Boeing - Delay on 787 - More indepth analysis

So the smoke has cleared and as we predicted as far back as May (well spotted Addison) Boeing did not make its overly ambitious schedule for the 787. Lets dive a little into the Boeing situation.

The 777 program - much less complex and very little integration issues arrived exactly on time promised delivery with a suitable gestation period occurred to United on the day promised.

The 787 is several orders of magnitude more complex. For example 4x the lines of code in the software. Vendors from all over the world with not just components but major subassemblies (like Wings and Fuselage barrels etc etc).

An overly aggressive delivery schedule

Supply chain issues that range from raw materials to specific parts such as fasteners.

However perhaps the biggest challenge remains just learning how to run a business such as Boeing has set themselves up for. It is clear by the amount of "travel work" that there have been and will continue to be significant issues in the integration of this just in time production capability. Boeing is probably guilty of believing it’s on Bullshit. The 787 is not the Smart Car type production they thought it was. No manner of Toyota engineers is going to make an inherently complex process any easier.

So from our vantage point, the following issues remain with the aircraft:

1. The learning curve is steeper than the Company ever imagined.
2. The amount of time for learning while now extended is still not going to be enough.
3. The amount of "travel work" indicates it requires an overhaul of the assumptions that were created in the design of the production schedule - particularly where the Italians are concerned. Building the schedule on the basis of the relationship to Spirit was somewhat optimistic.
4. Single sourcing has long term ramifications that need to be revisited. Boeing needs to consider how to ensure long term supply of its critical finished and raw supply chain. In this case they cannot blame the procurement process of the Government (a la C17) as a root cause.
5. Raw materials access beyond the direct provision of the supply chain interface is a cause for concern. The significant rise in the price of raw materials (whether plastics for the composite sections or Titanium) is going to cost Boeing dearly in future years.

We believe that the early customers such as ANA, JAL and Qantas are going to see significant in service issues particularly at some airports where Ramp Rash is well known. Those and other 787 customers would be well advised to learn from Boeing's issues in doing a gentler ramp up of the new aircraft. It should be remembered that it has been a long time since we saw a generational change in aircraft introduction.

And finally - let’s not forget Airbus. They better learn also. AND given the long term contract lock down of certain components that Boeing has already made - they better get their supply chain right for the A350XWB.

US Air Force Tanker Deal - A different view

So at the moment all of the Beltway bandits are probably engaged in the biggest political battle of the season. Who is going to win the USAF's Air Refueling contract. it could be worth $100 Bn when all is said and done.

In the red corner is Reigning Champ and long favoured bidder Boeing with its decidedly ancient Boeing 767 design. In the Blue corner is the Northrup Grumman and EADS-Airbus Industrie the nasty Franco-German smelling foreigners, with their bigger A330 based design. OK so on patriotic grounds Boeing should win. But not so fast. NG/EADS-Airbus (what a mouthful) is proposing a production line in Alabama Only 400 Miles from where Mercedes (And EADS Shareholder, builds its M and R series).

At the moment the battle is squarely around an old US based design smaller and the bigger newer European design.

But i would like to post a contra view. Because over to the side is Lockheed-Martin (US's Largest Defense Contractor) advocating an update to the very decrepit C5 with the C5M re-engined, updated avionics. Boeing is also advocating more purchases of the C-17.

Lets start with the C5M. BAD IDEA. The plain is clapped out and the wings leak like crazy. It is in such poor shape that half the fleet (the ones that can fly not the ones on the books) are now used as cannibalization for parts. It has lost most of the crews (After being forced to do back to back tours the Reservists who fly this old clunker bailed en masse).

So how about this. Re-think it. Although I am sure that the Lobbyists would welcome this and Congress and the others will moan - but even though this contract has been scandal plagued and delayed for nearly 10 years, they time has come to rethink the whole idea of Military airlift in the USA Arsenal.

I propose that the US uses the A330M as a COTS based aircraft. I further propose that all the money that was to be used for C5M be used to purchase many more additional C-17s.

Who wins?

Boeing ends up with a good contract extension on the C-17 and we can reduce the price do the very stupid US procurement practices. Further they can stop wasting time on the 767. Time to put the old girl out to pasture which in turn will free resources for the now troubled 787 program.

Lockheed gets a smack in the eye - they need it.

NorthrupGrumman/EADS-Airbus (whew!) get a US production line and possibly a shot at the Hercules replacement market with the A400M.

The US Air Force (remember them) get much greater airlift capacity and better tanking with multiple convertible aircraft better suited to today's needs.

The US public gets a better deal for its money

Will they do it?

Naw not a hope in hell. Still nice idea.

Cheers
Timothy


Timothy J O'Neil-DunneManaging Partner - T2Impact LtdGlobal Travel eBusiness Tel (US) +1 425 836 4770Mobile (US) +1 425 785 4457
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