Aerospace Supply Chain challenges for planned production rates

Airbus and Boeing have announced production rates for their single-aisle airplanes of 42/mo each and are thinking of going as high as 52/mo. Boeing last week announced a planned rate of 14/mo for the 787. Airbus has plans for 10/mo for the A350 XWB, and is considering a second final assembly line.

Bombardier, Embraer, COMAC, Irkut, and Mitsubishi each have new airplanes coming on line soon. There are more than 22 new and derivative airplanes planned to enter service between now and 2022.

How will the supply chain meet the demands of the OEMs?

It will be tough, says J. C. Hall, the chairman of the Pacific Northwest Aerospace Alliance, headquartered in the Seattle area. PNAA represents small-to-medium suppliers.

We sat down with Hall to get his take on the challenges ahead for the supply chain.

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Odds and Ends: Embraer reports weak quarter; MRJ FTV #1 assembly; JAL, ANA politics

Embraer’s Third Quarter: Embraer delivered fewer commercial airplanes in the third quarter than had been expected. The maker of E-Jets and the E-Jet E2 re-engined versions due beginning in 2018 listed its deliveries and backlog in its press release. Analysts expects 22 E-Jets would be delivered in the quarter. But the backlog is up 44% year-over-year, largely on the strength of the launch of the E2 (150 orders, 100 of which are for the smallest E-175 E2 and 25 each for the E-190/195 E2), and orders from Republic Airways Holdings and SkyWest Airlines for the current generation of E-Jets. The E-175 remains to most frequently-ordered airplane.

Although Embraer is expanding the size of the E-195-E2 by up to 12 seats, orders have been few. The E-190 has proved a better-selling model than the E-195.

EJet_E2 Compare

Source: Embraer

Officials expect to have a healthy fourth quarter delivery stream.

Mitsubishi MRJ: Assembly for the first Mitsubishi MRJ Flight Test Vehicle (to borrow Bombardier’s term for the CSeries) is underway. The first delivery was originally planned for this year; it’s now planned for 2017, four years late. This rivals Boeing’s 787 and exceeds the Airbus A350 and as yet the CSeries.

JAL, ANA Politics: Reuters has an analysis about the suspicion politics may have been involved in the decision by Japan Airlines to buy the Airbus A350 and the pending order by ANA of an Airbus or Boeing airplane.

Production wars coming: Airbus v Boeing

If some industry observers are concerned about the prospect of over-production now, the current state of affairs may only be the tip of the iceberg.

Airbus CEO Fabrice Bergier says he expects to boost production of the A320 and A350 families over the next few years, overtaking Boeing by 2018.

Airbus currently produces the A320 at a rate of 42 per month. The A330 rate is 10/mo and the A380 at 3/mo. Production of the first customer-destined A350 is to begin by the end of this year, with a targeted delivery in the second half of next year. Ramp-up to an initial production target of 10/mo is planned over a four year period, but the wing factory in Broughton, Wales, has a capacity for 13/mo, inferring a greater rate is already planned. Airbus is considering a second A350 production line, largely focused on the A350-1000.

Boeing currently produces the 737 at 38/mo, going to 42/mo next year. The 777 rate is 8.3/mo and the 747-8F/I rate is 1.75/mo. The 767, driven by the USAF tanker, is 1.5/mo. The 787 is ramping up to 10.mo, with a target by year end, but we believe this will be more likely in Q12014.

Boeing has notified the supply chain to consider higher rates for the 737, 767 and 787. We posted the chart below last June, reflecting the higher planning rates.

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Latest twin-aisle orders shift market share; Plus Odds and Ends

The flurry of orders in September and this month from Lufthansa Airlines and Japan Air Lines tightens the wide body race between Airbus and Boeing.

Airbus and JAL on Monday announced a firm order for 31 A350s and options for 25 more. Last month, Lufthansa announced a firm order for 34 777-9Xs and 25 A350-900s.

Twin Aisle Market Share 093013Sources: Airbus and Boeing

Airbus traditionally has significantly trailed Boeing in the twin-aisle sector, but so far this year the race is running about even through September. The Lufthansa orders for the Boeing 777-9X and the Airbus A350-900, announced in September, are not reflected yet, nor is the Japan Air Lines order for A350-900s and -1000s. None of these orders has been booked yet by either OEM. Airbus would take the lead.

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Odds and Ends: Slowing sales; Airbus in Japan; MRJ delay; Crandall on merger

Slowing Jet Sales: Within a few days, Bloomberg, Reuters and The Seattle Times each had stories about slowing jet sales.

Here is the Bloomberg story, focusing on cargo sales.

Here is the Reuters story.

Here is The Seattle Times story.

The theme of each is worrisome, but with Richard Aboulafia’s comments to The Times, we disagree with his view on American Airlines. American has an ancient fleet of Boeing MD-80s and aging Boeing 757s that have to be replaced, and we believe the Airbus and Boeing orders won’t go away if the merger with US Airways is blocked.

Airbus still trying Japan: Airbus, which has never had a lot of luck penetrating the market in Japan, still appears to have an uphill battle, according to this article. The Reuters piece quotes Airbus’ John Leahy at the Paris Air Show; when we spoke with Leahy by phone from the IATA AGM immediately before the PAS, Leahy wasn’t quite as upbeat as quoted in the Reuters article. Leahy tamped down speculation that he’d have a Japanese order for the A350 at the PAS (and he did not) but neither was he ready to predict any timeline when one might be forthcoming.

Aspire Aviation continues to believe Boeing may place the 777X wing production in Japan as a means to secure 777X orders and block the A350.

Mitsubishi’s delay: Mitsubishi’s latest delay on the MRJ90 program is being blamed on not following FAA process, according to this article.

Poor South Carolina 787 deliveries: All Things 787 reports that Boeing’s Charleston (SC) 787 assembly plant has delivered only four 787s this year.

Crandall on DOJ AA-US lawsuit: Former American Airlines CEO Robert Crandall (who retired in 1998) has a very good analysis of the faults of the Department of Justice lawsuit to block the American-US Airways merger in this Bloomberg TV interview. He’s first up in the 22 minute segment.

Desperation: Kingfisher sued International Aero Engines for $236m over allegedly defective and poorly designed engines on the Airbus A320. This doesn’t pass the laugh test and smacks of desperation. The V2500 has been on the A320 for decades and seems to have been designed just fine and performing well.

Odds and Ends: Lufthansa’s pending widebody order; MRJ v E-Jet E2; MAXimizing space

Lufthansa’s Pending Order: As we have written on previous occasions, Lufthansa Airlines has been preparing a large order for twin-aisle, twin-engine aircraft: 50 or more. We’d noted that the order was likely due in September.

Aviation Week has this update.

Mitsubishi MRJ v Embraer E-Jet E2: Flight Global reports that the Japanese OEM says the latest 15 month delay won’t hurt sales of the MRJ (to which one wag notes it’s not selling well anyway–there are only three customers), but what caught our eye is the Mitsubishi reference comparing the MRJ with the Embraer E-Jet E2. This is like the debate of new vs re-engine between Bombardier’s CSeries and the smallest Airbus and Boeing products.

MAXimizing space: Boeing shifted work around at its Renton (WA) factory as it prepares for production of the 737 MAX. The Seattle Times has a good wrap up.