Leeham News and Analysis
There's more to real news than a news release.
Boeing Announces Preliminary Significant Q3 Loss: Cuts 767 Freighter Program, Delays 777X EIS, Major Layoffs
By Chris Sloan
October 11, 2024, ©. Leeham News – In a late Friday news dump just after U.S. financial markets closed, The Boeing Company Announced significant financial hits as the IAM strike lurches toward a full month with no end in sight, nor are further talks scheduled after pulling its latest off the table.
In an email to Boeing staff, Kelly Ortberg, Boeing President and Chief executive Officer, starkly admitted: “Our business is in a difficult position, and it is hard to overstate the challenges we face together. Beyond navigating our current environment, restoring our company requires tough decisions and we will have to make structural changes to ensure we can stay competitive and deliver for our customers over the long term.”
The company announced a multi-prong series of “clear-eyed, difficult decisions” and program updates. The headline is a roughly 10% permanent reduction in the size of the non-represented workforce, many of whom are already on furlough or partial furlough. These reductions will include executives, managers, and employees, who will begin learning their fate next week. The company did say, it will not proceed with the second wave of furloughs for now.
- Boeing reports preliminary third quarter results
- Boeing CEO Message About Positioning for the Future
Bjorn’s Corner: New engine development. Part 28. Wrapup.
By Bjorn Fehrm
October 11, 2024, ©. Leeham News: We have done an article series on why engine development takes longer than airframe development. Part of the reason is that advancements in engine technology can deliver considerably higher fuel consumption reductions than airframe advancements.
The change of engines for the A320 series and 737 MAX delivered a 15% improvement in engine efficiency. In contrast, the airframe improvement was less than half, mainly by stacking cabin seats closer together.
Figure 1. The 4:1 gear ratio Utrafan demonstrator in the Rolls-Royce test cell. Source: Rolls-Royce.
Boeing strike hits suppliers, Airbus steps in
- Strike creates gap for suppliers.
- Airbus places accelerated orders at some affected suppliers.
- Snapping up capacity may complicate Boeing’s post-strike recovery.
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By Scott Hamilton
Oct. 10, 2024, © Leeham News: There is no end in sight for the strike by the International Association of Machines and Aerospace Workers, District 751, ending its fourth week today.
The strike costs Boeing between $50m and $150m a day, depending on whose estimate you believe. (The world will have an understanding of the cost on Oct. 23, when Boeing reports its third-quarter financial results.)
A strike by the IAM 751 in 2008 lasted 57 days. Boeing lost an estimated $6bn in sales during this period and racked up more than $2bn in lost cash flow. It took Boeing about two years to fully recover from the strike. Then, Boeing didn’t have the overhang that it has today from five years of crises and an irate Federal Aviation Administration that oversees and restricts Boeing’s production.
But recovery, whenever it begins, has a new wrinkle that didn’t exist in 2008. Then, it was Airbus that was in disarray. Its A380 program was in shambles due to production issues. The fledging A350, Airbus’ answer to the Boeing 787, was being redesigned and tweaked for the fourth or fifth time due to poor market reception. The A400M program was an operational and financial disaster.
Today, Airbus is playing from a position of strength and dominance. Boeing is playing from a position of weakness and financial trauma.
Boeing-IAM contract talks fail, no new negotiations scheduled, no end in sight
By Scott Hamilton
Oct. 9, 2024, (c) Leeham News: Contract talks between Boeing and its largest union, the IAM 751, broke off again yesterday after the two sides failed to make progress to reach an agreement.
The strike is four weeks old tomorrow. No new talks are scheduled and there is no end in sight to the strike.
The two sides issued public statements yesterday that make it seem they weren’t even at the same meeting.
Click on image to enlarge. Credit: Boeing, IAM 751.
Boeing 3Q deliveries up despite strike
By Scott Hamilton
Oct. 8, 2024, © Leeham News: Third quarter deliveries by Boeing were up slightly despite a strike the last two weeks of the quarter by its machinists union.
Boeing deliveries 92 737s during the quarter, despite lower new-production rates hovering around +/- 20/mo. The company doesn’t break out deliveries from the lingering inventory of 737s vs new production aircraft. Deliveries of the 787 also are a mix of new-production airplanes and those from inventory that required rework from a production flaw discovered in 2020.
Boeing said deliveries included “new-build production units, including remanufactures and modifications.”
Strike slows Boeing’s march toward improving safety culture
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By Scott Hamilton
Credit: Federal Aviation Administration.
Oct. 7, 2024, © Leeham News: With the strike at Boeing by the International Association of Machinists and Aerospace Workers District 751 nearing its fourth week, progress in improving the safety culture is one of the areas that has slowed.
Boeing initiated a company-wide furlough to stem cash outflow during the strike. Among those laid off were people in the Chief Aerospace Safety Office, The Seattle Times reported on Sept. 19.
“[O]ne particular set of nonunion employees were surprised to learn they will be among those subject to the rolling furloughs,” the newspaper reported.
“That’s those in Boeing’s Chief Aerospace Safety Office — responsible for the company’s implementation of Congressional legislation that raised safety standards and setting up a new companywide safety management system.”
The Safety Office was created in 2021 in the fallout from the 2018-19 737 MAX crisis and continuing revelations of shortcomings in safety protocols and quality assurances on assembly lines in Washington State and South Carolina. It’s headed by Mike Delaney, a career Boeing employee.
The Federal Aviation Administration (FAA) has come down hard on Boeing to improve its safety culture and quality control.
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The IAM 751 and Boeing in 2019 proposed a safety reporting program called ASAP, which stands for Aviation Safety Action Program. It took three years of negotiations before it was adopted. Two years later, union president Jon Holden said implementation was still in its early stages.
Boeing’s engineer and technicians union, SPEEA, early this year proposed a similar ASAP program, But in April, the union claimed it and Boeing was at an impasse over how the program would work. Negotiations between SPEEA and the company were held by Boeing’s labor relations department, not the Safety Office.
Boeing’s labor negotiators now have the strike to contend with. With the Safety Office employees subject to rolling furloughs, progress on improving the company’s safety culture has slowed. SPEEA’s lead negotiator is now occupied with contract talks at Spirit AeroSystems, a major Boeing supplier. SPEEA also represents the engineers and technicians there.
Rival Airbus has its safety protocols from which Boeing might benefit as an example to follow.
Aerospace supply chain still ailing; Sustainable Aviation Fuel isn’t the answer to go green
- Aerospace supply chain is still in recovery.
- Suppliers in Russia had to be closed. What happens if the same happens in China?
- Sustainable Aviation Fuel isn’t the answer to green aviation. Innovation in engine and airframe design is.
- US government must step up funding to go green.
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By Scott Hamilton
Oct. 4, 2024, © Leeham News: RTX, maker of the Pratt & Whitney Geared Turbo Fan engine and a large supplier to Airbus, Boeing, Embraer, and others through various divisions, continues to struggle with its supply chain.
CEO Greg Hayes told the US Chamber of Commerce Aviation Summit last month that “as much as we had contingency plans for pandemics, and I go back to the early 2000s with SARS and how the airlines managed through that, we were completely unprepared for COVID. Absolutely completely. There was no playbook.
“How do you keep your employees safe? How do you keep the airlines flying, despite the fact that there were very few passengers? How do you maintain all of your systems?”
Bjorn’s Corner: New engine development. Part 27. Long developments
October 4, 2024, ©. Leeham News: We do an article series about engine development and why it has longer timelines than airframe development. It also carries larger risks of product maturity problems when it enters service than the airframe of an airliner.
We looked at engine technologies and why several are challenging to bring to a mature technical state. Then, we compared previous engine developments with the present generation. Memory is short. What we could see is that previous generations of engines carried larger reliability and durability problems than the present generation engines.
Now, we discuss the development timelines for key engine versus airframe developments.
Figure 2. The GE-36 Open Fan of the first generation, from 1988. Source: Wikipedia.
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Longshoreman strike adds to Airbus, Boeing woes
Update, Oct. 3: The Longshoreman’s union and the employers agreed to a 62% pay hike over six years. The strike has been called off.
By Scott Hamilton
Oct. 1, 2024, © Leeham News: As if the aviation industry supply chain isn’t causing enough heartburn to Airbus and Boeing, a new US dockworkers strike today will interrupt shipping to Charleston (SC) and Mobile (AL).
Charleston is where Boeing assembles the 787. Mobile is where Airbus assembles the A320/321. It’s also where there is an assembly line for the A220.
“We are aware of the situation and have taken actions to mitigate the potential impact on our operations in Mobile,” an Airbus spokeswoman said, without providing details. Fuselage sections and wings for the A320s are shipped to Mobile. It’s unclear whether any sub-systems for the A220 are affected; most components are trucked in, but not all.
Boeing’s 787 line largely relies on airlifted components via Boeing’s in-house Dreamlifter program. But some components are shipped. The 787 line currently is the only assembly facility remaining open during a separate contract dispute strike by the International Association of Machinists and Aerospace Workers. This strike, now in its third week, shut down all Boeing aircraft assembly in the greater Seattle area. Boeing doesn’t “currently” expect and impact.
Southwest Airlines Slashing Capacity Growth Shakes Up Their Fleet Plan
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By Chris Sloan
Sept. 30, 2024, © Leeham News: Southwest Airlines outlined significant moves in its quest to return to sustained profitability at its investor day on September 26 in Dallas. Widely reported revenue and financial initiatives include assigned and premium seating, network realignment, capacity growth cuts, and staffing reductions.
Billed as Southwest Even Better, the plan is the most transformational program in the company’s 53-year history, according to Chief Executive Officer Bob Jordan. “The plan includes a robust set of tactical and strategic initiatives and elements uniquely available only to Southwest Airlines. The plan is capital efficient and supports achieving our financial goal of ROIC [Return on Invested Capital], well above our cost of capital,” he said. Yet, he acknowledged that recent financial performance is not up to anyone’s expectations. “Our model is not broken, but it needs continued calibration and enhancement.” By 2027, the plan is expected to add approximately $4 bn in cumulative incremental earnings before interest and taxes (EBIT).
Jordan pointed to external factors as a significant culprit, notably Boeing. “It’s no secret that Boeing’s delivery delays have created significant issues for us, making it very difficult for us to run a business. Boeing has delivered very few MAX aircraft on time, and we are still waiting on the MAX 7 certification.” Though compensation agreements remain confidential, “Past financial issues caused by Boeing delivery delays and other Boeing issues have largely been resolved through the application of credits on future deliveries,” said Jordan.
Southwest is taking dramatic steps to mitigate “operational risk” by reducing hiring and cutting annual capacity growth to 1-2 percent through 2027. “We expect production issues at Boeing and issues related to the (Pratt & Whitney) Geared Turbofan engine to continue to constrain industry growth for years to come,” Jordan noted.