Leeham News and Analysis
There's more to real news than a news release.
Odds and Ends: Progress on the KC-46A; Southwest and AirTran; British Air’s A380
KC-46A Progress: National Defense magazine has this update on progress of the Boeing KC-46A tanker. According to the article, progress is proceeding well.
Southwest Airlines and AirTran: Southwest Airlines is the USA’s legacy low-cost carrier, and it has grown through selected mergers. The acquisition of LCC AirTran fills a big gap in Southwest’s system (the Southeast) and is the most ambitious effort yet. This article wonders if it’s too much.
British Airways’ A380: BA has revealed its interior plans for the Airbus A380. The news article is here. BA becomes another airline to configure the super-jumo with fewer than 500 seats.
Cattle Car: Airbus is looking at a 236-seat configuration for its A321, using 28-inch seat pitch. Ouch.
Odds and Ends: SPEEA says strike is likely; CFM LEAP update
SPEEA v Boeing: The Seattle Times reported that there is a very high chance of a strike by SPEEA against Boeing come February. This is, of course, bad news for all concerned.
SPEEA is already talking about a 60 day strike and says this would cost Boeing $400m a day. In 2000, when SPEEA struck for 60 days, Boeing deivered 50 fewer aircraft for the year. IAM 751’s 57 day strike in 2009 depressed sales and cost Boeing billions (though nothing like the $400m SPEEA forecasts, which is a puzzle).
Customers, who were ticked off by the IAM strike, will once again be the innocent bystanders in this potential strike. A strike will also redouble Boeing’s drive to diversify to non-union states, though hopefully this time it won’t be so stupid as to connect the dots again as it did with the 751. It’s our belief Boeing can’t fulfill the demand for engineers in Washington State anyway so it has to locate work elsewhere. Although as a Washington State resident we don’t want to see this happen, this is, we believe, reality.
SPEEA has the power to truly disrupt things at Boeing, not only for deliveries but also for future engineering projects, but nobody will win and everybody will lose if Boeing and SPEEA don’t reach an agreement.
CFM LEAP Update: The Seattle Times also has this update on the CFM LEAP-1B, the version for the Boeing 737 MAX.
Noteworthy in the article is the revelation of the contractual commitment for CFM to reduce fuel burn for the LEAP-1B by 15% compared with today’s 737 CFM engine. This is a key piece of information and well beyond the Airbus assumption in the continuing war of words between the two companies.
It also is key to Boeing’s previously advertised target of the 737 MAX being 13% better than today’s 737NG. What strikes us, however, is whether 13% is still an operative figure.
All other things being equal, installation typically costs 1%-2%, which means the MAX on engine installation alone should be 13%-14% better than the NG. We know that Boeing is working hard on airframe improvements. Shouldn’t the 13% actually be better? We know the advanced winglets are supposed to add 1.5% to fuel reduction, for example. Boeing has also cleaned up the tailcone and undertaken other aerodynamic improvements.
We’ve asked Boeing and will post its response when received.
Update, 2pm PST: We have an answer of sorts from Boeing, though we’ve asked for further clarification.
“CFM’s number is in SFC or specific fuel consumption for a given thrust which when you apply it to a specific mission gives you the fuel-burn reduction for that trip. The attached shows a 500-nmi trip comparison which gives the MAX engine 14% fuel-burn reduction compared to the NG engine, next we factor in engine integration and aero improvements ending up with a total 13% reduction for a 500-nmi trip compared to the NG).
“You will see in the chart that we credit the AT winglet with approximately 1 percent improvement (again this is at a 500-nmi trip). However, at longer ranges customers will experience even more improvement from the AT winglets, up to 1.5%.”
This chart (click to enlarge) is extracted from Boeing’s Farnborough presentation. It starts with a 14% improvement for the engine, while the news article says 15% is required in the CFM contract. The Boeing spokesperson said this is for a 500nm mission at a “specific thrust” level. We’re trying to clarify the difference between the 15% contract number and the 14% above. If we get this clarity, we’ll update again.
Update, 545pm PST: Here’s the final answer from Boeing:
“CFM’s number is in pure SFC and our numbers are in fuel-burn per trip so they are not equivalent. It’s like comparing apples to oranges. In our case – we are using a 500-nmi trip which is our standard comparison. This includes then in our calculations the fuel-burn cost of lifting the airplane empty weight off the ground since takeoff is part of the trip. CFM’s number is an engine in a test stand compared to another engine in a test stand so the two comparisons are not equivalent.”
Meanwhile…
Not revealed in the article but we learned that there will be a thrust bump for the LEAP engine. Right now CFM lists on its website the LEAP-1B thrust at a maximum of 28,000 lbs, the same as the current engine. Because of the higher weights for the MAX, runway performance has been assessed as poorer than the NG by customers we’ve talked with. A thrust bump, and airframe improvements, are aimed at fixing this issue, we’re told.
Airbus v Boeing: another round of what the customers tell us
With the recent spat upping the media war between Airbus and Boeing over whose airplanes offer better economics, we’ve been once more asking customers what their analyses conclude.
Nothing has changed from our earlier conversations.
As recent media and advertising wars relate, Boeing claims the 737-8 MAX is 8% better on a per-seat basis than the A320neo. Airbus claims its aircraft is 3.3% better than the MAX-8. The differences come in the assumptions of fuel burn, with Airbus claiming the neo will save more fuel than the MAX. Boeing claims the MAX, being lighter, will match the fuel savings and with 12 more seats, this is how Boeing comes up with the 8% figure.
Boeing also claims the 737’s maintenance costs are 24%-27% better than the A320, a figure which drives Airbus officials right up the wall as ludicrous. (We’ve written several times why we dismiss the validity of the Boeing claim as relying on old data on the one hand and data that can be manipulated on the other.)
In the last 10 days we have had conversations once more with customers and potential customers who have analyzed data from Airbus and Boeing and reached their own conclusions. These are additional customers to those we’ve talked with previously, thus adding to the list and data points.
The conclusions are the same:
- The A320neo and the 737-8 MAX are about equal in economics, with Boeing retaining a slight edge on a per-seat basis, but nothing like the 8% it claims. Boeing’s maintenance claims are laughed off. Commercial terms therefore become the deciding factor.
- The A321neo has the advantage over the 737-9 MAX, in part for the same reason the 8 MAX has the advantage: the neo has more seats than the MAX.
- The A321neo is a closer replacement for the Boeing 757 than the 9 MAX, although neither is a true replacement.
SPEEA, Boeing suspend talks at Mediator’s request
Boeing and its engineers’ union, SPEEA, suspended talks Dec. 4 until after the first of the year at the request of the federal Mediator.
Boeing and SPEEA issued terse statements citing the Mediator but adding no comment of their own:
WASHINGTON, D.C. – Federal Mediation and Conciliation Service Director George H. Cohen issued the following statement today on the ongoing labor negotiations between the Boeing Company and the Society of Professional Engineering Employees in Aerospace:
“At the request of the Federal Mediation and Conciliation Service, negotiations between The Boeing Company and the Society of Professional Engineering Employees in Aerospace (SPEEA), IFPTE Local 2001 are being suspended until after the first of the year. Both sides agreed to this mediator request.”
“In the interim, the FMCS will be in discussion with the parties to schedule resumption of negotiations.”
Airbus’ A330 improvements aimed at maintaining market position vs 787
Airbus last week announced additional gross weight upgrades and improvements to the A330-200/300 that increase range and reduce fuel burn. Aviation Week has this story about the enhancements.
This is the latest in a series of improvements taking advantage of the four year delay in the Boeing 787 program that Airbus believes will enable the airplane, which first entered service in 1994, to remain viable well into the 2020 decade.
Boeing launched the 787 in December 2003 and promptly claimed the aircraft would kill the A330. Had the aircraft entered service in May 2008 as originally planned, Boeing might have been able to make strides to do so. But delays allowed Airbus time to incorporate several Performance Improvement Packages (PIPs). The European company has sold more A330s post-787 launch than it did before.
The latest improvements give the A330-300 an anticipated range of more than 6,000nm, compared with less than 4,000nm when the airplane entered service.
Boeing, SPEEA talks take a turn for the worse
Labor contract negotiations between Boeing and SPEEA took a turn for the worse (and things were bad already) when Boeing asked for federal mediation.
If this request is granted, SPEEA won’t be able to strike while mediation is in process. Only after an impasse was declared by the Mediator, could SPEEA walk out (or conversely, Boeing could lock out the union).
If mediation is granted, Boeing buys an indefinite time during which aircraft deliveries was proceed more or less uninterrupted.
Update, 530 PST: Well, it seems our long history in the airline business got the better of us. In 20 years we never saw a strike happen until an impasse was declared in a mediation. As Nixon press secretary Ron Ziegler famously said, the statement above is “inoperative.”
SPEEA is already engaging in job action, refusing voluntary overtime and working to the rules. Look for this to expand.
The last time SPEEA struck for an extended period—40 days in 2000—Boeing deliveries for the year dropped by 50.
Negotiations update, Nov. 29, 2012
Boeing proposes mediation in SPEEA negotiations
Today, the company responded to SPEEA’s counter proposal regarding wage increases, the Voluntary Investment Plan and the BCERP basic benefit. Because the differences between the parties are still significant, and this was clearly reinforced during today’s conversation, the company proposed that a federal mediator meet with the Boeing and SPEEA teams. We hope the expertise of the Federal Mediation and Conciliation Service can help move the two sides toward a resolution.
During today’s session, we explained the salary increase pools proposed by SPEEA for both the professional and technical units of 6 percent a year for three years would move the salaries of our employees above the Puget Sound market. We also pointed out that SPEEA’s proposal to allocate two-thirds of the salary pool to all engineers and techs significantly slows the salary growth of top performing engineers and techs.
We explained that our Voluntary Investment Plan company match of 75 percent of the first 8 percent employees contribute is already market leading when compared with our aerospace peer companies. SPEEA proposed a company match of 75 percent of the first 10 percent.
Finally, we explained that the company’s proposal to increase the BCERP basic benefit each year over a four year contract to $85, $87, $89 and $91 keeps the plan market leading. SPEEA proposed to increase the basic benefit each year over a three year contract to $87, $93 and $99. The vast majority of SPEEA-represented employees retire under the pay-based benefit which will continue to go up with pay increases, including EIP, and will make an already market-leading plan even better.
The intent of our proposal is to improve upon a total compensation package that already leads the market. The question is — how far can the package exceed the market while we remain competitive as a business for the long term.
We encourage you to log on to the negotiations website to see regular updates where you’ll also find the Pay & Benefits Estimator. The Estimator shows how the company’s offer will affect you personally.
And the SPEEA message:
Odds and Ends: Boeing’s next twin-aisle strategy; Lion Air/Airbus: you read it here first
Boeing’s next twin-aisle strategy: Aspire Aviation has this long article looking at when Boeing will launch the 787-10 and 777X.
Our thoughts on the topic: We are hearing EIS for the 787-10, as Aspire reports, will be 2018 or beyond and that EIS for the 777X will likely be 2020 or beyond. As always, the situation is fluid and things could change. Aspire’s projection of a formal 787-10 launch in June is timed, probably not so coincidentally, for the Paris Air Show. (Unlike the boring Farnborough Air Show, Paris already is shaping up as a prospectively exciting show. Bombardier announced first flight of the CSeries is now expected in June [before, during or after the Show?] and Airbus would like to fly the A350 before the show–something that will likely be a challenge.)
We know Boeing continues to wait as long as it can in hopes Airbus will commit to a final design of the A350-1000 before launching the 777X, but time may be running out unless Boeing is willing to extend the gap between EIS of the -1000 and EIS of the 777X.
A 2018 or later EIS of the 787-10 means Boeing will avoid the EIS of two airplanes (the MAX and the -10) simultaneously, which could be a lesson-learned from the 787/747-8 programs. Readers may recall that Jim Albaugh, former CEO of Boeing Commercial Airplanes, said Boeing would avoid this in the future after experiencing the problems of the two programs.
Perhaps, and this is speculation, extending the time between EIS of the 787-10 and the 777X is partly driven by the same concern.
Given program history, at least some Wall Street analysts we’ve talked with are already raising the prospect that the 737 MAX EIS (4Q2017) might slip. Why? They are concerned about the broadening design creep as well as development of the CFM LEAP-1B. Can they point to anything concrete? Not yet. Chalk the conversation up to Boeing’s poor performance on the 787 and 747-8 programs and the fact that there are still industrial issues with the 787 suppliers, according to the chatter.
You read it here first: Aviation Week reports Lion Air is considering Airbus A320s to supplement its Boeing 737 fleet. We reported this on September 24.
Boeing and SPEEA: were they in the same meeting?
Within minutes of each other, we received the updates from Boeing and SPEEA, below. It doesn’t sound like they were in the same meeting.
Boeing and SPEEA discuss Ed Wells Partnership funding
Today, Boeing and SPEEA had an in-depth conversation about the Ed Wells Partnership and SPEEA’s proposal to fund the program.
The Boeing team restated our commitment to Ed Wells and clarified that we do not intend to cut funding to the program. Our focus remains on finding solutions to deal with expected future cost increases for Ed Wells, which is just one component of our employee training program.
While these negotiations continue, we already have an agreement in place to continue offering a full schedule of Ed Wells courses through the first quarter of 2013.
Boeing and SPEEA are scheduled to meet again Thursday morning.
Boeing has addressed the full range of proposals since our initial offer in September. Today, we posted a new fact sheet showing the current status of the issues raised as concerns by SPEEA from that initial offer.
We encourage you to log on to the negotiations website to see regular updates.
And now the SPEEA update.
Prof & Tech Negotiations Update
Again, no response to SPEEA counterproposals, Boeing still wants to cut training
The Boeing Company today (Nov. 28) again did not respond to our counterproposals and issues from last week, including our proposals on respectful wage pools, pension and pay disparity between the Professional and Technical employees.
Discussing the Ed Wells Partnership – our joint training program – the company’s proposed budget would result in the loss of 10,000 class seats during the next four years. The bulk of discussions revolved around the impact of these cuts on engineers and technical workers and a re-explanation of SPEEA’s funding proposal.
“The presentation included an example of a student who credited an Ed Wells class for his ideas that helped the company,” said John McLaren, Professional team member. “The idea resulted in a $6.3 million savings for Boeing each year, 1,200 gallons of fuel savings per airplane annually for customers and enabled Boeing to increase the 737 production rate.”
Link to Joint Ed Wells PowerPoint presentation
Link to SPEEA Ed Wells PowerPoint presentation
Our efforts remain focused on negotiating a contract that recognizes our contributions to the success of Boeing. We encourage members to continue workplace actions, including refusing to work voluntary overtime and other ‘work-to-rule’ actions to bring pressure on Boeing corporate.
We are doing everything possible to avoid the need for a work stoppage. However, as it’s also important to be prepared, the SPEEA Bargaining Unit Negotiations Support (BUNS) committee is holding two picket captain training sessions next week. Interested members should look for the notice in the SPEEA online calendar or talk to their Council and Area representatives.