Leeham News and Analysis
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Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 19. April 25, 2025
- How good is the C929? Part 2. April 24, 2025
- Boeing First Quarter Results Update: China is 10% of the backlog, with 500 in “Unidentified” April 24, 2025
- Boeing First Quarter Results: Tariffs, Return flights, $10.55bn asset sale April 23, 2025
- RTX Q1 2025 Earnings: GTF Talk Takes A Back Seat To Tariffs April 22, 2025
Tier 1 suppliers are a “failed market”
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By Scott Hamilton
Feb. 20, 2025, © Leeham News: The Tier 1 supply chain is all but dead.
Kevin Michaels.
This rather startling conclusion belongs to Kevin Michaels, the managing director of the consulting firm Aerodynamic Advisory. When he explains his thinking, it supports a major shift in the aerospace industry.
He made his remarks at the Pacific Northwest Aerospace Alliance conference this month in the Seattle area.
Tier 1 supplies are the last step in the supply chain, delivering products directly to the Original Equipment Manufacturers (OEMs), such as Airbus, Boeing, Embraer, and the engine makers.
Michaels said the supply chain is “fragile” and “red hot.” “Overall, the supply chain is in better shape than it was last year at this time. It’s in better shape now than it was two years ago. But it’s still incredibly fragile.” OEMs purchase about 75% of the value of the aircraft from the supply chain. Aerostructures are the first tier. And this is where Michaels’ rubber hits the road.
JetZero sees big sales potential, but consultants say it won’t be them to bring BWB to market
By Scott Hamilton
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JetZero Z4 commercial BWB and USAF tanker concepts. Credit: JetZero.
Feb. 10, 2025, © Leeham News: There will be a surge in aircraft replacement requirements as today’s Airbus A320neos and Boeing 737 MAXes age. Simultaneously, the seating capacity of aircraft is increasing, says Michel Merluzeau, the Head of Sales Engineering and Market Development for the start-up company JetZero.
JetZero is developing the first commercial blended wing body (BWB) aircraft, a 250-plus seat design with a goal of reducing fuel consumption by 50% over the remaining Boeing 767s and Airbus A330ceos still in operation.
Merluzeau joined JetZero last year after decades as a consultant in commercial and defense aerospace sectors. He spoke last week to the annual conference of the Pacific Northwest Aerospace Alliance in a Seattle suburb.
The replacement forecast and the up-gauging will open a replacement market for at least 7,000 aircraft, Merluzeau said, for which JetZero’s Z4 concept is designed.
Hopes, skepticism, for Boeing from suppliers
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By Scott Hamilton
Feb. 6, 2025, © Leeham News: Hope and skepticism for Boeing permeated the sidelines of a suppliers’ conference this week in the Seattle area as the big manufacturer struggles to regain footing following six years of back-to-back-to-back crises.
Boeing’s CEO Kelly Ortberg said on Jan. 28 that the company is on a path with the Federal Aviation Administration to achieve a production rate of 38/mo for the 737 MAX later this year. Afterward, rates would increase in increments of 5/mo every six months. At this rate, production won’t return to the pre-MAX grounding production of 52/mo until the fall of 2027.
But suppliers at the annual Pacific Northwest Aerospace Alliance (PNAA) conference this week interviewed on the sidelines think Boeing won’t hit rate 38 until late next year. If Boeing then could ramp up in increments of 5/mo thereafter, the pre-grounding production rate would be achieved in the fall of 2028, nine years after the MAX was grounded.
Suppliers think the ramp up rate is also optimistic.
Ihssane Mounir. Boeing photo.
But at the PNAA conference, Ihssane Mounir detailed Boeing’s new approach to the supply chain, safety and quality Boeing has adopted since the grounding and after the Jan. 5, 2024, accident involving a door plug separation from an Alaska Airlines 737-9 MAX. Mounir is the Boeing Commercial Airplanes (BCA) senior vice president of Global Supply Chain & Fabrication.
The same suppliers who are skeptical of the ramp plans express hope and optimism of BCA’s plans to return to normalcy.
A few also expressed residual anger toward Boeing over the six years of lurching from one crisis to another that disrupted business.
One supplier noted that it received no tooling orders for years because of the disrupted production and the absence of a new airplane program.
Airbus and Boeing need each other for healthy supply chain
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By Dan Catchpole
March 11, 2024, © Leeham News: In the public arena, Boeing is flailing. It’s the subject of public rebukes by government officials, a new criminal investigation by the US Department of Justice, and a seemingly endless stream of scathing headlines.
However, executives at its European counterpart, Airbus, are not celebrating Boeing’s struggles.
“Airbus needs Boeing,” said Joe Marcheschi, director of flying parts procurement services for Airbus Americas. “Disruption, and turmoil in the supply chain hurts Airbus, too.”
The industry’s supply chain depends in large part on the two aerospace giants—which means, indirectly, Boeing and Airbus need each other.
Instability at the airplane makers may in some sense have furthered this interdependence by prompting many suppliers dependent on one OEM to diversify by supplying both companies and by looking outside commercial aerospace.
Summary:
- Suppliers’ efforts to diversify beyond one OEM have deepened interdependence.
- Labor, materials are among biggest supply chain challenges.
- Airbus supporting suppliers to solve bottlenecks.
Boeing returns to PNAA
By Scott Hamilton
Dec. 5, 2023, © Leeham News: Boeing and the Pacific Northwest Aerospace Alliance have kissed and made up.
After a two-year boycott, Boeing returns this year as a sponsor to PNAA, a suppliers-oriented trade group, and to sponsor and provide speakers to its annual conference in February. Boeing abruptly withdrew from the organization and the conference in 2022, citing a sexual discrimination lawsuit that had been filed by one of its women employees against the then executive director, a male, and the male-dominated Board of Directors. However, PNAA’s staff was predominately women and women were represented on the Board. The lawsuit was settled for undisclosed terms.
Boeing’s stated reason for withdrawal was questioned by some familiar with the background. Additionally, there has long been an occasional tense relationship between PNAA and Boeing. Analysts and consultants who appeared as speakers or panelists long criticized Boeing for its Partnering for Success program, which some viewed as brow-beating suppliers into cutting prices.
Universal Hydrogen’s first flight nears
- Universal Hydrogen nears first flight of containerized fueling concept.
- Eviation’s Alice all-electric airplane offers another option for clean skies.
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By Scott Hamilton
Feb. 27, 2023, © Leeham News: Universal Hydrogen (UH2) is just days away from the first flight of its hydrogen tank concept in a converted De Havilland Canada Dash 8-300.
The flight will be from the Grant County International Airport at Moses Lake in Central Washington State. As such, weather—which is often unpredictable here—could upset plans. So far, the forecast is favorable if cold.
UH2’s conversion removes seats from the aft portion of the passenger cabin to make way for two large tanks to install through a main deck cargo-size door cut into the fuselage. A similar approach is underway in France with an ATR-72.
The liquid hydrogen (LH2) containers are trucked from the refueling source and loaded onto the planes. Then, when near empty, these are swapped for refueling with other tanks filled with hydrogen for the next flight.
Universal Hydrogen’s concept for an H2-powered airplane centers on two fuel tanks at the aft end of the passenger cabin. This example is the ATR-72. A De Havilland Dash 8-300 is also being converted. Credit: Universal Hydrogen.
This concept solves the hydrogen supply problem at any airport. The ATR-72 capacity goes from 72 passengers to 56, a reduction of 28%. This dramatic reduction in revenue seats calls for a reset of cost and revenue per available seat mile, but for a first entry into the hydrogen field, it’s an important step in the quest for clean aviation. LNA believes that UH2 has the most viable hydrogen concept of all at the moment because the company addresses the hydrogen supply problem without the billions of dollars needed for airport infrastructure and pipelines.
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Moses Lake is the same airport used by Eviation for the first flight last year of its Alice electric aircraft. Its CEO, Gregory Davis, outlined the Alice concept at this month’s annual conference of the Pacific Northwest Aerospace Alliance (PNAA).
The pros and cons of Boeing launching a new airplane program sooner than later
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By Scott Hamilton
Feb. 23, 2023, © Leeham News: Many, outside of Wall Street analysts and stockholders, are critical of the decision by Boeing CEO David Calhoun to suspend the development of a new airplane. It will be the middle of the next decade before the company “introduces” a new one.
The view from this month’s Pacific Northwest Aerospace Alliance (PNAA) Conference is split. Speakers like Kevin Michaels and Richard Aboulafia, both from the consultancy AeroDynamics Advisory, favor launching a new airplane program sooner than later. So does aerospace analyst Ron Epstein of Bank of America. He’s a rarity among Wall Street analysts.
While Calhoun pointed to the lack of step-change engine technology as the reason to suspend any development today, LNA previously pointed out that Boeing simply may not be ready internally. Production of the 737 MAX remains challenging and somewhat erratic. The 787 is ticking along at a mere one-half airplane a month. Certification of the 737-7, 737-10, and 777X have yet to be achieved. Boeing’s debt remains in the tens of billions of dollars; about $5bn in due this year alone.
And then there is the supply chain. It’s simply not ready, either. It’s struggling with materials and labor shortages. Some laborers are new and inexperienced. Even Airbus continues to struggle to make its delivery targets. It fell short last year by a wide margin and in January delivered only 20 airplanes.
Calhoun would have had better messaging on these points rather than simply saying technology isn’t advanced enough yet (which is only partly true). Critics may have been more easily persuaded.
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Pontifications: Ihssane Mounir’s big challenge at Boeing
By Scott Hamilton
Feb. 14, 2023, © Leeham News: Ihssane Mounir was named senior vice president of Global Supply Chain and Fabrication for Boeing Commercial Airplanes (BCA). Appointed in December, he previously was the top salesman for BCA.
Ihssane Mounir. Credit: Boeing.
Mounir has a huge challenge ahead of him that goes beyond managing the logistics of BCA’s huge supply chain. He faces an irate group of suppliers who are increasingly openly angry. Some border on open rebellion.
As LNA reported last week, suppliers at the Pacific Northwest Aerospace Alliance (PNAA), some suppliers on the sidelines of the conference openly complained about Boeing’s lack of transparency and reliability. Some vowed to reduce their exposure to Boeing or even abandon working with the company. As always, Boeing’s Partnering for Success program—a long-running cost-cutting effort that demanded suppliers cut costs or be terminated—was another complaint.
Some who also supply Airbus but have to trim costs for it as well nevertheless praised Airbus’ gentler, collaborative approach vs Boeing’s threatening tactics.
The latter is relevant for some of the panelists.
Aerospace supply chain needs capital, which isn’t always easy to find–and it may be expensive
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By Scott Hamilton
Feb. 13, 2023, © Leeham News: The aerospace supply chain is still struggling to recover from the grounding of the Boeing 737 MAX, the suspension of deliveries of the 787, the delays to the Boeing 777X, and the COVID pandemic.
Labor shortages and workforce quality/experience is also a challenge for the supply chain.
Profits remain elusive and capital is available at high interest rates, if at all. CFM, GE, Pratt & Whitney, and Rolls-Royce continue to face technical challenges with their engines. The CFM LEAP and PW Geared TurboFan engines have durability issues and must be taken off wing for maintenance and warranty work at a fraction of the time their predecessor engines were on wing.
It’s a rather bleak picture painted of the state of the aerospace industry during the annual conference of the Pacific Northwest Aerospace Alliance (PNAA) last week in a Seattle suburb.
Summary
- Suppliers need capital; Boeing should return to 30-day payment terms for immediate capital injection.
- Recovery not over, suppliers can make better investments in defense.
- Without a new airplane, there’s no reason for suppliers to invest in commercial.
HOTR: Boeing slammed in absentia at conference
By the Leeham News Team
Feb. 9, 2023, © Leeham News: Boeing wasn’t present, but that didn’t stop a succession of speakers and suppliers from slamming the company during the annual meeting of the Pacific Northwest Aerospace Alliance this week in Lynnwood (WA).
Boeing boycotted the conference for the second year in a row. In October 2021, Boeing withdrew from the February 2022 conference over an alleged sexual discrimination lawsuit filed by a woman against the then-executive director of PNAA and against the organization. The lawsuit was settled out of court and the executive director today is a woman. But Boeing declined to return to the conference this year.
Boeing’s absence was roundly criticized by suppliers on the sidelines of the conference. The suppliers complained about Boeing’s payment policies (deferring payment to them for 90-120 days) after years of cutting prices under Boeing’s Partnering for Success. They also complained bitterly about Boeing’s lack of transparency and frequently changing production plans. Boeing should have been at the conference to face them and communicate with them.
Kevin Michaels, managing director of Aerodynamic Advisory, is a supply chain expert. For many years, he criticized Boeing’s approach toward the supply chain. Tuesday wasn’t any different. He once again criticized Boeing for its treatment of the supply chain. Noting that suppliers, mainly Tiers 1 and 2, went through “Partnering for Poverty 1 and 2” cutting prices, Boeing then promised payment terms of 30 days. In subsequent days, payments stretched to 60 days, 90 days, and now up to 120 days. Coupled with the 737 MAX grounding, 787 delivery suspension, and the COVID pandemic, the extended payment terms put additional stress on the suppliers.
In terms unusually blunt for Michaels in this forum, he predicted it will not be long before “the shit hits the fan.”