Leeham News and Analysis
There's more to real news than a news release.
Pontifications: IAM 751 gearing up for Boeing contract talks in 2024
By Scott Hamilton
Sept. 19, 2023, © Leeham News: It’s September 2023, one year ahead of the expirations of the current labor contracts between Boeing and its touch labor union, IAM 751. (The contract with the engineers union, SPEEA, expires in 2026.)
The IAM district, whose members assemble all Boeing airplanes in Washington State, fired a warning shot across Boeing’s bow last week. It wasn’t the first.
751 urged its members to begin saving money in anticipation of a strike in September 2024. That was three years ago.
The strike fund information appeared in the 751’s March 2020 newsletter, Aero Mechanic. The same issue had commentary about the new pandemic. At that point, nobody thought the pandemic would last two years.
Boeing was already in trouble then. The 737 MAX had been grounded since March 2019. There was no end in sight when the grounding would end. Suspension of the 787 deliveries, for what became 20 months, was still another half-year away.
Analysis: Labor issues continue to challenge aerospace industry
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By Bryan Corliss
Sept. 18, 2023, © Leeham News – One of the continuing themes we’re hearing – at investor presentations and on quarterly earnings calls – is the shortage of skilled labor, which is disrupting deliveries up and down the aerospace industry supply chain.
The inability of suppliers to deliver parts on time – or to deliver correctly assembled parts – is hampering the OEMs as they attempt to ramp up production to meet high demand from airlines.
This is not just an issue affecting aerospace. There’s a general shortage of medium- and high-skill workers in the Western world right now, with shortages of every kind of worker from line cooks to truck drivers. Shortages existed prior to the Covid-19 pandemic, and there’s still strong demand, even with economies slowing as central banks move to tamp down inflation.
The issue is more pronounced in industries that rely on high-skill workers – like aerospace.
One outcome of this worker shortage is a rise in union activism. In aerospace, we’ve seen the strike by the International Association of Machinists against Spirit AeroSystems this summer, and the near strike by members of the same union against Boeing’s defense business in and around St. Louis last year.
Next year, both Spirit and Boeing will be back at the bargaining table; Spirit to negotiate with members of SPEEA, the union for aerospace engineers, while Boeing holds talks with IAM District 751, which represents hourly workers at the company’s plants in Puget Sound and Oregon.
IAM 751, in fact, is urging members to prepare for what it’s describing as a September 2024 contract vote that will “forever change the aerospace industry.”
The environment seems to be favorable to the unions, for reasons we’ve discussed before. However, with the OEMs and Tier 1 suppliers heavily in debt (and currently bleeding red ink), there’s going to be a limit to what the companies will be willing to offer in a bid to satisfy their labor forces.
- Demand for workers remains strong
- Lack of skilled labor is hurting industry
- Boeing, Spirit aren’t strong financially
- UAW strike bellwether for next year’s talks
GE Aero sees growth through 2026, despite supply chain snags
By Bryan Corliss
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Sept. 15, 2023, © Leeham News – Demand for aircraft engines and spare parts will continue to grow in 2025-26, but perhaps at a slower rate than what the industry is currently experiencing, the CFO of GE Aerospace said at an investor conference Thursday.
“Clearly the demand is robust,” Rahul Gai, who is CFO of both GE and GE Aerospace, told investors gathered at Morgan Stanley’s annual Laguna Conference. “We are trying to ensure we meet the demand expectations.”
GE Aero plans to deliver some 2,000 LEAP engines next year, which is up from this year’s projected total of 1,700, he said. This comes even as the company continues to deal with supply chain constraints caused in part by a lack of skilled labor.
- GE Aero and Vernova on track for two-company split
- Chinese recovery driving 2023 growth
- GE sending engineers to help its suppliers
Bjorn’s Corner: New aircraft technologies. Part 30. Detailed design -2
By Bjorn Fehrm
September 15, 2023, ©. Leeham News: Last week, we described the beginning of the Detailed design phase of an airliner development program. We discussed the importance of a good information set from Preliminary design, ideally as a collection of digital models forming a Preliminary level digital twin.
We now discuss how the work is managed in the Detailed design phase and how to speed up the work and make it more efficient.
Figure 1. The development plan for a new airliner. Source: Leeham Co.
The Airliner Production Problem
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By Bjorn Fehrm
September 14, 2023, © Leeham News: For more than a year, we have heard all the Airliner OEMs complain that they can’t increase production rates because of delivery problems in their supply chain. It’s a problem that is not easy to fix; it just goes on and on.
What is the root problem behind the persistent problem of increasing production of our airliners? There are specific problems for each aircraft type and time, but some fundamental problems are behind the overall problem of increasing the production numbers.
We analyze these fundamental problems in a series of articles.
Figure 1. The Airbus A321, a model which a new customer gets delivered six years from now if the production increases to plan. Source: Airbus.
Summary:
- We start describing the realities of airliner production, and what a gigantic puzzle it is.
- We also delve into the learning curve, and why it has such importance for production rates.
Pontifications: Moonshot for engines for Next Boeing Airplane may have to wait
By Scott Hamilton
Sept. 12, 2023, © Leeham News: The Next Boeing Airplane (NBA) may be a moonshot for CEO David Calhoun, but airlines will probably be reluctant to take a moonshot on the next new engine.
Service issues with the CFM LEAP and Pratt & Whitney GTF engines are driving airlines batty. The failures of the Rolls-Royce Trent 1000 years after entry-into-service (EIS) cost RR hundreds and millions of dollars and a confidence crisis that hurt future sales. LEAP engines are coming off wing well before initial forecasts. Every aircraft model using the GTF faced groundings as engine failures piled up.
Boeing sorely needs a successor to the 737, now in its 55th year and fourth iteration. Ron Epstein, the aerospace analyst for Bank of America, was biting in a Sept. 7 research note.
Flying a Boeing 737 is like driving a ‘68 Chevy Impala with a semi-modern dash.
“We note that Boeing continues to ride on the coattails of its past glory. The original Boeing 737 prototype first flew in April 1967, entering service less than a year later in February 1968 with Lufthansa. Fifty-five years later, the 737 airframe remains in service through a multitude of derivative models, including the most recent 737 MAX,” he wrote.
“However, we note that the model was never intended to be such a blockbuster long-term solution. Instead, the 737 was expected to be a band-aid for the Boeing portfolio to compete with the market share-winning DC-9. The Boeing fleet lacked a smaller narrowbody model to complement the company’s larger jets, like the 707. In the spirit of the General Motors model, the 737 was intended to be the ‘cheap Chevy’ of the portfolio. Fledgling carriers would operate the cheaper model before upgrading to Boeing’s large, higher-end products like the 707 and, later, the 747, which one could see as the ‘Cadillacs’ of the portfolio.
“In our view, while the longevity of the 737 is impressive, the aircraft is now a bit of an anachronism. Operating the aircraft is like driving around in a 1968 Chevy Impala with a semi-modern dashboard. It is important to note that the 737 is the only currently manufactured commercial aircraft without fly-by-wire controls, which are a staple in modern aircraft control system design.”
Epstein worked for Boeing from 1995 to 1999 as an Applied Research Scientist. He’s a technical advisor to United Airlines for the alternative energy sector.
Analysis: Jefferies presentations show industry hasn’t stabilized post-Covid
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By Bryan Corliss
Sept. 11, 2023, © Leeham News: Negative cash flow in the quarters ahead. Ongoing issues with the supply chain. OEMs struggling to meet high airline demand as Tier 1s wrestle with quality issues. New technology wearing out faster than the old systems it replaced.
The No. 1 takeaway from last week’s Jefferies Financial Group Industrials Conference presentations is that the aerospace industry is still a few years away from being in a stable state capable of meeting the demands of customers and shareholders alike.
“We know our customers really do want to make more,” said Howmet CEO John Plant, whose company casts fasteners and engine components for Tier 1s and OEMs. “The question becomes when can we achieve these improved rates?”
Plant went on to say that he believes both Airbus and Boeing will hit their goals for increased widebody production; Airbus at 9/mo on the A350, Boeing at 10/mo for the 787.
The question, he said, is whether the OEMs will hit those rates in 2025 or 2026.
Executives from Boeing, Spirit AeroSystems and Howmet all presented at the conference, and all agreed that there’s reason to be optimistic, given the strong demand from airlines for more planes.
The issue, as Plant put it, is the industry’s ability to meet that demand. “We haven’t seen the real benefits of increased aerospace production.”
- Companies discuss latest 737 quality issue
- Spirit tries to get on track as refinance deadline looms
- Gentile: Supply chain needs new contract terms
- Boeing CFO projects losses for next quarter
- Howmet talks about engine challenges
- Takeaway: Fundamental demand is strong, but…
Bjorn’s Corner: New aircraft technologies. Part 29. Detailed design
By Bjorn Fehrm
September 8, 2023, ©. Leeham News: We described the Preliminary design phase of an airliner development program over the last weeks. Now our project is transitioning into Detailed design.
It’s the most challenging part of the project as we now go from perhaps a thousand people involved at the OEM into tens of thousands and even more people at consultancies and suppliers.
Figure 1. A new airliner family development plan. Source: Leeham Co.
The range of the Airbus A321XLR, Part 2
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By Bjorn Fehrm
September 7, 2023, © Leeham News: The advertised range of 4,700nm for the Airbus A321XLR enables true trans-Atlantic single-aisle routes that can originate further inland, both in the US and Europe. When EASA and FAA demanded that Airbus add extra fire protection around the tank that gives the extended range, rumors told of a substantial range loss.
Last week we could see that whatever the weight increase, the range loss is not substantial. Now we look at what Airbus could do to restore the range of the A321XLR.
Figure 1. The Airbus A321XLR. Source: Airbus.
Summary:
- We could see last week that the range shortfall from the rumored weight increases is less than rumored.
- When we look at the fixes for any range shortfall, they seem straightforward and doable.
Pontifications: History is repeating itself
By Scott Hamilton
Sept. 5, 2023, © Leeham News: Decades after US airline unions were on the decline, some are making big gains in restoring wages, benefits, and strength.
Pilots at American, Delta, United, and Alaska airlines (among others) won big wage increases under recent contract negotiations. Pilots at Southwest Airlines are aggressively seeking more money and revised work rules. Flight attendants at American just approved a strike authorization by a wide margin.
Drivers at UPS Airlines, the package-freight carrier, won a generous new contract. Pilots at rival FedEx also became more militant in recent months.
One can hardly blame the unions for seeking dramatic wage hikes and work rule changes. Labor has been under constant pressure since the 1970s. Unions probably reached their peak strength in 1966, when five US airlines were struck at the same time by the International Association of Machinists and Aerospace Workers (the IAM). Sixty percent of the capacity was grounded for 43 days. Eastern, National, Northwest, Trans World and United were affected.
The industry was highly regulated. The Civil Aeronautics Board, created in 1938, oversaw virtually everything airlines did. Routes, airfares, serving alcohol, classes of service, and mergers were tightly controlled by the CAB. So was the competition. From its inception to 1978, the CAB turned down every single application to create a new airline (except a host of local service carriers immediately following World War II) or to upgrade charter carriers to scheduled service. More than 70 applicants were turned down.