A move in the US House to adopt legislation to overturn the USAF tanker award to Boeing is ill-advised on a number of levels.
According to a story in The Seattle Post-Intelligencer, Boeing supporters in the House, incensed over the award by the Air Force to Northrop Grumman and Airbus parent EADS selecting their A330-based KC-30 for the KC-45A tanker, are thinking about adopting legislation to block the award. The details, according to the news story:
There are so many things wrong with this approach.
Let the GAO deal with this, like the law allows. If the GAO upholds Boeing’s protest, so be it. But if the GAO rejects the protest, Boeing and its supporters need to let this one go. In fact, Boeing would be better off calling off the dogs on this Congressional fight. Boeing might win the battle but lose the war. The EU won’t sit back idly if Congress interferes, and Boeing will be the one to pay the penalty, not some member of Congress with a few district jobs to protect.
As we previously said, Boeing would be far better off to devote its engineering resources to fixing the 787 program and developing the Blended Wing Body for the KC-Y competition scheduled for 2020. A KC-BWB, and subsequent commercial applications of the BWB, would be far more advanced than the KC-30 or anything else Airbus has to offer, and superior to the KC-777. Go for this gold, and the advanced technology that comes with it. Don’t stick with an airplane originally designed in the late 1970s-early 1980s. Think ahead. Be bold.
Blended Wing Body test model. Source: Boeing
Eco-Aviation continues to gain ground in the US. Environmental forces in Europe have been targeting aviation for several years, and very aggressively. In the US, the issue has been much slower to catch on.
Airbus and Boeing have been working for years to reduce the environmental impact of their airplanes. The development of the A380, 787 and A350 are manifestations of this effort. In concert with the engine makers, GE/CFM, Rolls-Royce, Pratt & Whitney and International Aero Engines, the manufacturers have worked to reduce CO2 emissions.
We’ll be taking a more in-depth look at this issue next week on our corporate website bi-weekly update. In the meantime, Air Transport World and Leeham Co. have organized the USA’s first dedicated Eco-Aviation conference.
This conference has representation of the environmental community, US regulators, airframe and engine manufacturers and the airlines.
More information about the conference may be found here.
A survey released today (March 22) released by the Pacific Northwest Aerospace Association of 55 companies in the Puget Sound area (Seattle) finds that the loss of the KC-767 contract to Boeing results in the loss of fewer than 250 jobs. Fewer than 400 jobs would have been added.
Boeing had previously projected the tanker contract would have added 9,000 jobs in Washington State and the local politicians have been in an uproar over the job loss because the tanker contract went to Northrop Grumman. The same PNAA survey projects the KC-30 will 13-22 jobs annually. Northrop projects its tanker contract will add more than 4,000 statewide.
The full results of the survey are here.
Separately, as the reader knows there has been a great deal of focus on the fact that a foreign company (EADS/Airbus) is the prime subcontract to Northrop and there are other foreign subcontractors from Europe involved. The stated concern is whether these foreign suppliers will be reliable to the US in time of war.
We think the concern is less about foreign suppliers than it is about Airbus. BAE Systems of the UK is the sixth largest supplier to our Department of Defense. It builds many of the armored personnel vehicles used in Iraq and Iran and has many contracts to DOD and our Homeland Security department, including contracts involving intelligence matters. Fully one third of BAE’s revenue in 2007 came from the US DOD, equaling the revenue from European defense sources.
EADS subsidiaries other than Airbus already have contracts with DOD, and EADS is a supplier to the Boeing 787.
Speaking of job losses, here’s a satirical look at Sen. John McCain’s role in the tanker controversy.
Here’s the Northrop Transcript of Northrop Grumman’s conference call refuting Boeing’s conference call the same day. Boeing did not create a transcript of its conference call, a spokesman told us. But fundamentally, by comparing Northrop’s transcript to Boeing’s redacted protest, the reader can get the full picture.
We’re sometimes accused of having a warped sense of humor (guilty) that occasionally gets us in trouble with readers. But we simply can’t help ourselves.
We found something in the Boeing tanker protest that we could not help but chuckle at. Boeing has made a real issue over the inexperience of Northrop Grumman and EADS compared with Boeing on building tankers. Boeing also has criticized the production model of Northrop/EADS. The Airbus A330-200 on which the Northrop KC-30 is based in built in England, Spain, Germany and France and the fuselage components will be shipped to Alabama for assembly. (Not unlike the 787 and KC-767 production models, but that’s neither here nor there).
In the protest, Boeing had this gem:
“…The Northrop/EADS…production process…will hopscotch through Europe to produce some planes….”
Who says Boeing doesn’t have a corporate sense of humor?
Separately, Northrop said in a conference call that 50% of the revenue from the tanker will make its way to EADS, which then has to pay its suppliers. We took a stab at assessing this figure on our corporate website in a report. It looks like we were pretty close in our assessment.
Let’s put some context into the latest news about the new round of expected delays of the Boeing 787.
When Richard Safran, aerospace analyst, wrote recently that he forecast another six month delay for the project, he wasn’t really denounced but he was dismissed by some, using the old “rumors and speculation” gig.
But when Steven Udvar-Hazy predicted another six month delay, people listened. Hazy is Boeing’s largest customer—as he is of Airbus—and his comments carry a lot of weight. Boeing had to walk a real tightrope with him: the company said Hazy is a valued customer, but his statement was just his opinion.
Hazy’s opinions are usually based on fact and his opinions matter. Just ask Airbus about Hazy’s opinions about the A350 two years ago. His opinions caused Airbus to redesign the Airbus, and sales took off.
Boeing has a real conundrum. Analysts, airlines, lessors, investors and the media are clamoring for information. Will there be another delay? How long? What’s the problem? Or problems?
For Boeing, the information is coming out in dribs and drabs, and not from their official sources. For long-term Boeing watchers, however, there has been subtle difference this time. Boeing is tending to confirm some detail this time that it didn’t in advance of the last go-around, and it’s leaving some wiggle room in its responses about delays.
This time, Boeing has confirmed there are wiring redesigns occurring (which the company says is part of the routine process in any new airplane program) and that a design changes on the wing box are underway, albeit adding that such things are routine in a new airplane program—as indeed, broadly, they are. Boeing also is sticking with the official line that power-on is set for April and first-flight for June but adds that the program reassessment continues. Previously, Boeing wouldn’t acknowledge issues and kept sticking to the timetable.
Why won’t Boeing be more forthcoming about the delay, people are asking? Probably because officials don’t yet know. And this time Boeing wants to get the story correct.
We talked to an aerospace analyst at ISTAT’s annual meeting last week, who said Boeing CEO Jim McNerney was pretty exercised over the creeping delays and this time wants his team to be sure there won’t be any more surprises after this next program update. McNerney, according to this analyst, said he can’t keep going back to shareholders with more delays.
His concern is obvious: look at the trend line on the Boeing stock since last October, when the first delivery delay was officially announced. Boeing stock is off more than 30% while the Dow Jones is off 14% from the October highs. (Some of Boeing’s decline is also due to the loss of the tanker contract.)
James Wallace of The Seattle Post-Intelligencer today had a similar report to what we heard a week ago.
“People familiar with the company’s thinking say Chairman and Chief Executive Jim McNerney, along with 787 program boss Pat Shanahan and Boeing Commercial Chief Executive Scott Carson, do not want anyone at Boeing to make comments about the status of the program until they are certain that the schedule will not be changed after the next program update in early April,” Wallace wrote.
Boeing is in the same predicament that Airbus faced with the A380. The creeping delays drove everyone mad, and Airbus had to stop and undertake a full program reassessment before finally saying it would take another year before its industrial problems were fixed. The consensus is the 787 will need another six months, but will this be all? Will Boeing be able to really convince the market it finally has a handle on the issues?
In addition to responding to all the stories now, these things are part of Boeing’s conundrum.
Update, 1155am PDT: Here’s a podcast in the 787 situation. It’s 11 minutes.
Update: 1155am PDT: James Wallace updates things on his blog.
Here’s Boeing’s Tanker Protest filed with the Government Accountability Office over the Air Force award of the KC-45A tanker contract to Northrop Grumman. It’s an executive summary and there’s a lot that’s not in it, but it’s the closest thing the general public will get to reading the file.
Steven Udvar-Hazy, the CEO of International Lease Finance Corp., carries enormous weight in the airline industry. His ILFC is the biggest customer of Airbus and Boeing. His public criticism of the A350 (Version 4.0) at the ISTAT conference two years ago (in response to a question we asked, BTW) set the stage for Airbus to redesign the aircraft.
Hazy once said he doesn’t think the A380 will sell more than 300-400 and he doesn’t think the 747-8I will sell well, either. Both predictions remain to be seen, but people listened.
While the world waits for Boeing to tell us about the latest delay for the 787, Hazy told the JP Morgan Aviation & Transportation conference today that he expects an all-in delay of 15-16 months from the original May 2008 delivery schedule, according to someone who was there. That means August or September of 2009 before the first delivery.
Hazy is usually extremely well clued in on these sorts of things. He told us of the third delay for the A380 before this became public, and we broke the news at the time.
It’s like the old EF Hutton slogan: When EF Hutton talks, people listen. EF Hutton is defunct, but this analogy isn’t to suggest that ILFC is headed that direction. It’s simply a great line.
Our corporate website, Leeham.net, has been updated with an in-depth look at the Boeing protest of the KC-30 tanker award; the surprise doubling of the Northrop Grumman jobs for the KC-30; and a Wall Street Journal story looking at the reasons for the Boeing protest.