The debate over using DOT Form 41in comparing A320 and 737 costs

Long time readers know that we don’t think much of the veracity of data filed with the US Department of Transportation under Form 41, detailing maintenance and fuel costs. We know from a consultant who helped an airline create its methodology for filing the data that the airline “fudges” the methodology to distort the data for competitive reasons.

Boeing has cited Form 41 data for years in making its comparisons between the 737 and the Airbus A320. A key piece of information Boeing uses is the maintenance cost data, in which Boeing claims the 737 was up to 29% less costly to maintain than the A320. This comparison in particular drives Airbus crazy, and officials say the Form 41 data is “garbage.”

737 v A320 maintenance

Boeing also previously used a study from IATA from 2006-2009, but dropped that in this year’s comparisons at the pre-Paris Air Show briefings.

Boeing also relies on DOT 41 data for fuel comparisons.

737 v A320 fuel

Beverly Wyse, VP and general manager of the 737 NG program, emphasized the reliance on DOT data in the comparisons.

“You don’t just have to believe us,” she said during the briefings. “We know that out there in the market ‘Airbus says,’ ‘Boeing says,’ and it’s hard to find the truth, so wherever we can we’re trying to use independent sources to substantiate the information that we are providing you. This data actually comes from the US department of Transportation Form 41. Depending on the model, and the configuration of the aircraft, the Dash 800 compared to an A320 or the A321 compared to the 900ER, you’ll see between 5% and 8% better fuel efficiency for the 737.”

Wyse credited the 737’s rival with good dispatch reliability, a rare Boeing compliment of the A320. But she claimed the 737 was nonetheless better.

“The A320 and 737 both have incredible reliability. Anything with 99 point something reliability is something to be proud of. The simpler design of the 737 contributes to 20% lower maintenance costs resulting in 67 fewer days out of service,” she says.

Given the reliance on DOT Form 41 data and our open doubts about using this data, we followed up with a series of questions to Boeing. Here is the exchange.

Boeing cites DOT 41 data in claiming the 737NG costs 20%-24% less on maintenance than the A320. First, DOT 41 data is crap. The airlines manipulate the data to mask what their true costs are from competitors. So how does Boeing purport to un-crap it?

DOT F41 data is a good source because it has rigorous reporting processes, contains constant costs in U.S. dollars, and includes reported data by operators who maintain both aircraft fleets, insuring consistent accounting practices.  But it is not the only source of data for our claims.   That goes toward your second question…

Secondly, Bev in one-on-one said, well, Boeing compares maintenance schedules between the 737 and the A320. Which is it? DOT 41 or company manuals?

The Maintenance Schedules or Check Intervals (that is the interval between performing various levels of Checks, typically classifieds as A, C and D-Checks) are obtained from our company manuals and for the A320, from industry publications and conferences. Specific A320 check intervals are periodically announced in Airbus press releases, journals and conference papers. It may be noted that F41 data provides a look at historic data while the Maintenance Planning Document (MPD) provides the check intervals for the future occurrence of check events. The continuous improvements that occur in the Boeing MPD usually result in even lower maintenance costs to airlines than being currently reported in F41 data. Our focus is to enable the airlines to continuously reduce their operating costs including maintenance costs through better product and services.

Third, I know from my own sourcing from within Boeing that to get to 24%, Boeing has compared new 737s to the oldest A320s using the earliest engines. When new-to-new is compared, the delta is 4% in favor of Boeing. Bev responds to this that this is a fleet-wide analysis.

Bev is absolutely correct; we use fleet-wide data in our comparison. There are many differences in the fleets of different airlines, like airplane age and the average stage length (Fhrs/Trip). Both affect maintenance costs. To enable true comparison, maintenance cost is normalized for a common airplane age. Since A320 is usually an older airplane the normalization process actually reduces the A320 costs to bring it to say a level of 737NG airplane age (say 8 years). Without normalization for age, the cost difference would be an additional 4 to 5% to the advantage of 737NG, but we diligently apply our processes while showing the relative cost and remove this fleet age based difference .  Similarly, costs are normalized for stage length and some other factors. All these normalizing processes are approved by the IATA Maintenance Cost Task Force of which both Boeing and Airbus are also members and uniformly used by most of the industry. We compare costs and do modeling in our tools on basis of the normalized costs.

In summary: All maintenance costs are compared on basis of like airplane age. Our multi level data analysis is for “as reported data”, normalized data and data from airlines operating both airplane types. In each case, the airframe costs for the 737NG are lower and on an average 20 percent lower. 

Fourth point: If this is a fleet-wide analysis, how is this possibly fair? The NG didn’t enter service until 10 years after the A320, so maintenance on aging aircraft skews everything.

Maintenance cost data is normalized to the same age level for instances where the airplane ages are different. This is done for each airline and then grouped together. The analysis ensured we were comparing like-aged aircraft not the entire fleet. By that comparison, the 737 has about 20% (+/-) lower airframe maintenance cost than the A320. But consider that there also are a number of other factors …

Five facts that drive lower maintenance cost for the 737:

1. Newer simple value added design

2. Lighter weight, smaller size;

3. Fewer systems

4. Fewer installed components

5. Longer intervals; fewer maintenance visits

Airlines believe and give us credit for our maintenance story. 

If there were truly a 20%-24% maintenance delta, why would anyone buy the A320? It doesn’t all come down to price, you know. The A320ceo evenly splits the market with the 738 but the A321ceo outsells the 739 by a wide margin and the neo widely outsells the MAX.

Maintenance and its cost is only one of the criteria by which airlines judge airplanes, and a relatively small one at that. Airframe Maintenance is usually 4 to 5 percent of cash operating cost. However, maintenance and reliability plays an important role in the operational experience for an airline. Price is an important factor in airline decisions, but you are correct that it doesn’t all come down to that. As you’re aware, for example, there can be political issues, or even funding issues.  As for the division of the single-aisle market, we are very aware of the inroads Airbus has made in its relatively short existence and are very much motivated by that.  Arguably, that’s another reason some airlines opt for one plane or another. So, too, is the ability to deliver an airplane when an airline wants or needs it. The on-time reliability of one model or the other can be a factor (while both companies produce reliable airplanes, Boeing’s 737s have better on-time statistics).  Too, some airlines prefer to stick with airplanes compatible with their installed fleet to reduce maintenance, training and scheduling costs. The choice is very complex.

I note, too, that this year Bev dropped citing the 2006-2009 IATA maintenance data. How come?

IATA data is used extensively within our own internal analysis. However, we acknowledge that there are some issues with IATA data. IATA airlines do not report data consistently over a long period. They may drop out entirely, miss reporting in some years and new airlines may join for a period. The Form 41 (US DoT) data is mandatory to report and usually aligns with the airline’s Annual Reports reported costs. In addition, variation in currency exchange rates becomes come into the picture. Airlines report in their own currency and that is converted to U.S. dollars. Inconsistency of reporting and the additional currency variable frequently clouds the data.

Bev says, though, that what tipped its use in the end in these slides, however, was that the data we had at the time was old.

We asked Airbus for a response to some of these questions. Engaged in the Air Show this week, we have yet to hear back.

It’s official: Boeing launches 787-10 with 102 orders, commitments

Here’s the Boeing press release.

Boeing expects the 787-10 to perhaps be the best selling model of the family over time. With a range of 7,000nm, it will have the ability to do most airline missions; 8,000nm-8,500nm range airplanes (let alone the proposed 9,400nm range of the 777X) is really more than most carriers need. We expect the orders to double by the end of the year.

In other Paris Air Show news, easyJet chose to stay with Airbus for its fleet renewal ordering a combination of 35 A320ceos and 100 neos. This was hard-fought competition. Boeing thought it won the deal on price, and Bombardier was ready to go with its own contract when Airbus came in at the last minute with a low price of its own, blowing both competitors out of the water.

Bombardier: This story explains in part why Bombardier has been challenged in selling the CSeries. The US Scope Clause inhibits sales to regional airlines; and lessors want to see a broader customer base. This is in addition to Airbus under-pricing Bombardier in key campaigns to block sales.

ATR landed an order for up to 90 ATR-72-600s.

Boeing will market the Embraer KC-390 to the Pentagon. After all the Boeing campaign about the Pentagon buying a foreign airplane for a tanker, this really takes the cake.

Paris Air Show Day 1

UBS has this easy-to-read Table of the orders and commitments announced on Day 1 of the Paris Air Show:

UBS Paris 2013 Day 1

The big news, of course, is the launch of the Embraer E-175/190/195 “E2” (second generation). The press release is here.

Embraer Rendering

Airbus scored an unexpected order for the A380: 20 from specialty lessor Doric Leasing, which has financed a number of A380s. We think this is an odd deal, and it must be one that already has some A380 customers lined up.

Tomorrow is expected to be the day Boeing launches the 787-10, so it should be Boeing’s day. We also believe tomorrow will be the day Airbus does a fly by of the A350 XWB. A little tit-for-tat, perhaps.

“We’ll be in a constant state of development for the next 10 years:” Boeing’s Fancher

Boeing may not be designing new airplanes to replace the 737 NG or the 777 family, but the head of Airplane Development says Boeing employees will be busy just the same.

“We’re going to be in a constant state of development for the next 10 years,” says Scott Fancher, VP and GM. “We can very seamlessly move talent, move experience, move lessons learned from one development from one project to the next to maximize talent.”

The 787-9 entered assembly at the giant Everett plant last month. The 787-10 has been in design for the past several years; launch is expected Tuesday at the Paris Air Show.

787-9 tail

Photo by Scott Hamilton

The 777X, in two models, is expected to be launched at the Dubai Air Show with a massive order from Emirates Airlines. The 737 MAX is moving forward, with assembly of the test airplanes to begin in 2015.

“The EIS for those airplanes extends early into the next decade,” Fancher said of the 777X.

The KC-46A, based on the 767 platform, is in pre-production design. The 737 NG, 747-8 and 777 continue to get Performance Improvement Packages (PIPs).

Airplane Development, a new department within Boeing Commercial Airplanes under Fancher, was created to put key talent under one roof, so-to-speak, as one way to avoid the problems of past programs.

“This becomes a one-stop shop,” Fancher told an international assembly of media during the briefings in advance of the Paris Air Show.

Part of this was detailed in our post about the 777X’s retention of an aluminum fuselage.

Fancher also said new airplane development needs to work with suppliers in a closely coordinated manner that provides for profitability for both. This seemed to fly in the face of recent statements by Boeing CEO Jim McNerney, who said suppliers need to cut costs.

We subsequently asked Fancher about the apparent inconsistency.

“Profitability and competitive pricing are not mutually exclusive,” Fancher said. “We want our suppliers to be healthy and profitable, which they can be while also cutting their costs to be more competitive.”

Fancher said that as a result of lessons learned from the 787 program, Boeing has and will bring more design work back in-house, but suppliers may build to the Boeing design. The 787 handed a great deal of design-and-build work to suppliers, which caused problems, delays and cost overruns.

Odds and Ends: Airbus will “win” the Air Show; AvWeek’s McNerney interview; 747-8 vs 747-400

Airbus will “win” the air show: We did this preview for CNN International.

Jim McNerney Interview: Aviation Week has this long one.

Dominic Gates of The Seattle Times will be blogging from the Paris Air Show. You can follow him here. He has several reports worth reading.

Meantime, he reports that the Boeing 787-10 may be built in South Carolina, not Boeing’s main plant at Everett.

NYC Aviation has an interesting pilot perspective on flying the Boeing 747-400F and the 747-8F.

United launches new winglet type from Aviation Partners Boeing

United Airlines and Aviation Partners Boeing launched a new winglet, the Scimitar. It looks similar to the feathered winglet Boeing designed for the 737 MAX, but closer inspection shows distinct differences.

Here is the press release.

777X: Why it’s not a composite fuselage, and going with a derivative for the 737

Boeing defends 777X aluminum fuselage, reads the headline from Bloomberg News, reporting from the Paris Air Show.

During the pre-Paris Air Show media briefings by Boeing, we asked Scott Fancher, vice president and general manager of aircraft development, why Boeing didn’t go with an all-new fuselage. His answer:

“Our job is to harvest the investments in technology we’ve made over the last 10 years and translate those into value for our customers and value for Boeing,” said. The 787 required a new fuselage cross section compared with the 767, so Boeing had to go with all new tooling anyway and the composite fuselage was the result. The 777 fuselage cross-section remains unchanged, so the decision was made to harvest the hard-won 787 technology but retain a metal fuselage.

Undecided is whether the fuselage will be traditional metal alloys or new alloys.

The same is true in deciding to re-engine the 737 rather than proceeding with a new design.

“It’s really about harvesting those technology investments [from the 787], Fancher said. “The time it would take to do a new small airplane in the single aisle market vs the time it would take to bring to market that is very competitive against our adversary, it’s a very cost-effective decision to do a derivative.

“On the wide body side of the equation, we made big investments and pushed technology forward on the 787. We’ve made huge investments in technology. It was a long, hard road. But the investments paid off. We need to continue to harvest those investments and apply them going forward in the most cost effective way we can. Going forward, offering derivative airplanes that are able to offer 20% more fuel efficiency to the market place by harvesting the technology investments we’ve made today, that sounds like a great business plan to me and that’s why we’re doing derivatives. It’s about value to the market place in the most cost effective way.”

Elizabeth Lund, VP and GM of the 777 program, and Jason Clark, director of manufacturing, explained that continuing to upgrade the current 777 is key for an airplane that is the “flagship” for many airlines.

“The Triple 7 is a huge part of the Boeing franchise. We are deeply committed to it,” Lund said. “The 777 has a departure reliability of 99.4%, the highest of any twin-aisle aircraft today. There are many more investments you can’t see. You can’t see the things that have been done. In the last couple of years we’ve added international connectivity to the airplane. We’ve added the antennas and capabilities so the flying public can stay connected over the oceans all the time and not just over land.

“We’ve improved our navigation links, which allows real-time changes to be uploaded to the airplane to change flight plans through the system instead of verbal conversations as it has been done through the years.”

Lund said the 777-300ER is qualified to operate with 330 minute ETOPS. Only one airline, Air New Zealand, is flying 330 minute ETOPS.

Continuous improvements have reduced the empty weight of the airplane today by 1,000 pounds compared with three years ago.

“We’ve reduced our maintenance costs. We’ve offered a full sweep of service and maintenance capabilities, including things like airplane health monitoring on the airplane as well,” Lund said. “We invest for three primary reasons. One is to reduce the cost of the airplane. Two is to meet the needs of our customers. We spend a lot of time with our customers understanding the market, doing technology development so that we understand the future market needs. The third area is to do some investment where it makes sense is that if there are technologies or applications that we can implement early to prove out for the Triple 7X as we continue to move into that.”

Clark said Lean manufacturing has improved efficiencies and reduced costs.

“Going to moving line and Lean reduced parts shortages by 57% on 777 line. Our quality continues to improve year end and year out. It gets down to improved productivity,” he said. “If we are going to have the rate flexibility that the market demands of us, we were going to have to look at the production system differently.”

Competitive advantage is no longer just about the platform, Clark said. It’s about the entire supply chain and production system.

“Lean is the basis of our production methods. When you look at some of the investments we are starting to make it’s about taking it to the next level. This isn’t a conversation for doing it for automation or technology just for technology’s sake. It’s really about the right balance. It’s also about the ability to allow the customer to differentiate the product. We are looking at elements that allow us to provide the differentiation.”

Not from the Paris Air Show: Move Over; riding in a DC-3

In a week dominated by Paris Air Show news, we have a couple of unrelated items.

We saw this car in a parking lot and couldn’t resist taking a picture. Note the writing on the windshield and how it would be legible in your review mirror as the car comes up behind you.

Porsche.

And then back to aviation, we took a ride in the ex-Pan Am DC-3 over the weekend. It’s owned by the Historic Flight Foundation in Everett (WA).

PA DC-3

Photo by Scott Hamilton

PA-DC-3_2

Photo by Scott Hamilton

“One Boeing” leads way for P-8, KC-46A; 767-2C commercial order seen

“One Boeing” is the strategy that blends all the company enterprises–Boeing Commercial, Boeing Defense, Boeing Commercial Aviation Services and other business units into a single set of resources rather than operating as solo businesses.

The P-8A Poseidon program is just such a blend. Using the commercial 737-800 as the platform with the 737-900ER wing, Commercial and Defense integrate the technologies of the two units and assemble the P-8A in what is actually the third 737 production line.

The US Navy has plans to acquire 117 P-8As to replacing the Eisenhower-era Lockheed P-3 Orion. The P-3 and the P-8 has a primary mission of anti-submarine patrol but the airplanes are increasingly being used for maritime patrol in a variety of countries for fisheries, immigration and more recently anti-piracy surveillance.

India ordered eight. Boeing sees a potential market for more than 150 more with countries now flying the P-3.

The Poseidon’s One Boeing approach was copied for the re-bid of the USAF KC-X tanker competition. The original platform, the KC-767 International program, was largely a Boeing Defense effort. The KC-767I, which involved taking a commercial 767-200ER and converting it to a cargo aircraft at Italy’s Alenia and finishing it out at Boeing Wichita, was a disastrous effort. Boeing pulled the work back from Alenia and design and flutter issues caused the program to be several years late to customers Italy and Japan. Only eight were built.

In the re-bid against EADS, BCA and BDS joined forces in an effort patterned after the Poseidon project. Boeing won with a bid that was 10% below EADS. So far, the USAF reports the project is going according to plan.

Boeing is now talking with customers to sell the KC-46A tanker outside the US, which was always part of the plan, according to this Bloomberg article. The platform, called the 767-2C, is about six feet longer than the 767-200ER but shorter than the 767-300ER. Air Force officials were quoted in trade press that commercial cargo versions could be offered, but nothing has been said about this prospect since.

However, we understand that Boeing is nearing a commercial order from FedEx for the -2C that will enable Boeing to boost production of the 767 lines to as much as 2.5 aircraft per month by October 2016.