October 2007 Archives

A few weeks back I started a discussion about the hot airplanes market in China. I wanted to return to the subject again, because there’s so much more to the story than just the market forecast.

When I first started going to China in the early 1990s I remember getting up in front of an audience or working with an airline many times, and giving a presentation. Afterwards, there’d be no response, no questions.

Well, what I find today is, you can go into meetings with airlines, and what’s been allotted for a one-hour presentation can stretch on for two hours and more! That’s how much the interaction and questions have evolved. And it’s one of the things I’ve noticed that define for me how far China has come.

A display at Aviation Expo/China last month.

Another thing that’s even more amazing is that many of the presentations I give today in China, particularly with airlines, no longer need an interpreter. Many of the people in the audience don’t require it. That’s a real change.

The airlines have made great strides in terms of their technical capability, their evaluation process, and in terms of engagement. They ask tough questions when you give a presentation and you talk about airplanes. That just wasn’t there when I first started giving presentations in China 15 years ago.

The media is becoming just as dynamic and forward-thinking as the airlines. During my visit, I think I was challenged by the media and just about everyone I talked to - airlines, government agencies – about our market forecast. And not in the way you may think. They all told me they thought Boeing was being too conservative in our 20-year forecast for China. Mind you this is a forecast that already predicts an 8.8% increase in travel growth and a quadrupling of the airplane fleet!

Meantime, other reporters came up to me just to see whether the guy behind the blog was real. I felt almost like a rock star. It’s been an ongoing sense of wonder for me.

Construction cranes seem to be everywhere in Beijing, even in Tiananmen Square.

And as I mentioned last month in the blog, Greater China is a dynamic market like I’ve never seen before. The streets of Beijing are incredibly busy - construction cranes everywhere, as they get things as perfect as possible for the 2008 Summer Olympics. I’ve never seen so much activity in Beijing.

And that brings me to airports. Did you realize that there are more than 40 new airports under construction in China today? And the plan is to build nearly 60 airports in addition to that by 2015. Now contrast that with the United States, where the last new major airport to open was Denver International Airport in 1995.

If you want to look at the growth potential from another angle, consider that today in the U.S. there are about 290 airports with commercial service. That’s for a population of 300 million people. Now, consider that in China there are only 142 certified jet-capable airports right now – serving 1.5 billion people! Getting the picture?

Boeing and China have a long, successful history together, and it’s our objective to grow as the Chinese economy and the airlines grow. We’re doing that by helping them create a safe, efficient transportation system. We partner with suppliers, and virtually 4,500 Boeing airplanes today fly with Chinese parts and assemblies. And they’re a partner on the 787 as well.

It wasn’t all airplane talk during my recent visit to Beijing. I found some time to enjoy a local specialty: spicy fish heads.

We’ve created and work with a number of joint ventures within China for maintenance and modifications as well as manufacturing. In total we employ more than 5,000 Chinese workers in high value manufacturing and maintenance jobs. Something to keep in mind when you hear about proposed ventures by other airplane manufacturers.

Boeing has provided hundreds of millions of dollars of professional training to more than 34,000 Chinese aviation professionals. Alteon, a wholly-owned subsidiary of The Boeing Company, recently announced it will open a new training center in Shanghai, in partnership with Shanghai Airlines, housing the first 787 full-flight simulator in China.

It’s hard to properly put into words how exciting and fast-growing the China market is. But you can see it at the airports. You can sense it in talking to passengers. You can feel it in the cities.

Coming up for China there are increasing market opportunities, dynamic global competition, and the freedoms and economic growth that travel brings.

It’s clearly a region headed for an exciting journey.

The Boeing Company released our results for the third quarter today. On a number of levels it was an outstanding quarter. And I think that our well-publicized challenges ought to be viewed in the context of the big overall picture.

Performance company-wide is up, with revenues that were 12% over the third quarter of 2006. The total backlog for our company is a record $295 billion, a 29% increase over the past 12 months.

For Commercial Airplanes, we noted here a couple of weeks ago that game-changing innovation is not easy. And the planned initial deliveries of the 787 Dreamliner have been delayed by 6 months - now expected to begin in late November or December 2008. The first flight is anticipated around the end of the first-quarter of 2008.

As you may have read, Pat Shanahan has returned to BCA to lead the 787 program, and the entire team is focused on the new schedule. Pat has managed complex programs such as Global Missile Defense and the 767-400ER. I last worked with Pat when he was leading the 757 program. He’s a fantastic choice to lead the 787 into production.

For me, I’ll also have the opportunity to work closely with Mike Bair as he moves into a new challenge at the lead of our business strategy and marketing function. Mike’s leadership of the 787 program helped make the Dreamliner the best-selling new airplane launch in history, and his expertise will help us take the right steps in developing future products, services, and strategy.

As for BCA performance overall in 3Q, it continued strong: 109 airplanes delivered, with gains in Commercial Aviation Services revenue as well, driving BCA revenues up 23% over third-quarter 2006.

We booked 354 gross orders in the quarter, bringing our total unfilled orders now to more than 3,000 airplanes. We had 903 gross orders in the first 9 months of the year. And our Commercial Airplanes backlog is now valued at a record $224 billion.

As Scott Carson told BCA employees today, clearly, we’re at a crucial stage right now. But our performance continues to be strong, and we’ve got the tools to accomplish the challenging jobs ahead.

The notion of government subsides for the major airplane manufacturers is at the heart of a debate that’s now before the World Trade Organization (WTO).

When it comes to “launch aid,” does everyone do it? No, everyone does not do it. And that’s the point made by my Boeing colleague Ted Austell, our vice president of international trade. He’s written an interesting commentary today, and it’s worth a read.

SEOUL – I’m in Korea for the Seoul Air Show. But at the moment a lot of eyes are watching the developments elsewhere – the delivery of the first A380 to Singapore Airlines.

No doubt, the first delivery for a new airplane program is always a big deal. We’ve been through many of these events ourselves.

Bringing a new airplane to the market is always an exciting time. And we’re looking forward to similar occasions coming up - with the 787, the 777 Freighter, and the 747-8.

First deliveries are always great milestones.

Of course, much of my time is spent talking about our market and product strategies – strategies that led us away from pursuing the super-jumbo.

But regardless of our differences in philosophies, there’s no doubt that a tip of the hat is in order to Airbus on this milestone. We also salute Singapore Airlines, a great customer of ours and a leader in commercial aviation. Congratulations on a big delivery.

AUCKLAND, NEW ZEALAND - Clearly, as our company’s top executives expressed this week, the 787 schedule change is disappointing for all of us at Boeing. The 787 rightly has generated so much excitement inside and outside Boeing that even a temporary setback like this doesn’t feel so good

But it is especially disappointing because we let down our customers. We’re determined to work with our program partners to meet the new flight plan for the Dreamliner.

We’ve said it again and again here. Building new airplanes is tough and challenging, especially with an innovative, game-changing airplane such as the 787. Still, this six-month delivery delay from our original target of May 2008 stings a bit. Our team is working extremely hard to minimize the disruptions and impacts the delays will have, and to get the airplane to our customers.

The first 787 is now due to fly by the end of the 1st quarter of 2008.

The schedule change calls for deliveries to begin next year in late November or December. And we’re anticipating first flight around the end of the first quarter of 2008.

But what hasn’t changed is our confidence in the Dreamliner’s breakthrough innovations and new technologies. And with 710 orders and 50 customers, we know the market’s validation of the 787 is rock solid.

The issues that led to this week’s announcement are essentially the same ongoing challenges we talked about last month, including out-of-sequence production work on the structure of the first airplane and shortages of parts. What we discovered is that the work has gone more slowly than we had anticipated. And it became clear that we’d used up the margin to accommodate any unexpected issues.

So the new schedule for first flight and first delivery takes these challenges into effect. And it builds back in a margin for dealing with issues that may come up during ground tests and the flight test program. It is absolutely the right step to take to get our production system prepared for delivering this exceptional airplane.

On a related note, as you know, I was traveling this week through Australia, and currently I’m in New Zealand. During a media briefing in Sydney on Monday morning (Sunday afternoon, Seattle time) I reiterated our target of a May 2008 delivery for the Dreamliner. Some have asked why I would say that given this week’s announcement. Well, keep in mind that the media briefing took place before the decision on the schedule change was made back in Seattle.

We’re totally committed to providing accurate and timely information. And that’s always the plan. On Monday, Australia time, I presented our schedule and plans as they were known at the time. When they changed, we shared the new plan promptly. It’s rare, but sometimes it happens that way. It comes with the territory, I guess, when you’re out on the road, miles and time zones away, on the front line of communications for a dynamic company like Boeing.

By the way, this week we did learn that the more difficult structural work on Airplane #1 is behind us. The airplane is back on its gear and work is proceeding with remaining structural and systems installations. Software coding and integration is also progressing, and the new schedule will give us more time to mature the systems. We think that will lead to fewer problems in flight test.

So, despite the schedule delays, there is progress. And as always, we’ll keep you updated as we move along.

SYDNEY - Space may be the final frontier. But in this case I’m talking about space inside an airplane cabin.

What traveler hasn’t wished that economy seating could incorporate more of the space and comfort features of business and first class seats?

Well, I don’t know if we’re quite there yet, but an interesting article today holds out some promise of seating innovations to come. And to top it off, the piece includes some insight from my colleague Klaus Brauer as well.

Meantime, I’m traveling through Australia and then on to New Zealand later this week - talking about Boeing’s market outlook for the region. I’ll have more to share when I return from this part of the world.

I started my career with Boeing on the technical side, and I guess when that’s in your blood, you never quite lose that interest in the nuts and bolts of our business. So it’s a good thing that we brought back a publication that was wildly popular with the techies - and not-so-techies - of our field.

AERO magazine is a quarterly publication that essentially provides technical info to help our airline customers operate their Boeing fleets more efficiently. It’s also a way to keep our customers and others in the industry informed of the latest about Commercial Airplanes products and services. Boeing operators get the magazine, and so can you, right here.

Click on the image to go directly to AERO Magazine.

AERO went away for a while at the end of 2003. But we found out that customers really valued the information and communication from Boeing. So we brought it back last year.

You can subscribe to AERO on-line. This service will notify you by e-mail when a new issue of AERO has been posted to the web.

Our latest issue features a look at the no-bleed systems architecture for the 787 Dreamliner written by 787 Systems Director Mike Sinnett. 787 Vice President and General Manager Mike Bair also talks about the industry milestones in building this game-changing airplane.

We also hear from Boeing Senior Safety Pilot Bill Roberson on fuel conservation strategies that pilots can use during cruise flight to operate efficiently, save money, and help deal with low-fuel situations.

The fourth-quarter 2007 issue also includes articles on protecting maintenance, flight and cabin crews from injury on the job, and how pilots can avoid a recently identified phenomenon of high-altitude ice crystals during thunderstorms.

In addition to the current issue, all back issues are available on the AERO Website. Just click on the “Archives” button at the top of the home page.

So welcome back, AERO. We missed you.

I’m not one to typically “ham” it up, but I didn’t want the summer to go by without at least mentioning something neat that’s been going on in Seattle for the past several months.

This little piggy went to market, and sports tiny wings and depictions of Boeing products and historic events.

It’s called “Pigs on Parade” – 100 giant fiberglass painted pigs, scattered throughout the urban landscape around here.

And although you could hardly call them “lean,” a couple of these fine swine do depict Boeing products and achievements.

Boeing’s official entry, “When Pigs Fly,” showcases the history of our company since its origins as a ham-town hero more than 90 years ago. Boeing graphic artist Faye Lomax is the creative force behind this pig’s feat.

This little piggy sports the Boeing livery.

Another Boeing-themed entry is called “Dream Swiner.” It springs from the imagination of local artist and aviation architect Gordy Edberg, who envisions a pig in the new Boeing livery.

Pigs on Parade benefits the charitable Market Foundation, and wraps up with an auction of the pigs later this month.

The event commemorates both the Chinese Year of the Pig, and the famous Pike Place Market on the Seattle waterfront – which turned 100 over the summer.

And that’s nothing to snort at.