windshield and an engine oil leak–are minor, the headlines add to the growing bad publicity surrounding the 787. These issues also cause service interruptions for the airplane, inconveniencing passengers and the operators.
The famed Airbus “5th Quarter”–huge LionAir buy reported
We talked about this a month of more ago: the prospect LionAir would order 100 Airbus A320 family aircraft. Today (or was it yesterday, in Asia?) comes this report that LionAir signed an order in December for as many as 220 A320neos (with PW GTF engines, we understand).
Through November Airbus recorded a net of 585 orders, compared with Boeing’s year-end total of 1,200. Reuters believes Airbus will end 2012 with around 900 orders.
LionAir has been exclusively a Boeing customer.
Update, Jan. 10: Avolon (a lessor) announced today it signed an order for 20 additional A320s in December.
SPEEA-Boeing talks resume today; grim outlook
Flashback to 2000 strike: KPLU takes a look.
The war of words resumed yesterday in advance of contract talks that restart today at 1pm PT in Seattle between Boeing and its engineers’ union, SPEEA.
Even before parties reconvened, SPEEA yesterday issued a press statement outlining demonstrations to take place today:
Wednesday’s ‘Day of Action’ events are expected to draw from dozens at small sites to hundreds and thousands of SPEEA members walking inside and outside Boeing facilities in Renton and Everett. Boeing has drawn three Unfair Labor Practice Charges (ULPs) for videotaping and photographing union members at the events, confiscating cameras and the photographs they held. All of the marches have been peaceful. The ULPs are awaiting action before the National Labor Relations Board.
Both sides want an agreement without a strike, but SPEEA has been vocal for weeks, predicting talks will break down almost immediately because—in its view—the two sides are too far apart.
Boeing has a different view. The company notes that SPEEA at one point offered to extend its current contract, which Boeing rejected in part because health care and pension costs would remain unchanged. But the company points out that the current contract includes a 5% annual raise while Boeing’s current offer is 4.5%–just one-half of one percent apart. SPEEA has asked for 6% in the current negotiations.
Where the real differences appear to be are over those pesky health care and pension costs. SPEEA asserts that Boeing is asking for too much in the way of co-pays and other medical costs and that by changing the retirement plan from a defined benefit program to a define contribution to a 401(k), any raises offered by Boeing are negated and in effect result in losing money.
Boeing takes issue with this, saying that over the life of its contract offer, SPEEA engineers will receive $17,000 in raises and spend $5,000 in added medical costs.
As for the retirement plan, Boeing says the proposal for switching to a defined contribution to a 401(k) will be for new-hires only. Non-union employees throughout the company are on a 401(k) plan.
We view the current situation as grim. We think Boeing Chicago is misunderstanding the mood of SPEEA members, just as it did in the contract vote in October and as it did with IAM 751 in 2008.
But as we’ve written before, as one who pays 100% of our medical and retirement costs, we have little sympathy for Boeing wanting SPEEA members to pony up a greater share of health care costs. We also believe that defined benefit plans have unrealistic federal ROI assumptions that place an undue burden on companies. Update: we certainly muddled this statement. We’ve previously written that we have little sympathy for SPEEA not wanting to pony up more of its own health care costs, and this is our position.
At the same time, we recognize that SPEEA–along with the IAM–saved Boeing’s bacon during the debacles of the 787 and 747-8 development, and it’s also clear that neither program is running smoothly just yet.
We also believe that profit sharing, such as that proposed by Boeing, is a good employee incentive. But we also believe that Boeing Chicago tends to trend toward being too anti-union for its own good.
We don’t think there will be a quick resolution as talks resume today. SPEEA is planning job actions and it is making plans to shut down deliveries as soon as a strike occurs. The 42-day SPEEA strike in 2000 saw 50 fewer deliveries at a time when production rates were far less than today.
We hope cooler heads prevail, but we’re not counting on it.
Embraer selects PW GTF for E-Jet RE; concept clarity comes at last
It’s official: Embraer selected the PW GTF to re-engine the E-175, E-190 and E-195.
In doing so, it looks like the E-170 will be allowed to wither on the vine.
This is a huge win for PW and setbacks for Rolls-Royce, which sorely wanted to win the E-Jet RE for its Advance 2 RR development; and for GE, the incumbent supplier of the CF34 and which was developing the Next Generation variant for the E-Jet.
It’s yet another validation for the GTF. Versions of this engine will power the Mitsubishi MRJ, the Bombardier CSeries, the Irkut MS-21, the Airbus A320neo family and now the E-Jet RE.
It’s a huge comeback for PW, which made a major strategic error in not competing to power the Boeing 737 300/400/500. Boeing continues to use the GE/CFM LEAP engine as its sole-source supply for the 737 MAX, though Boeing seriously evaluated the GTF as well.
Below is EMB’s press release:
Embraer Selects Pratt & Whitney’s PurePower Engines for Second Generation of E-Jets
São José dos Campos, January 8, 2013 – Embraer SA (NYSE: ERJ; BM&FBOVESPA: EMBR3) announced today that Pratt & Whitney´s PurePower® Geared TurbofanTM engines have been selected for its future, second generation of E-Jets, with entry into service planned for 2018. The decision is an important milestone in the program, which is expected to be officially launched later this year.
The new engines – the PW1700G and PW1900G – range in thrust from 15,000 to 22,000 pounds. In combination with new aerodynamically advanced wings, state-of-the-art full fly-by-wire flight controls and other systems evolutions, they will result in double digit improvements in fuel burn, maintenance costs, emissions and external noise.
“We are very happy to expand our partnership with Pratt & Whitney, keeping the E-Jets family as the best solution for our customers, today and in the future”, said Frederico Fleury Curado, President & CEO of Embraer. “The PurePower GTF engines are a great fit to the next generation of our E-Jets and we look forward to another long lasting and successful program with Pratt & Whitney”.
“We are proud that Embraer has recognized the unmatched value of the PurePower engine, and we are committed to supporting a successful launch of the new E-Jet aircraft family,” said Pratt & Whitney President David Hess. “To date, Pratt & Whitney has completed more than 4,200 hours and 12,400 cycles of full engine testing for the PurePower engine family, demonstrating the benefits and reliability of the engine architecture.” Pratt & Whitney is a division of United Technologies Corp. (NYSE: UTX).
The second generation of E-Jets will be a significant step in Embraer´s commitment to continuously invest in this line of commercial jets, complementing a series of ongoing improvements currently being implemented in the existing family, with great benefits to its customers. Embraer´s objective is to offer the best product and maintain its leadership in the 70 to 120 seat market.
Perspective on 787 Boston incident
Update: Wall Street Journal reporting United Airlines found mis-wired battery following inspections in wake of JAL 787 fire.
Update, 1215 PM PT: Boeing issued this statement regarding the fire incident:
“Regarding yesterday’s event onboard a Japan Airlines (JAL) 787 at Boston Logan Airport, we are working closely with the National Transportation Safety Board (NTSB), our customer and other government agencies. JAL has reported that smoke detected while a 787 was on the ground after passengers disembarked and during cleaning was traced to the battery used to start the auxiliary power unit (APU).
“As is standard practice within the industry, it would be premature to discuss additional details at this stage as the investigation is ongoing. However, nothing that we’ve seen in this case indicates a relationship to any previous 787 power system events, which involved power panel faults elsewhere in the aft electrical equipment bay. Information about the prior events has been shared with the NTSB and they are aware of the details.
“Boeing is cooperating with the NTSB in the investigation of this incident. Before providing more detail, we will give our technical teams the time they need to do a thorough job and ensure we are dealing with facts not speculation.”
Original Post:
We’ve been inundated with calls from media asking what we think about the small fire and battery explosion on the JAL Boeing 787 parked at Boston. A couple of questions were common:
- What does this mean for the 787?
- Would you fly it?
- Is there a problem with the airplane?
- Are problems like this common with new airplanes?
Before addressing these specific issues, we want to say: use caution in drawing any conclusions. There is much more we don’t know than what we do know.
We don’t know:
Odds and Ends: PNAA Aviation Conference; AA-US merger review; UAVs in USA; SPEEA-Boeing; 2013, Part 2
PNAA Conference: The Pacific Northwest Aerospace Alliance holds its annual conference Feb. 12-14 in Lynnwood (WA), north of Seattle. This event is now the largest of its kind in the Pacific Northwest and the first or second largest of its kind on the West Coast. The top airframe manufacturers present, along with key aerospace analysts (including the ever-entertaining Richard Aboulafia) and key suppliers. There is a Suppliers Fair and this year for the first time a focus day on the airline industry. Follow PNAA @pnaalliance on Twitter.
American-US Airways merger review: This should be concluded within weeks, says AMR CEO Tom Horton.
UAVs in USA: Rules on the use of UAVs within the US are emerging and vary widely throughout the world.
SPEEA and Boeing: A reminder that SPEEA contract negotiations resume with Boeing next week on January 9. Based on conversations with SPEEA, we don’t expect things to go well. SPEEA told us–and pretty much anyone else–that it believes the gap between it and Boeing is so wide that it expects talks to break off quickly. A strike vote will follow and a target date for a strike is February 1. SPEEA filed another Unfair Labor Practice complaint this week over Boeing taking pictures of SPEEA marchers at the Everett plant.
The year ahead, Part 2: Earlier we posted our Leeham.net look at 2013. Here’s what we did for CNN.com, in a somewhat broader look.