Pontifications: Complacency, arrogance aren’t a Boeing exclusive

By Scott Hamilton

March 21, 2023, © Leeham News: Airbus is resting on its laurels while Boeing struggles to recover from one crisis after another since the March 2019 grounding of the global 737 MAX fleet.

Multiple sources tell me that Airbus, aside from the production problems it has in common with Boeing, is enjoying Boeing’s deep freeze by China. The decision by Boeing CEO David Calhoun to delay the “introduction” of a new airplane until the middle of the next decade took the pressure off Airbus to be ready to move sooner than later.

While Boeing struggles, Airbus has become conservative, complacent and—gasp—even arrogant, a longtime Boeing trait.

What’s happening?

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Pontifications: One step forward, two steps back for Boeing

By Scott Hamilton

March 14, 2023, © Leeham News: There is a phrase in the US about the politician’s dance: one step forward, two steps back and a sidestep.

I couldn’t help but this about this dance step in connection with Boeing in recent weeks. For every step forward, Boeing seems to take two steps back.

The delivery suspension of the 767/KC-46A line—none has been delivered since the first of the year—was the first step back.

Then, for a second time, deliveries of the 787 were suspended. While the 767/KC-46A deliveries remain “paused,” to use Boeing’s favorite word, the Federal Aviation Administration last Friday cleared Boeing to resume deliveries of the 787.

I recall that Boeing CFO Brian West recently said a month ago that there will be some bumps ahead on the way to Boeing’s recovery. He didn’t allude to the 767/KC-46 issue at the time and the 787 was being delivered then. But as these issues emerged, Boeing once more seems snake bit.

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Pontifications: 30-40 MAXes potentially delayed by software issue: Jefferies

By Scott Hamilton

March 7, 2023, © Leeham News: About 30-40 Boeing 737 MAXes potentially will be delivery-delayed by the Option Section Software reconfiguration issue, the investment bank Jefferies Co. reported yesterday. Jefferies followed up on our report published Monday by Airfinance Journal and LNA.

Boeing didn’t much like our story about the new software issue delaying some deliveries of the 737 MAX. The story was joint reporting by AFJ and LNA.

“This has no impact on our [2023] delivery outlook,” a corporate communications representative emailed yesterday, specifically putting this on the record. The statement addresses a point the story didn’t raise.

“Today’s Leeham News article looks misleading in that the software issue it describes as ‘new’ has been known for over a year and isn’t expected to cause incremental delays in 737 MAX or 787 deliveries,” wrote the aerospace analyst at TD Cowen Co. “BA indicates this issue has been known for well over a year, isn’t new, was well understood at the time of their investor day and won’t cause any incremental impact to BA’s projected deliveries.”

AFJ/LNA was told by customers that the issue was discovered last Autumn, which is what we reported. One of the questions posted to Boeing included the Autumn timing. Boeing did not react to the timing outlined.

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Pontifications: Visiting AvGeek heaven

By Scott Hamilton

Feb. 28, 2023, © Leeham News: When Boeing began selling off real estate in the greater Seattle area to reduce costs during the 737 MAX grounding and the COVID pandemic, some sacred cows were among the sales.

All the buildings located in Renton on a former horse racing track known as Longacres were sold. The symbolism was painful. These buildings were the headquarters for Boeing Commercial Airplanes. Some buildings where composites were made and research was located were sold.

Buried in the downsizing disposing of the building in Bellevue, a Seattle suburb, that was the long-time home of Boeing’s archives. Documents. Engineering plans. Photos. Film and movies. Records of just about everything you can think of and lots you probably can’t.

And models. Rows and rows and rows of models. Models of every Boeing airplane ever sold. Models of concept airplanes, some really weird.

Boeing archivist Michael Lombardi holds a model of an Avenger Army truck Boeing built during a period of diversification. Credit: Leeham News.

Then there are models and records of things probably 99% of the people who follow Boeing didn’t know Boeing ever did. Boeing built and delivered mass transit rail cars. Military ground vehicles. Small naval vessels. Small passenger ferries.

Where was all this history going to go with the closure of the Bellevue location?

All the records, models, photography, etc., moved to a new and larger location at Boeing’s industrial and design complex in Auburn, a Tacoma suburb. The move was completed in January. I had the opportunity to visit this facility last week.

It is an AvGeek’s heaven.

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Pontifications: Bumps ahead notwithstanding, Boeing sees steady recovery

By Scott Hamilton

Feb. 21, 2023, © Leeham News: Boeing will have some bumps in the road (or maybe I should say, some turbulence) now and then, but its chief financial officer is confident the company is solidly on its way to recovery.

Recovery is daunting. There’s $51bn in total debt (more than $34.5bn in net debt), with $5.2bn coming due this year. Production of the 737 and 787 remains erratic. Deliveries are slower than hoped. Certification of the 737-7 and 737-10 has yet to be achieved. Program progress on the 777X is slow. A host of defense programs are in money-losing positions.

But orders picked up nicely for the 737 and 787. Even the 777X won 10 orders, from Air India, after a long, long drought. Debt, huge though it is, is coming down. Revenues are up at Commercial Airplanes and Global Services, though down at Defense.

Brian West, the CFO, outlined Boeing’s outlook during an appearance at a Cowen Co. investors conference last week. There was little new since Boeing held its own investors’ day on Nov. 2 and the 2022 earnings call on Jan. 26. But there are always a few nuggets to come out of these appearances.

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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.

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Pontifications: One “good” engine in future for RR, faulty business strategy and model: JP Morgan

By Scott Hamilton

Feb. 7, 2023, © Leeham News: Our report last week about Rolls-Royce’s new CEO characterizing the company in dire straits is just part of the story. Shortly before that, on January 18, JP Morgan issued a 38-page dissection of the company that perfectly encapsulates what LNA has pointed out in the past about its commercial engine business.

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Pontifications: New Rolls-Royce CEO paints a dire picture; all scenarios on table at Airbus

By Scott Hamilton

Jan. 31, 2023, © Leeham News: Rolls-Royce’s new CEO says the engine group is a “burning platform,” failing to give returns.

Tufan Erginbilgic, who joined RR as CEO on Jan. 1, said this is the “last chance” to get its house in order and turn a profit.

The dire outlook has potentially disastrous implications for Airbus. The airframer relies exclusively on Rolls for its engines for the A350 and A330neo. Airbus is monitoring the situation closely. Market sources tell LNA that Airbus is assuring customers and potential customers that Airbus will make sure engines and aftermarket support are available, without detailing how.

An Airbus insider tells LNA that all scenarios are under consideration. Some speculate that Airbus might either provide financial support to Rolls or even, in the extreme, buy the engine company. Others believe either course is unlikely because Airbus has its own production problems to sort out. Its fiduciary duty is to its stockholders. “It’s not their job to inherit a problem that was created decades ago,” one London-based analyst says.

What’s at the root of RR’s current problems? Many of the reasons have been discussed before, but let’s summarize them.

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Pontifications: “What can be. What should be.”

By Scott Hamilton

Jan. 17, 2023, © Leeham News: “What can be. What should be.”

This was the title of an address last week at the University of Washington’s aerospace department. The speaker: the former CEO of The Boeing Co., Phil Condit.

Condit was named president of Boeing in 1992 and CEO in 1996. He retired in 2004 after a lifetime career at Boeing, with leadership roles in the 747, 757, 757, 767, and 777 programs.

With ecoAviation the soup de jour these days, beneficiaries of billions of dollars of investment (much of it stupid money) and the subject of much greenwashing, Condit had frank and candid observations about these concepts.

Although Condit retired from Boeing in the wake of the USAF tanker procurement scandal dating to 2001, his engineering skills and fundamental visions were highly regarded. He put these skills to good use a week ago.

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Pontifications: Calhoun’s third year anniversary as Boeing’s CEO

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By Scott Hamilton

Jan. 10, 2023, © Leeham News: In three days, David Calhoun will “celebrate” his third anniversary as the chief executive officer of The Boeing Co.

I put “celebrate” in quotes because I’m not sure Calhoun really is in a celebrating mood. Boeing still has a big hole to climb out of and it’s going to be a few more years at least just to get back to 2019 production levels for the 737. Production levels for the 767/KC-46A are stable with a goal of increasing to 4/mo. Levels for the 777 remain at around two per month, pending certification of the 777X. Production of the 787 won’t get back to its peak of 14/mo, or even 12/mo. But Boeing hopes to achieve a production rate of 10/mo by mid-decade.

In the meantime, things are hardly running smoothly at Boeing Commercial Airplanes (BCA) or Boeing Defense, Space and Security (BDS).

David Calhoun

BCA remains plagued by quality control issues. Inexperienced workers hired to replace those who retired, accepted early buyouts, and normal attrition during the MAX grounding and COVID pandemic have learning curves. Clearing the grounded MAX inventory is slower than hoped. Clearing the 787 inventory will also be a slow slog.

Relations with the Federal Aviation Administration may be better than under Calhoun’s predecessor, Dennis Muilenburg. But Boeing doesn’t have its own “ticketing” (certification) authority restored and another safety investigation is about to begin.

BDS has its own long-standing issues. The Starliner and SLS space programs have been problematic. Losses and delays continue on the KC-46A, Air Force One, T-7, and MQ-25 programs. Legacy programs from the McDonnell Douglas era (the 1990s and before) recorded losses last year.

Boeing Global Services seems to be the only bright spot. Even Calhoun’s announcement on Nov. 2 that BCA won’t introduce a new airplane until the middle of the next decade drew a lot of raspberries from a wide swath of the industry—including, of all things, the Wall Street Journal.

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