PARIS: Interview with former Boeing Commercial chief Jim Albaugh

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Jim Albaugh is president of the American Institute of Aeronautics and Astronautics, a senior adviser to the Blackstone Group and a retired corporate officer from Boeing, where he served as chief executive of both the commercial and defence units during his career.

You've taken a position as the president of the AIAA and more recently an advisory position with the Blackstone group. Is this how you intended to spend your retirement or did it evolve this way?

I really wanted to be involved with the AIAA and I'll tell you why. I think that there's so many important issues that need to get talked about in Washington DC relative to technology, relative to the impact that aerospace has on the economic wellbeing of our country and I think this gives me the opportunity to talk about that and also to talk about the need for, I think, an industrial base policy, which includes a discussion of aerospace and how important it is for our country. So I'm looking forward to that. The Carlyle thing keeps my head in the game relative to aerospace and defence, but don't think I'm spending all my time working. I'm working on things I enjoy as well.

jim albaughYour use of the phrase "intellectual disarmament" sparked a huge dialogue just a few years ago. From your platform with the AIAA, what are your hopes for seeing real change or action with that issue?

It remains to be seen. If you talk to [the Aerospace Industries Association], the AIAA, the National Academy of Engineering, you talk to the National Association of Manufacturers, I think we all have some of the same concerns, and I think there's an opportunity for many of these institutes and associations to speak with a common voice on how important education and especially engineering and technology are to the future of this country, and one of the things I hope to do is to further that technology. I often joke that I'll spend time in Washington DC until it's run by scientists and engineers, and I say that a little tongue in cheek, but I am not certain there's an appreciation [of the importance of] what companies like Boeing and UTC and others do for our economy, and how they really drive innovation and drive change.

Certainly there's a lot that DC can do, but do you have advice for the industry about what things they can do to deal with that problem?

I think you're seeing all the large companies taking a very significant position on how important education is. They all have initiatives where they're trying to help the local K-12 schools. I think they're also developing very solid relationships at the university level as well. I think if you talk to any of the CEOs and ask them what the long-term issues they face are, they'd say where they're to source the next generation of engineering talent from and how we need to improve our educational system.

In your role with Blackstone as part of the Carlyle Group, how do you view the overall economic health of the industry right now?

Certainly we've got two very different cycles - a very positive and prolonged one on the commercial side. In fact, it may be a very different cycle than we've seen. In the past, we've got very robust backlogs - both Boeing and Airbus backlogs going back seven to eight years. Boeing came out with their forecast for the next 20 years [last week] and they see the number of aircraft doubling in 20 years. You're seeing the ability to take those backlogs and turn that backlog into profit - so very, very positive opportunities on the commercial side. On the defence side, over the last couple of years, we've seen negative growth, but at the same time I think the defence contractors have done a great job managing their costs, managing their cash and I think you're seeing them turning pretty good margins. You're going to continue to see, though, some erosion in growth over the next few years. I think the real question becomes when does that defence cycle turn around. I think it really depends on budget realities of the USA and also what our defence policy might be. But I give all of the aerospace companies - both commercial and defence - credit for having managed their costs. I think now that the 787 development is complete and the A350 development is winding down, they've retired a lot of risk on the commercial side.

When the battery issue came up on the 787, was that a surprise for you?

Absolutely. I don't think anybody anticipated that at all. We had a very rigorous flight test programme focused on the electrical system and the electrical distribution system. We've had thousands of actual operational flights by the airlines. It was a big surprise to everybody.

What did you think about the regulatory response?

I wasn't going close enough to it to be able to have a view on that. Boeing worked very closely with the NTSB and very closely with the FAA and they got to the right conclusion, and I'm not going to comment on that. I'm just not close enough to it.

Your successor at Boeing Commercial Airplanes is going to have a very busy Paris air show it seems?

I hope he does. Ray, I think, has done a terrific job working through the battery issue. They've gone through a number of rate increases over the last six to eight months. I think that he deserves a lot of credit. I think that Jim [McNerney] and Ray [Conner] and Pat [Shanahan] are doing a great job with the company.

In the long term, when do you think we'll see another all-new airframe from either of the commercial manufacturers and do you think all these lessons from the 787 will even be remembered when that happens?

I've said that I think the 787 is going to be the airplane that other airplanes are measured against for decades to come and I really do believe that. It really did push technology. For right now, and I'm talking again [about] my observations of industry [and of] both Airbus and Boeing, I think they will continue to evolve the 787 and A350 and I think that's prudent to do, given the significant investment that they have made in those two airplanes.

What will you be doing at the show this year?

I'm going to see some old friends and talk to a few people. I'm looking for a much more relaxing Paris air show than I've had in the past!