July 2011 Archives

With all the discussion about the now seemingly uncertain future for Renton and its role on the re-engined 737, set off by comments yesterday from the company's CEO, it's important to note how the line achieved the status of "one of the great aerospace factories in the world." The credit, in large measure goes to Carolyn Corvi, who until 2008 was Boeing Commercial Airplanes vice president of Airplane Programs. 

Jim Albaugh, CEO of Boeing Commercial Airplanes, made a comment last week on the sidelines at the American Airlines order announcement in Dallas that initially escaped my note, in response to a question about the industrial footprint for re-engining the 737 and Renton's role in building the updated narrowbody:

That question was revisited in today's second quarter earnings call by CEO Jim McNerney:

Ken Herbert, Wedbush Securities: You've talked about narrow body rates now a few times getting to a 50-60 range, as you think about the cost profile of this program, how should we think about understanding considering some of the limitations up in Renton. How narrow body production may evolve to potentially support, to maintain some of your margin while at the same time looking at some of the rates you've thrown out there the next five to ten years:

Boeing CEO Jim McNerney: We haven't made the final decision on where we're going to produce the re-engined airplane, your question implies though that after the 42 per month, we do run into some challenges if Renton were the choice, some capital expenditures there to increase it. But we have other options and we're going to study them all as we think it through. But, demand could easily be that high in the timeframe we're talking about and the good news is we have options.

KH: To what extent could South Carolina step in and meet some of that demand for you?

JM: It would depend as we studied it for how competitive they could be as compared to a Renton or compared to another site, if we would study it all and come up with a decision that would make the most sense for our customers and the company.

Continuing later on...

And depending on how it goes [in South Carolina], we'll have to see how competitive the factory is. We're going to invest to make it as competitive as we can. But I think it's fair to say, just getting the 87 done over then next few years is a big challenge and we are going to succeed. But over the next few years, I don't want to dilute the effort down there with other new airplanes right away, so it could be an option down the road on re-engine, it's not at the top of the list right now."

Dominic Gates, Seattle Times: I'm a little surprised to hear you opening up this option, you hope to produce 50 to 60 narrowbodies but the end of the decade per month, so you're now talking about not doing the re-engine in Renton, that seems like such a surprising thing to bring up. You've got your most efficient line of all your aircraft programs, you've actually got a third line - which does have the complication of being an ITAR line - but it seems like in Renton you do have all the options you could possibly want to make that airplane there. Are you seriously considering doing a re-engining somewhere else? Charleston doesn't even do metal airplanes, or is this a matter of just trying to keep your options open. And what's the effect on morale of the Renton workforce when you raise this, what'd I have to call a spectre, of putting work elsewhere?

JM: Well listen, Renton is one of the great aerospace factories in the world, obviously, the idea of putting a lot of work, a lot of narrowbodies there is very attractive, I think the spirit which I was answering the question was: Until we have sorted out the milestones associated with the ramp up, the degree to which we have to modify the airplane, there would be major investments in Renton, beyond the currently planned for production rates. Until we sort that all out we can't confirm where we're going to put it precisely. But would putting it in renton be a good option? Yes.

DG: All your supply chain converges on Renton. To put it somewhere else means having Wichita send it elsewhere. It seems like more investment to do it elsewhere.

JM: I think until we study it all...Renton has a strong case, but again, Dominic, there is significant investment that we'd have to make some place beyond the current rates that we're contemplating and until we understand exactly what the plane will be and what rate we have to build it, I think we have to study that and figure it out.

The investment, put simply, appears to a back of the napkin equation: Is the cost of setting up a greenfield site higher or lower than the cost of tooling and equipment it would take to expand line three in Renton? 

Paradoxically, as it heads into the 2012 labor negotiations with the International Association of Machinists, Boeing's own stated desire for labor stability is perhaps lost when it introduces uncertainty within its own workforce. Boeing was quick to try and walk back McNerney's comments about the future of Renton, saying "We're committed to [Renton]. Jim (McNerney) might have omitted some things."

Also, the initial release provided no guidance on the 787-9 timeline, saying only that it expected first delivery of the 787-8 and 747-8 later in the third quarter. The 747-8F first delivery guidance rhetoric has slowly shifted from "mid-2011" now to third quarter 2011. Additionally, the release holds no mention of re-engining the 737, which is expected to be a major topic of the company's 10:30 AM ET earnings call with CEO Jim McNerney and CFO James Bell.

With final certification submittals to the US Federal Aviation Administration in sight, Boeing aims to deliver the first 787 to Japan's All Nippon Airways around the third week of September, but is not likely to deliver more than five or six 787s before the close of the year, say company and industry sources, who say the slow pace of progress of reworking and outfitting each airframe is taking longer than expected.

Further, ahead of a planned critical program review in the late summer or early fall, an entry into service slip of the larger 787-9 appears almost certain, say company, supplier, industry sources pushing handover to of the first aircraft to launch customer Air New Zealand into the first half of 2014 with an additional delay of three to six months, due to a slower than expected pace of design, possibly paired with a more modest production ramp up.

Boeing said it would provide updated 2011 delivery guidance at its July 27 second quarter earnings call, but declined to say if it would update its 787-9 entry into service target from its late 2013 goal, but said its current target remains unchanged.

Yet the company's near term halt in deliveries to final assembly highlights the remaining challenges of how the 787 production system learns and achieves 10 aircraft per month by 2013, all while standing up its second final assembly line in Charleston.

Sources on both sides of the US say that completion of the 787's aft body has been of particular focus during the delivery hold, which is expected to expire in early August.

"The adjustment is due to a few production areas in the supply chain experiencing temporary challenges related to spot parts shortages and remaining engineering change incorporation," says Boeing.

Going into the month-long delivery hold, the first shipsets for the newly opened Charleston final assembly were the first to be delivered with 100% completion of assembly, the first in the program's history.

While on its surface an extremely positive development for a program that has worked for years to eliminate incomplete shipsets, multiple sources confirm that both Airplane 45 had considerably lower completion in comparison to earlier aircraft, and Airplane 47 - which has not yet been delivered to Everett - was expected to carry considered travelled work before the delivery halt.

The cause, say those with direct familiarity in Everett and Charleston, stemmed from Airplanes 45 and 47 being "cannibalized" for Airplane 46's completion.

Boeing says: "We're not confirming supplier by supplier details, nor completion of assembly by line number." 

The Aerospace Learning Curve

While Boeing has sought to take advantage of lean manufacturing techniques built into the production system, the reality, and the uneveness of completion, illustrates how the lean processes have been hard to meet deeper in the supply chain.

Notably, that as completion of assembly decreases and work is pushed later in the supply chain or even to final assembly, those responsible for the task completion are denied the opportunity to learn a steady repetition in their statement of work, say those with direct familiarity with the 787's production system.

Though the 787 final assembly line in Everett is definitively improving say company sources, citing Airplane 40 as an important turning point, with the first to have all of its flight controls - including long-missing flaps - installed before leaving the factory, along with its auxiliary power unit.

Despite the steady improvement the unevenness in production, and the amount of rework required on Airplanes ahead of 40, highlight how aerospace manufacturing systems "learn" at different rates.

The industry standard places the "curve" at around 85%. An 85% learning curve denotes for every doubling of production, the cost of each completed aircraft is reduced by another 15%.

For example, if the first item is at the top of the learning curve costs $1, the second will cost $.85 to produce. The fourth will cost 85% of the second at $.72, and the eighth 85% of fourth.

"The 85% learning curve is kind of the text book long-range average," says Scott Fancher, 787 vice president and general manager, "But in fact, when we look at our database of actual learning curves across many programs, you see quite a wide variation."

"It really depends upon the automation, the maturity of that automation the complexity of the structure being put together, the quality and the experience of workforce and the training of the workforce.

"It's hard to draw conclusions about what you would expect on 787 from that number," he adds.

In areas that have seen very little traveled work and not had a lot of design changes, Fancher says, "our productivity and quality numbers are better than our projections, we're very pleased the way that aspect is coming together."

When asked if those areas were exceeding the 85% textbook curve, Fancher would only say "They're doing better than our projections" without offering specifics.

I'll be the first to admit this is not your typical Movie Monday, even though it runs more than an hour. For the past several years, Precision Manuals Design Group, also known as PMDG, has been at work creating the world's most extensive desktop simulation of the Next Generation Boeing 737 for Microsoft Flight Simulator X. Final pricing and release dates are not yet available, but with its release to beta status the project is finally nearing completion.

UPDATE: PMDG announced this morning that software will be release on or before August 4.

The project, known as the NGX, has been developed as a product officially licensed by Boeing and has spared no detail, both visually and technically. One of the company's beta testers, Angle of Attack, has created a fly-through of the 737's virtual cockpit, highlighting the nearly uncountable number of features built in to the simulation. The AoA video is available in HD to really show off the level of depth and detail designed into the simulation. I would challenge 737 pilots, Boeing engineers and maintenance personnel to find things that might be missing, but I have a feeling you might be hard-pressed to do so.

AoA also created a considerably shorter walk-around of the external model, though if you're looking to get up close with the 737, Boeing's own gigapixel walk-around of a United Airlines 737-900ER with the updated CFM56-7BE engine and drag clean up is well worth your time.

I had an opportunity this afternoon to record a podcast with AirInsight's Addison Schonland, Ken Herbert of Wedbush Securities and Michel Merluzeau at G2Solutions to discuss Wednesday's American Airlines mega-order and its impact on Boeing and Airbus, including the reaction of Boeing's most-loyal narrowbody customers to the timing of the decision to re-engine the 737 with CFM Leap-X engines.
 

460: Total firm aircraft ordered by American Airlines, a record for commercial aviation, with 260 for Airbus and 200 for Boeing.

100: Firm re-engined Boeing 737s aircraft ordered, plus options for 60 more.

365: Options and purchase rights provided to American for Airbus aircraft.

13,000,000,000: The number of dollars committed by Airbus and Boeing to finance the first 230 deliveries to American.

286,000,000: The number of dollars lost by American in the second quarter of 2011.

0: The number of lessors outside of Boeing and Airbus identified that will lease the first 230 aircraft to American.

2013: When the aircraft deliveries begin to American Airlines, stretching to 2022.

5: The number of years it will take American to have the youngest and most-fuel efficient fleet in the US.

78: The inches in the fan diameter of the Leap-X1A that will power American's A320neo.

920: The number of engines CFM will need supply to American Airlines between 2013 and 2022, split between 260 Leap-X1A, 200 Leap-X1B, 260 CFM56-5B and 200 CFM56-7BE.

1259: The number of orders and commitments Airbus has earned for A320neo family aircraft since launch in December 2010.

2109: The number of remaining Next Generation 737s in Boeing's backlog, selling out the company's narrowbody production line through 2016.

3518: Aircraft forecast by Boeing to be needed in North America between 2011 and 2030 to replace today's aging narrowbody fleets.

UPDATE 8:56 AM CT: Central to Boeing moving forward in developing this new 737 variant is Boeing's own tendency to make too much change all at once. Boeing's Jim Albaugh discussed this over a year ago, and the phase "requirements creep" us going to be one you'll be hearing a lot about in the coming months.

March 18, 2010 Flashback: Boeing must resist 'requirements creep' on re-engining 737: Albaugh

UPDATE 7:42 AM CT: My first take: Boeing looks to 4Q for formal launch of re-engined 737

Also, this order is a big win for Renton, Washington, which in recent months saw the evaluations of the new single aisle (NSA) and wondered whether or not it would play a roll in building what came next for Boeing's single aisle offering. 

UPDATE 6:53 AM CT: Strong indication now coming from the airframers that narrowbody production rate increases as a result of this deal are likely. 

Boeing says that the re-engined 737 - a product currently in its conceptual phase - will likely be launched by the Boeing Board of Directors sometime this fall, placing the formal authority to offer the aircraft sometime between late September and late December.

UPDATE 6:37 AM CT: AMR said it will "benefit from approximately $13 billion of committed financing from the manufacturers through lease transactions" to reduce risk and covers the first 230 aircraft. 

American Airlines leadership will hold a 7:30 AM CT conference call on the massive order, followed by a 10 AM CT press conference with Boeing Commercial Airplanes CEO Jim Albaugh and Airbus CEO Tom Enders.

6:01 AM CT: AMR, parent corporation of American Airlines, has placed an order for 460 aircraft, including 260 Airbus A320s and 100 Next Generation Boeing 737 and 100 yet-to-be-launched re-engined 737s, powered by CFM Leap-X engines.

The announcement, now expected in Wednesday's early morning hours, is to split some portion of a 300 to 400 aircraft order between rivals Boeing and Airbus, with suggestions the number could rise even higher.

Industry analyst consensus, as well as prevailing wisdom inside Boeing concludes that the European airframer cannot achieve 60 A320s per month without major expansions of its Toulouse, Hamburg or Tianjin, China lines and opens the door to a US based final assembly line in Mobile, Alabama, current site of an Airbus engineering center sometime late in the decade to meet the replacement demand in North America, while its other lines are devoted to meeting growth demand in the rest of the world.

The strategy assumes at least a partial win with American Airlines by Airbus, delivering A321neos to replace the aging fleet of 757s, which serve as the workhorse of the carrier's fleet. And more broadly a supply chain that can handle the record rates.

Key to Airbus sales strategy is the commoditization of narrowbody travel in the US, guiding consumers selecting travel based on the fare price rather than differentiated product that can be leveraged for a higher price tag.

Wielding a nearly 25% improvement in seat mile costs, according to an AirInsight report comparing the A321neo to the 757, American Airlines would gain a significant upper hand in crowded and price sensitive markets.

The result Airbus is banking on is American's legacy US competitors, Delta Air Lines, United Airlines and US Airways, all following suit with major orders to secure delivery positions to replace their own aging fleets of 737 Classics, MD-80s and 757s with A320neos.

Airbus was aiming to capitalize on Boeing's perceived indecisiveness on the future of the 737, though news of a re-engined 737, or at least some version of it, offered to American Airlines may stave off a mass exodus of customers to the A320neo, say those familiar with the European airframer's thinking.

Though a split but, say industry watchers, allows American to compete Boeing and Airbus on an airframe by airframe basis, forcing both to trade margins for marketshare.

Mobile Rising

When it first bid on the US Air Force KC-X tanker contract, Airbus and then-partner Northrop Grumman said it would establish an A330/KC-45A final assembly line in Mobile, Alabama after the initial test articles were produced in Toulouse.

To reduce its risk further, Airbus was to build A330-200 freighters in Mobile as well, providing the airframer an expansion of its industrial footprint at Boeing's doorstep, as well as providing its business access to non-Euro Zone based production costs.

Boeing was able to block that foothold at the end of the protracted and winding tanker competition, with its KC-X win that will see it build the Air Force's new KC-46A, though the Air Force now says the cost of the project is now forecast to be a billion dollars higher than the company's winning bid.

Though despite its victory in the strategic deal, Airbus may look to Mobile to build A320neos to serve the demands of US fleets.

The European airframer has been expanding its footprint in the US with approximately 200 engineering jobs at the Mobile facility focusing on cabin engineering for its widebody aircraft, says Airbus.

While Japanese car-maker Toyota built its first Kentucky plants in 1988 because of import tariffs intended to protect US car makers on their home turf, Airbus faces no such barrier with the Agreement on Trade in Civil Aircraft (ATCA), says Teal Group vice president of analysis Richard Aboulafia, which has afforded equal market access to Airbus and Boeing onto the opposition's home turf.

Though the Toyota comparison may be even more apt, fitting within Piepenbrock's Red-Blue, steadily advancing production rates in worldwide markets, incrementally advancing production rather than leaping forward, only to cut production later.

Airbus CEO Tom Enders said July 15, the airframer was looking into additional production rate increases on the A320 family, examining the capability of suppliers to meet the anticipated demand for the A320neo production ramp up, adding that increases would be "in notches" and "not big jumps."

Narrowbody production is set to reach 42 aircraft per month by the fourth quarter of 2012, with increases to 44 being explored, which follows increases from 18 to 22 A320 family aircraft at the turn of the decade to a near doubling today, all incrementally increased over the past ten years.

As it heads to a rate of 42 narrowbody 737s per month by the first half of 2014, Boeing Commercial Airplanes CEO Jim Albaugh said last week that his company was distantly exploring what it would take to build 60 competing 737s per month, echoing a sentiment reflected in Airbus own strategy: "It'll be a while before we go that high, but I tell you what if they can build them I think we can sell them."

American Airlines is expected to purchase an undisclosed number of aircraft on Wednedsay, splitting the order between Airbus and Boeing, industry sources tell FlightBlogger. 

American Airlines will announce Wednesday a purchase of commercial aircraft, ending a month of speculation since the Paris Air Show about the timing of the order, which could be for more than 250 single-aisle aircraft, an industry source confirms. The breakdown of the order between Boeing and Airbus, however, remains unknown.

 

Boeing is laser sharp when it comes to its use of language, especially in press releases. As ZA002 completes its time in Japan for Service Ready Operational Validation, the company's line on 787 first delivery has changed in a subtle, but important, way. When the company first announced in May it planned to take ZA002 to Japan it narrowed its handover of the first 787 for All Nippon Airways to August or September, that target is now identified as "later this year."

Boeing has instituted an approximately one-month hold on the 787 final assembly line and a halt in structural deliveries to its Everett factory due to supplier part "spot shortages" and "remaining engineering changes", the company confirms, another in a series of halting stops and starts as the production system works to get beyond two aircraft per month.

Today's Movie Monday takes you to the April 1981 coverage of Columbia's first liftoff and and landing as reported by NBC and ABC News. Rather than embed each of the 27 parts below, the players is in a playlist format that allows you to step from one part to another. The news coverage of STS-1, as well as a 30-minute NASA documentary of the flight runs a whopping 4 hours and 30 minutes. Enjoy.

With ZA002 bouncing between airports in Japan this week, 787 has been on display for the aircraft's Service Ready Operational Validation (SROV). While the external paint matches that of the 787's launch customer, All Nippon Airways, the interior could not be more dissimilar. 

As a test aircraft, ZA002's interior is stocked with racks of instrumentation and bare insulation sidewalls, not the stylized interior that Boeing offers with each 787.

The first 787 that will be delivered to ANA, ZA101, Airplane Eight, is currently parked at Factory South undergoing change incorporation and cabin outfitting. When it is handed over to All Nippon Airways in August or September it will not immediately enter service as the carrier waits for the formal regulatory sign-off from the Japan Civil Aviation Bureau to begin passenger operations.

When it does begin revenue operations, the 787 is expected to remain on domestic operations to begin its life with ANA for pilot training before stretching its legs to regional destinations. The airline announced this past weekend it had narrowed its choices for the first 787 route to two cities from Tokyo's Haneda International Airport: Hiroshima or Okayama. 

ANA's fifth 787 will be its first to fly on long routes from Japan, and will be configured with around 200 seats in a two-class configuration with its staggered business (1-2-1 and 1-1-1), a configuration it unveiled at the Paris Air Show along with the special paint scheme for its first two aircraft.

The first four 787s delivered, thought to be Airplanes Seven, Eight, Nine and 24 will feature a two-class cabin configured for the short to medium-haul missions. However, ANA has not officially unveiled the cabin details for its medium to short-haul 787s, footage published at ZA002's arrival at Haneda this past weekend provided the first look inside the aircraft. The same footage can be seen on the airline's Made with Japan promotional film (interior at :47) on the airline's youtube channel.

A bit of digging revealed that ANA has selected Sicma AIRgonomic FX seating for its economy seats, laid out at eight-abreast in a 2-4-2 arrangement. Like its 777-300ERs, ANA appears to have opted for a 24-seat mini-economy cabin ahead of the door two LED archway on the short-haul configuration and behind a second zone of staggered business seating for the long-haul arrangement. Also at the archway appears to be a counter-height bar unit, presumably for economy passengers.

The only notable difference between the long-range and short-range economy cabins appear to be a smaller seat pitch (34" on long-haul), 9in IFE (10.6in on long-haul) screen that doesn't include a Panasonic eXport iPod jack. Up front, ANA has chosen a 2-2-2 arrangement with Sicma Majesty up front in its regional business class configuration. 

After the jump you'll find three videos from Boeing and ANA which give you a look inside ZA002's cabin on its flight to Japan, and most notably for those who love the view out the window, a look at the 787's wing flex at takeoff and cruise. The videos also include progress reports on the SROV missions at Haneda, as well as the 14 minute raw video of ZA002's arrival in Tokyo.

Bombardier Aerospace announced today that one of its own, James Hoblyn, passed away on July 3. Hoblyn served as President, Bombardier Customer Services & Specialized and Amphibious Aircraft.

I first met James last year on my way to EBACE in Geneva. My colleague John Croft and I joined a small group of journalists and staff from Bombardier aboard a Global 5000 aircraft for the trans-Atlantic flight. We were all very much awake for the day-time crossing and had a lot of time to talk with one another. His warmth and enthusiasm for work and his love for his family was immediately apparent. During the downtime before he held on-the-record court in the jet's mid-cabin, we talked tech and cars. Weeks earlier he had gotten a Mini Cooper, which he joked his teenage daughter wasn't allowed anywhere near.

James had an affinity for technology and got a real kick out of the fact that I was live-tweeting and blogging the crossing on my iPad somewhere between two continents. He was a proponent of social media inside Bombardier, using his own internal blog, called The James Exchange - which he wrote himself - to connect with his employees, solicit feedback and cultivate dialogue. 

This industry spends much time discussing how social media is used outwardly, but James found a way to harness its power inside of Bombardier to nurture transparency and openness amongst his staff. Every time I would see him he would let me know how his experiment was going. Today, James' Blog had 10,000 visitors from inside Bombardier and more than 120 comments have been left in remembrance. Bombardier Aerospace has 30,000 employees.

For conservative companies, such experiments can often backfire, but James was excited at the possibilities his blog held to build a more effective team. Whether he knew it or not, James Hoblyn was a pioneer in advancing corporate transparency.

James is survived by his wife Josée and their three daughters. He was 46.

The second in a two part Paris Air Show news analysis exploring the strategic questions facing Boeing and its decision about the future of the 737. This analysis builds on the discussion of tactical decisions facing Boeing as it develops the technology for the new conceptual jet. READ PART ONE

PARIS -- Amid the temporary chalets, noisy press conferences and overcrowded flight line, the Paris Air Show featured a traditional straw poll of sorts. Boeing's stalwart narrowbody customers quietly - and some not so quietly - cast their vote in favor of a New Small Airplane.

As the ink dried on a purchase agreement for 15 more 737-800s, Norwegian Air Shuttle CEO Bjorn Kjos told a room of journalists he was "lining up in the queue to tell Boeing to build a new aircraft" and was urging Boeing it was time to take "the next giant leap."

Steven Udvar-Hazy employed the pages of the Seattle Times to send his message: "We're ready to sit down (with Boeing) and make a deal on a new airplane, that's how strongly we feel."

Contemplating a 200 aircraft order from China's Comac, Morgan Stanley industry analyst Heidi Wood called Ryanair CEO Michael O'Leary's actions as "dual-pronged" with a loud message to Boeing's Chicago headquarters: "Notice served; Ryanair wants a new plane."

Even all-Boeing operator American Airlines pursuit of the A321neo to replace its 757s, as reported by Bloomberg News, was the carrier's way of saying the Next Generation 737 isn't enough. The story shot a bolt of panic through Seattle as its "cannot lose" customers cast their vote one by one.

The message is far from subtle, Boeing's customers want an all-new airplane, yet the decision, by "market-driven" Boeing, isn't so simple.

Paris demonstrated the A320neo accomplished one clear feat - Airbus found an effective means to lock in its customer base for another decade, despite the protests of lessors. In the first six months of 2011, Airbus has earned 668 firm orders for the A320neo, more than the total combined net orders for 2009 and 2010.