May 2007 Archives

Conference call

I was in Chicago last week for an opportunity to talk with a vital audience about how Boeing views the commercial aviation market over the next 20 years - and about how we’re addressing that market.

Close to 200 representatives of major investment and securities-trading firms crowded into a ballroom at the Ritz-Carlton Hotel to hear our story and to ask probing questions at our annual Boeing Investors Conference.

It’s a big-deal event, as investors are hungry for updates on all aspects of the company’s business. Our senior executives, including CEO Jim McNerney, CFO James Bell, Integrated Defense Systems president Jim Albaugh and Boeing Commercial Airplanes president Scott Carson, all gave detailed presentations. And there was also a fair amount of deep conversation at social events surrounding the conference.

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BCA president Scott Carson told investors last week that we remain focused on the customer, and on product development and production system execution.

The analysts and investment managers - whose jobs depend on choosing the right places to invest their clients’ money - were focused on three things: Does Boeing have the right strategies in place? Does Boeing have the right people in place to execute those strategies? And are those people getting the job done?

Well, as you know, our BCA product and services strategy is based around the concepts that people want to go where they want to go, when they want to get there, and that airlines want to accommodate those desires in the most efficient way possible. We’re building a family of airplanes that allows airlines to bring point-to-point service to the widest variety of markets at the widest variety of distance. And the success of our entire product line over the past couple of years testifies to the soundness of that strategy.

But when it comes down to whether this plan is going to continue to succeed, the financial analysts aren’t just taking our word for it. Scott Carson and Mike Bair (who leads the 787 program), couldn’t move from one part of a room to another without a crowd of analysts often coming back to the same question again: Are you getting the 787 Dreamliner done right?

And the answer is yes. The rollout of the Dreamliner (or “Premiere,” as we’re calling it) is just six weeks away. We hosted an event in Everett May 21 to celebrate the opening of our 787 assembly line. All the pieces that will be fit together to become the first Dreamliner are in place in the factory, and final assembly of that game-changing airplane is underway.

We’re on track, and on schedule, and we have plans in place that will help us deal with any issues that might come up. The message investors heard last week is that we continue on track for a 07-08-07 rollout, a first flight later this summer, and first delivery to launch customer ANA in May 2008.

I’m thinking investors got the message. And while I’ll keep my analysis on the airplane market and not on the stock market, I couldn’t help but notice that the share price for Boeing’s stock closed at all-time highs the day after the conference and again at the end of the week.

Arrivals

The 787 factory is officially open for business. And it’s time to start assembling the first 787 Dreamliners.

I have to say there’s no experience quite like watching a new airplane come together. I’ve been with Boeing for more than 25 years now, and I’ve been lucky enough to see the 757, 767, and 777 come together.

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The nose of the 787 Dreamliner, at the start of final assembly yesterday in Everett.

All-new airplanes don’t come around often. For many Boeing employees today, the Dreamliner will be their first new airplane rollout.

We’re certainly getting closer, with the factory opening and start of final assembly yesterday, following the flurry of deliveries of major parts to Everett over the past month. Well, we call them deliveries, but you might just as well call them “arrivals.”

And I thought it would be interesting to review just how we got to this point in the assembly process.

The first major assembly arrived in Everett on the Dreamlifter at the end of April. Its tail door swung open, and we unloaded the horizontal stabilizer for the 787.

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April 25 – The horizontal stabilizer is unloaded. Manufactured by Alenia Aeronautica in Italy, the completed assembly will have a span of about 62 feet and measures 32 feet fore/aft.

Then, about 11 days ago, three large all-composite fuselage sections arrived - the nose section (what we call “section 41”), and the two aft sections of the fuselage known as “section 47” and “section 48.”

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May 11 - The composite forward section - in white – is manufactured by Spirit AeroSystems in Wichita, Kan. It’s 21 feet in diameter and 42 feet long. The aft sections – in black – were manufactured and joined by Vought Aircraft Industries in Charleston, South Carolina. Section 47 is 23 feet long and 19 feet in diameter. Section 48 is 15 feet long and 14 feet in diameter.

Once these fuselage sections arrive, they are immediately taken off the Dreamlifter using a specially designed Cargo Loader and moved into the 787 factory. This delivery of three sections represents 40% of the 787’s fuselage. And it’s a very tangible sign that the Dreamliner is taking shape.

A few days later, standing on edge in custom-made tooling, the wings arrived from Japan.

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May 15 - Very early morning arrival of the gigantic composite wings for the 787. Manufactured by Mitsubishi Heavy Industries in Nagoya, Japan, Each wing is 98 feet long.

Then, last Wednesday, the final major structure arrived in Everett - the integrated mid-body fuselage. This consists of “section 43,” a forward section made by Kawasaki Heavy Industries; “section 11/45,” the center wheel well and center wing tank, made by KHI and Fuji Heavy Industries and joined at FHI; and “sections 44 and 46,” the center fuselage sections made by Alenia Aeronautica in Italy. The sections were joined at Global Aeronautica in Charleston, South Carolina and then flown to Everett.

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May 16 - The last of the major airframe components for the first Dreamliner arrived in Everett. Wrapped in black, this section fully filled the cargo bay of the Dreamlifter, with about six inches of clearance. This integrated section is 84 feet long and 19 feet in diameter.

What can’t been seen from these photos is the incredible work done by the “Global Logistics” team in Everett. They have the task of off-loading the parts and moving them into the factory. In just these first four deliveries they made remarkable progress in improving their turn time.

From the time the Dreamlifter touched down on the runway to the time the logistics team walked away from the airplane - product out and job done - here are the times it took the crew to complete the Everett deliveries:

  • Horizontal Stabilizer: 3 hours, 27 minutes
  • Sections 41, 47 and 48: 3 hours, 22 minutes
  • Wings: 1 hour, 38 minutes
  • Midbody fuselage: 1 hour, 23 minutes

It’s pretty amazing, and I think this team deserves a ton of credit for making these kinds of improvements on the initial deliveries in a brand new process.

All in all, after seeing these “arrivals” and now the start of final assembly, I’d have to second what Scott Strode, 787 vice president of Airplane Definition and Production said last week: “The Dreamliner is no dream anymore – it’s real, and it’s here.”

KC-767

Last month Boeing submitted to the U.S. Air Force our proposal for the KC-767 Advanced Tanker. It’s a big milestone, and a big step in a process that has gotten a lot of attention.

Our entry in this competition is based on a new version of the 767-200 Long Range Freighter, and encompasses 75 years of Boeing tanker technology. It has a smaller footprint than its competitor, which allows the Air Force to deploy more tankers, access more, closer bases, ensure more refueling booms are in the sky, cover more refueling orbits, and offload more fuel.

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This is an artist’s rendition of the KC-767 Advanced Tanker.

The new tanker is going to be a very advanced aircraft, with the latest flight deck technology, avionics, mission equipment, and engines. And as I mentioned, the Air Force is getting an airplane with outstanding capabilities. In addition to being able to refuel other aircraft with either a boom or a hose and drogue system, it can also carry significant amounts of cargo, passengers, or patients. Best of all, Air Force planners will be able to “mix and match” these capabilities based on the mission.

What’s significant for this program here in the Puget Sound area is that if Boeing wins the contract, these new tankers will be built in the Everett factory on the existing 767 commercial line.

And under the proposal we submitted to the Air Force, a majority of the structural and systems changes to make the 767 a tanker would also be designed and installed in the airplanes here in Everett, before the tankers are flown to Boeing’s facility in Wichita, Kansas for final modifications and flight tests.

It’s a project that would be designed, built, and supported by 44,000 Americans and 300 U.S. suppliers – building a tanker for the Air Force that would save taxpayers nearly $10 billion in fuel costs compared to the competitor.

And in the meantime, the “mighty 767” program continues to do well - with 60 unfilled orders for passenger and freighter models.

The replacements

Something I talked a lot about in my previous role as Customers Leader for the 747-8 program was the replacement cycle for passenger airplanes in the 400-500 seat category.

And since earlier here in the blog we talked about the timing for 200-400 seat airplanes, I figured it makes sense to continue the story with the market for the larger twin-aisles.

For many years, the 747 was the only long-range airplane. As a result, many 747s were ordered for their range capability, rather than their seating capacity. At the time, no other long-range choices were available. Basically, before 1993, the only option for long-haul was the 747, regardless of what the passenger demand happened to be on a route.

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Today there are a number of types of commercial jetliners that can fly long-haul routes - and they can do it efficiently at smaller seat-counts than the 747. This allows airlines to better match capacity to demand on those routes.

For instance, in the last few years, part of the success of the 777 family can be attributed to airlines having the ability to “right-size” their fleets. And there are now offerings of several models of long-range airplanes from 200 to more than 500 seats. So the 747-8 market is truly going to be for those who need capacity of around 400-500 seats, in addition to long-range.

Consequently, the near-term demand for growth of 747-and-larger size passenger airplanes is limited. All the 747s that were being used only for their range capability are now being reallocated for segments that truly need 400-500 seat capacities.

Which brings us to what we’ll call the “replacement cycle.”

The 400-500 seat passenger airplane market is different from what you see in other categories. This segment is nearly all replacement. We will see some shift in terms of where these airplanes are flown and by whom, but no real growth.

The growth we do talk about in our overall airplanes forecast will be accommodated by more frequencies and nonstops – as I mentioned, by medium-sized twin-aisle airplanes such as the 787 and 777.

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Taking a look at this chart, you see why the 747-8 Intercontinental is timed perfectly for the replacement cycle in the 400-500 seat category.

What you see above is that a fair number of 747-400s will be reaching retirement age starting at the beginning of the next decade – just as the 747-8 Intercontinental enters service – with another spike in retirements later in the following decade.

The 747-8 is designed to meet these replacement needs. Customers told us they wanted a slightly larger version of the 747 – with new technology to improve efficiency and noise performance, while still working within the airport infrastructure developed for the existing 747s.

About 60% of the 747 replacement market is in the Asia-Pacific region. Another 30% is in Europe, and the remaining 10% is in North America and the rest of the world.

Launch customer Lufthansa has ordered 20 747-8 Intercontinentals. And people have been asking when we can expect the next order for the Intercontinental. Well, while we don’t talk about orders yet to come, I can say that we are talking right now with a number of other airlines about their replacement needs.

I may be biased, but I think this is an airplane that is going to fit in perfectly with existing fleets around the world.

Hello, hello

I think Randy Baseler had it exactly right. Magical Mystery Tour it is. In so many ways.

As I find myself stepping into some big shoes, this tour is just beginning for me. And it’s certainly an odd thing to read that I’ve already earned a number of nicknames: Randy T., Randy #2, Randy-Next Generation, Randy-8, and my personal favorite, Randy 2.0.

One guy even suggested here in the comments that we have an eating contest and foot race to see how the fuel capacity and range of “Randy NG” compare to “Randy Classic.”

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You say goodbye, and I say hello.

But actually, if you think about it, aside from the funny aspects, there’s some serendipity at play here too. The Randy to Randy transition coincidentally illustrates a fundamental strength of the Boeing Company. That even as things change, the basic principles remain constant.

Randy B. and I come from a different experience level for sure. But one thing we have in common is, we’ve both been around Boeing for a long time. And we both happen to believe in the strength of our products and services, and in the philosophy of providing more value to our customers. It’s an idea that has made Boeing a leader in aviation for nearly a century.

Randy Baseler spent his whole, entire career of 33 years in the Marketing department at this company. I don’t know of anyone else who’s accomplished that. He was out on the front lines in the “air wars” for a lot of years – truly flying without a net.

I, on the other hand, have traveled between several different parts of Commercial Airplanes in my career. I think I’m probably one of the few who have gone between the Marketing and Sales organizations a couple of times. So I might bring a little bit of a different perspective. Since I’m an engineer by training, I do like to crunch numbers. (But my kids still don’t let me help them with their math homework.) I like to talk about the financial parts of our business. That’s an important aspect of what our customers are concerned about.

About the blog. The response I’ve been getting has been overwhelming - from people I’ve met in the industry, people I haven’t run into in 15 or 20 years, to people that I work with every day. They all tell me how valuable they find Randy’s Journal. And how much they’ve appreciated reading it. So we’ll continue to provide the same good stuff you’re used to, and maybe a few innovations along the way. At the moment though, I’m starting to recognize just how “little” I know. The list of things we talk about is really, really, long. So I’m getting up to speed.

Right now, it all still does seem a little funny. Kind of like when the character of Darrin on the TV sitcom, Bewitched went from being played by Dick York to another actor named Dick Sargent. I won’t read too much into the fact that the series was cancelled just three years after Dick/Darrin 2 joined the show!

Oh, and another thought. I just want to make it clear. My name really is Randy – just Randy. I’ve given Randolph Baseler some good-natured grief about that in the past.

Anyway, at least one guy from Down Under found a way to tell me it will all be okay:

Farewell Randy B
We know you will be
Our Friend in the Sky
When we need to ask Why?
We welcome Randy T!

So thanks for the welcome. I’m looking forward to the conversation we’re going to have in the coming months and years!

 

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