Leeham News and Analysis
There's more to real news than a news release.
EADS/Airbus says ‘No’ to Air Force One competition
EADS and its subsidiary Airbus won’t compete for the Air Force competition to replace the US President’s Air Force One.
The very idea of the President of the United States possibly flying around in a French airplane was blasphemous, even for us. With only three orders in the USAF Request for Information (RFI), there was no way EADS would assemble the A380 in the US, in contrast with the prospect of building the KC-30 air force tanker in Mobile (AL), meaning the airplane would have been assembled in France.
This leaves Boeing as the sole-source supplier for the new Air Force One and its two backup airplanes. Boeing will in all likelihood offer the 747-8 (as opposed to the 777 or, even more far-fetched, the 787). The 777 and 787 are considerably smaller than the 747-8, and the new composite technology for the 787 is something the Secret Service probably would like to see proved before entrusting POTUS to it.
Boeing has eight VIP orders for the 747-8I.
EADS’ statement is below:
Financing Airbus, Boeing customers
Too much is being made over a decision by France to funnel cash through French banks for the express purpose of providing financing to Airbus customers.
France will provide $6.5 billion to the banks for loans to the airlines. The US government should follow suit. Bloomberg News has this report about the lack of financing available to customers potentially hurting Boeing.
The French stories headline or write about the money to the banks being aid to Airbus. In a round-about way, it is, but more to the point the world credit crisis is putting the squeeze on airlines. Depending on who you believe, there is a funding gap of $10bn to $28bn this year for customers buying airliners. Even though Airbus and Boeing pledged up to $1.5bn and $1bn respectively in customer financing this year, and other OEMs will likely step up as well, and even though the export credit agencies are doubling their participation, this isn’t enough.
The Obama Administration proposes around $900bn as a stimulus for the US economy, some of it for dubious project the Republicans rightly question, such as millions to resod the National Mall in Washington, hundreds of millions to engineer social policy via Planned Parenthood and (at least at one point) funding to build a museum in Las Vegas about the history of the mob.
Boeing is the USA’s largest exporter. Instead of funding dubious projects, Obama should earmark money for the banks that would be required to put into the credit markets to finance Boeing airplanes.
France got it right. The US should follow its example.
2009 ‘Year of Boeing tanker’
The head of the Boeing Tanker Program call this the ‘Year of the Tanker,” according to a news release from the company.
In the news release, Dave Bowman, VP and GM of the program, vows to win the KC-X competition that is to be resumed this year. It’s unclear yet whether the Pentagon will simply pick up where it left off last September when suspending the competition or whether an entirely new process will be started.
Boeing claims 44,000 jobs will be supported by its KC-767 tanker. Northrop claims 48,000 jobs for its KC-30. Boeing claims its tanker is 85% American content by value; Northrop claims its tanker is 60% US content (and that the KC-767 is 69% US content). Boeing’s supporters, notably Sen. Murray, challenge Northrop’s jobs claims but have nothing concrete to back up the challenge. (We’re highly skeptical of both claims, for reasons we’ve written about many times.)
But what is truly “American built?” The Wall Street Journal today (Jan. 26) has a very interesting article asking this question of the automotive industry. The parallels to aerospace are apt.
Boeing’s internal press release on the tanker follows.
787 test planes to retain temp fasteners
All six Boeing 787s slated to be test airplanes in the certification program will retain an undisclosed number of temporary fasteners, we’ve learned.
Temporary fasteners became a cause célèbre, it will be remembered, when Airplane #1 used for the July 8, 2007, roll-out to an international media extravaganza was revealed to have thousands of temporary fasteners as a result of a shortage of the proper fasteners. This required non-standard ones be used to assemble the display airplane.
Since then, fasteners have been a continuing source of frustration for Boeing. Shortages, followed by incorrect installation at the Global Aeronautica industrial partner and then the revelation that thousands of them were designed incorrectly and have to be removed and replaced, adding further delays to the program.
Lessor LCAL in 787 talks
Middle East lessor LCAL is in compensation talks with Boeing over delays to the 787 program.
LCAL was created to lease 787s and has 21 on order. With the delays to the program, the lessor’s business plan is in disarray. Steve Clarke, president of LCAL, gave us this statement when we inquired:
For several months LCAL has, like a number of other B787 customers, been in compensation negotiations with Boeing over the delays to the aircraft we have on order. These negotiations are progressing slowly but have yet to be concluded.
It would be inappropriate for LCAL to comment further on the details of its negotiations.
SPEEA begins work-to-rules on 747-8
SPEEA, the Boeing engineers union, has begun a work-to-rules effort in Wichita (KS) on the 747-8 program intended to put pressure on the company as contract talks continue, we’ve learned. SPEEA also passed out 2,000 fliers at the wide-body plant at Everett (WA) Monday night preparing the engineers there for a work-to-rules program in support of Wichita if negotiations didn’t go well.
They aren’t: SPEEA issued the following press release moments ago:
Message to SPEEA-represented employees at Wichita Boeing
________________________________________________________________________________
Boeing reaffirms disappointing wage and benefit offer – Employment seminars planned
The Boeing Company presented a disappointing and disrespectful offer to WEU negotiators today. The offer showed virtually no movement from previous wage and benefit offers the company talked about in November.
“This is very unfortunate,” said Ray Goforth, SPEEA executive director. “The company is showing a clear lack of commitment to the future of Wichita IDS.”
The wage offer was contradicted by data recently distributed by Boeing to employees. The data, contained in a CNN news report, said engineers should receive 4.5% raise increases. The link to the article was removed from the Boeing negotiations page today after SPEEA pointed out it contradicted what the company presented during negotiations. Read the CNN article: A 3% raise this year? That’s all folks
SPEEA research shows that despite the economic downturn, the job market remains intact for experienced aerospace engineers. Spirit AeroSystems, Airbus and even Cessna are hiring engineers. Given Boeing’s apparent lack of support for Wichita engineering, SPEEA will start providing seminars to help Boeing engineers find employment elsewhere in the aerospace industry. With many employees nearing retirement age, moving to another firm can have significant financial benefits for individuals.
(More after the jump.) Read more
First meaningful 787s cancellations coming
Look for the first meaningful Boeing 787 cancellations to appear, perhaps as early as this month, due to delays and the economy.
By “meaningful” we mean more than the one from some obscure airline that has already occurred. And we are not talking about Delta/Northwest, which has been publicly hinted at by Delta.
The positions would revert to Boeing, which would not resell them but would absorb them to relieve–however slightly–the pressures on the delivery stream brought on by two years of delays.
In terms of financial impact to the 787 program, this particular cancellation isn’t all that great–after all, there are 900+ orders. But there will be a cash-cost (compensation) to Boeing, we understand, because of the delays to the customer.
KC-X procurement faces deferral
The controversial KC-X aerial tanker procurement will likely be deferred, predicts Goldman Sachs. So will several other Boeing programs, according to Goldman: the Airborne Laser, the Ground-Based MidCourse Missile Defense System and the Boeing/SAI Future Combat Systems.
Goldman made the predictions during an investor’s conference call today (Jan. 12). The company believes the incoming Obama administration will defer these and other defense programs as it adjusts priorities within the Defense Department and as part of its overall economic recovery plan.
Goldman does not predict that overall defense spending will fall; on the contrary, the firm believes that defense spending will be maintained or increased.
President-elect Obama said during the presidential campaign that the Armed Services need to be modernized and replenished after years of spending on the Iraq War, and that troops need to be redeployed to Afghanistan to continue the fight against terrorists and to get Osama Bin Laden.
The Orlando Sentinel quotes an analyst with Global Security as saying the KC-X isn’t needed at all.
Boeing groups flight testing for efficiencies, cost savings
Boeing last week (Jan. 8th) announced internally a reorganization of its flight test department across Boeing Commercial Airplanes (BCA) and Integrated Defense Systems (IDS) that consolidates all flight testing into one organization.
The move will have several benefits, according to an e-mail sent to all employees of the Flight Operations, Test and Validation employees. The reorganization will:
- Streamline infrastructure;
- Create economies of scale;
- Increase visibility and cost control;
- Create more efficient use of people, resources and assets;
- Accelerate implementation of standard systems, processes, tools and training;
- Bring Boeing one step closer to the goal of operating as “one company.”
Boeing hopes to reduce costs of flight testing by 10%, saving hundreds of millions of dollars annually. These costs currently represent 20%-25% of the total cost of new airplane development, Dennis O’Donoghue, vice president of the department, said in the e-mail. He will head the effort to consolidate the flight testing, which is current spread across 28 sites.
O’Donoghue wrote that full integration is hoped for by the end of the third quarter this year.
The effect, if any, on Boeing’s delayed 787 program is unclear. Flight testing is to begin perhaps as soon as late April but may be in May, June or early third quarter, depending on a wide array of variables and unknowns in the completion of airplane #1 and subsequent test planes. (More after the jump.) Read more
New Air Force One; Boeing layoffs
Flight International reports that the Air Force issued a Request for Information (RFI) for a new Air Force One to replace the Boeing 747-200 that will be 27 years old when it’s replaced.
The USAF previously said that it is interested in a new Air Force One, and Airbus had provided information about its A380.
Boeing is determined to keep the exclusivity it’s had for the airplane since providing the very first jet AF One, a Boeing 707-120, to President Eisenhower. Later model 707s were provided up until the 747-200 entered service for President George HW Bush.
Boeing will likely offer the 747-8I, but according to Flight, the Boeing 777, the Airbus A330 and the A340 might qualify. We’d have to think that the Boeing 787 and Airbus A350 could also qualify, setting aside service entry dates, but the Secret Service is quite conservative and may not be ready to accept the new composite technology for the Commander-in-Chief. Even though the twin engine Boeing 767 had been in service for years, the Service wanted a four-engine 747 for safety when replacing the 707.
This has the potential to be another controverisal Airbus vs. Boeing competition. Although we’re only talking about two airplanes vs 179 in the KC-X tanker competition, and even though a European company won the contract to supply the next generation of White House Marine helicopters, the status symbol of flying the President of the United States around is beyond compare. Air Force One represents the United States.
Our view that the Northrop/Airbus KC-30 is better than Boeing’s KC-767 for the Air Force tanker is well known. Airbus and Boeing can debate all day long about which airplane is better, the A380 or the 747-8. Both airplanes are good, sound aircraft. In this case, as an American, we come down firmly on Boeing’s side: Airbus could pay the government to make the A380 Air Force One, but we think the president ought to fly an American aircraft and Air Force One ought to be Boeing. Airbus shouldn’t even waste its time on this one.
So there.
Layoffs at Boeing
Boeing confirmed layoffs hinted at some weeks ago in this press release. The company will lay off 4,500 of its nearly 75,000 workers.
The move is prudent, given the global economic conditions and deteriorating airline market. But SPEEA, still in contract negotiations for its Wichita (KS) unit, doesn’t think so; see SPEEA’s statement after the jump: Read more