February 2008 Archives

Tanker announcement

We found out this afternoon that Boeing’s KC-767 Advanced Tanker proposal was not selected by the U.S. Air Force.

Here’s the Boeing Company statement:

Obviously we are very disappointed with this outcome. We believe that we offered the Air Force the best value and lowest risk tanker for its mission. Our next step is to request and receive a debrief from the Air Force. Once we have reviewed the details behind the award, we will make a decision concerning our possible options, keeping in mind at all times the impact to the warfighter and our nation.

The Boeing Company would like to thank the many people who helped us in this campaign. We have received tremendous support from our suppliers, elected federal/state/local leaders, unions, community groups, and the 160,738 men and women who work for Boeing.

"First flight"

Our 787 chief pilot Mike Carriker, and our 787 systems director Mike Sinnett had an awesome experience earlier this month. They “flew” the Dreamliner with the “Blockpoint 8” software for the first time - in a successful test of the 787 integrated avionics and flight systems hardware and software that are now in final development.

The “flight” took place in the 787 engineering flight simulator.

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The testing of software and hardware took place in this 787 engineering flight simulator, which functions in a true airline operational environment.

During the test, Mike and Mike demonstrated most of the operational procedures required by a flight crew - pushback and engine start at Sea-Tac airport near Seattle, taxi and takeoff, climb, cruise, simulated engine failure, descent, approach, single-engine go-around, landing, taxi and arrival at the gate at the Portland, Oregon airport.

It’s an important first step in the validation of the Blockpoint 8 software that I mentioned. This is the family of software created exclusively for the 787, and that will support initial flight test. This flight software system is more highly integrated with many more features for crew efficiency, comfort, and situational awareness than flight systems in use today.

So what’s next? With this “first” behind us, we’re continuing our testing - improving and validating the systems on the road to real first flight of the Dreamliner.

Extra, extra

SINGAPORE — I’m here for the big air show this week, and I know there’s going to be a lot on people’s minds not only here at Singapore, but as I travel throughout the year. No doubt one of the major topics for discussion will be the future of a very capable airplane which happened to have an outstanding year last year - the 777.

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Orders … Jakarta-based Garuda Indonesia announced an order for 4 777-300ERs at the Singapore Air Show today.

Boeing had 141 orders for the 777 in 2007 - and now has a total of 1,050 for the program to date.

The 777 has a growing customer base, now at 55, including 6 new customers in 2007 - and a total of 17 new customers since January 2005.

Yet, even with the success of the 777, people will continue to ask, “Randy, how will the 777 do against the A350?” And my answer, as we plunge ahead in 2008, is that I see the same fundamentals in place now as I did last year.

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And a delivery … Last week, KLM Royal Dutch Airlines took delivery of its first 777-300ER.

Let me first say, I think Airbus is going to continue to be a formidable competitor, for sure. But I also expect the 777 to continue to do well in the marketplace.

Here’s why: First, given the strength of the 777 today, with a very high quality customer base, we think this airplane will continue to produce new follow-on orders as we saw last year.

Second, the 777’s efficiency and dominant position in its class will continue to attract new carriers who are seeking to grow existing markets, to open new markets, or to compete with current 777 operators.

And we haven’t even talked about the wider, more spacious 777 passenger cabin - which in the case of the 777-300ER, will actually carry more passengers. Two out of three A350 models are claimed to be “777 sized,” but the A350 cross-section is actually about a foot narrower than the 777.

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The 777 cabin provides flexibility for airlines to earn revenue with either wider seats and aisles or more seats in each row. So, for example, when comparing “like comfort” it’s important to use a 10-abreast economy configuration for the 777 versus a 9-abreast economy configuration for the A350. (The cross section detail above is our best estimate based on the data that Airbus has provided in public presentations.)

The 777 is in service now, and it is performing extraordinarily well. Because of its remarkable service record it enjoys strong respect from the industry - which widely regards it as the benchmark in its class. So, it’s respected, proven, and low risk. And it has a heritage of continuous improvements: the airplane that will deliver in the future will more than likely be even better than the airplanes that are flying today.

There’s been a great deal of talk about the performance attributes of the A350. Well, I’d say that when it comes to the economics and the range of the A350, there are still a lot of questions.

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Airbus has been changing the range capability of the A350-900 and A350-1000. The 777 airplanes provide proven range.

What we have noticed, as you can see in the chart above, is that the competitor’s statements on the range of the A350 have changed over time. Fact is, the airplane is yet to be defined. The 777 more than likely flies as far as, if not farther than, the competition will be able to.

Yes, the competition on the horizon to the 777 is the A350. But that offering is still 6 to 8 years from entry into service according to Airbus’ announced schedule. The 777 will not be standing still. It will - as do all Boeing airplanes - benefit from continuous innovation and improvement. So a 777 delivering 6 to 8 years from now will benefit from this Boeing practice of improvement and innovation.

And there’s another key consideration that potential 777 operators will discover as they evaluate the choices. The 777 is so efficient even today that a choice for the 777 made 4 to 5 years before an A350 becomes available will provide the opportunity to generate a significant profit advantage over the typical life of the airplane relative to waiting for an A350.

So how will the 777 do? As the newsboy in those old movies used to say, “Extra, extra, read all about it!”

And now, let’s get on with the show.

Airplane 4, position 1

I wanted to share with you a new photo from the 787 factory, as final assembly gets underway on the Dreamliner that will be our second flight test airplane.

Our team in Everett is joining together the fuselage sections and wings for the second of what will be a total of 6 flight test airplanes. This airplane is now in place in position 1 in the factory - where all major joins take place.

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Airplane 4 - loaded snugly into position 1 in the 787 factory this week.

I know there’s been a lot of discussion out there about this airplane and where it actually fits in the plan. So let me sort it out for you. As I said, while this is going to be the second flight test airplane, this Dreamliner is actually the fourth on the production line. It follows the two airplanes that will be used for static and fatigue testing. Those two will not be delivered to customers. Airplane #1, the Dreamliner we rolled out last summer, is still planned as the airplane to make the first flight later this year.

My colleagues on the program report that the newest airplane on the line arrived with less “traveled work.” That means the sections are significantly more complete than was the case with Airplane #1. We’re seeing continued improvements in the condition of each assembly we receive.

And as we move forward, we expect to start receiving assemblies for the third flight test airplane in the next few weeks - and of course this is good news for the program. It’s great to see a full production line. It shows progress, and moves us closer to operating within the original design of the production system.

Subsequent airplanes are underway as well. Right now we have a total of 21 airplanes in various stages of production around the world – including the 4 in Everett - and it’s going well. This is a key point to remember.

Understandably much of the focus has been concentrated on the airplanes on the Everett factory floor. But keep in mind there is a lot of work going on globally, leading up to position 1.

Level field

This is a crucial year for our industry in many ways. For one thing, there’s a head-to-head competition going between Boeing and EADS/Airbus to provide the U.S. Air Force with its next generation of aerial tankers.

Much has been said and written about the needs of the Air Force, the relative advantages of each airplane, and the capabilities of the competing companies. Although aerial refueling is not my area of expertise, we think the Boeing KC-767 Advanced Tanker is the best airplane for the job.

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A depiction of the KC-767 Advanced Tanker refueling an F-22.

I did come across a couple of items on this topic that I wanted to share with you here. The author of this opinion piece does a very good job of presenting how the aerospace workers he represents feel about the tanker competition.

This op-ed column also effectively spells out some of the background about the World Trade Organization (WTO) case and how it relates to the tanker competition. And this piece talks about the jobs at stake across the U.S.

I’d be interested to read your comments on these opinion pieces.

Chinese Lunar New Year greetings

The Year of the Rat (or Mouse) is upon us.

We’ve put together a brief video to help celebrate along with people around the world.

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Click on the image to go to the video. And when you’re on the video page you can also download it as a screensaver by clicking below the video where indicated in both English and Chinese.

Apples and oranges

Last month I talked a bit about the industry-record 1,413 net orders for Boeing Commercial Airplanes in 2007. And you may have noticed that Boeing reported our 2007 results in net orders (while also indicating gross). That’s key because net orders are really the bottom line.

It was good to see that Airbus also reported net year-end orders results this time around. And the reason I mention this is that throughout any given year it can be challenging for those of you who follow our industry closely, to get a clear comparison of Boeing and Airbus numbers. You may have noticed that Airbus reports its numbers only monthly, in gross totals. Which means there’s no clear indication of cancellations of Airbus orders that occur during the year.

Comparing net to gross is like comparing apples and oranges. It doesn’t work. It was especially challenging last year due to the re-ordering and re-confirmations announced and counted in 2007 for A350s. Many of those orders were already booked and counted in previous years - during that airplane’s several earlier incarnations. As we finally saw last month, this accounted for a large number of cancellations on the Airbus books.

We did some calculating, in terms of the past five years, and what you find is that for both of us, indeed some portion of orders tend to be canceled every year.

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From 2003 to 2007 Airbus had 241 cancellations. Boeing had 49 cancellations - during a period in which Boeing had 164 more net orders.

But the distinction is - as you can see in the charts above and below - that both the total number of cancellations and the cancellation rates are significantly lower in Boeing’s order book compared with Airbus. It’s a reflection of Boeing’s very strong customer base.

Taking a look a the chart below, you see that in terms of cancellation rate, Airbus essentially had 5 times the cancellation rate compared with Boeing over the last 5 years.

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The average cancellation rate over the past five years was about 6% for Airbus. For Boeing the cancellation rate was about 1%.

Taking this further, over the past decade (1998-2007), Airbus had 511 cancellations. Boeing had 271, despite our having 193 more total net orders. Over this time period, Airbus’ cancellation rate was 84% higher – which means a much wider disparity between net and gross.

If you earn a paycheck then you’re quite familiar with the difference between net and gross. Gross is a nice figure – on paper. But net is what you really take home, after deductions. As I said, that’s the bottom line.

Several years ago Boeing elected to make our commercial airplanes orders process more transparent. The idea was to post our orders figures to our Website weekly. And that’s what we do. If you haven’t already, you can check it out every Thursday. In the case of deliveries we update every month. Key to the whole process is that anyone who visits the site can clearly see what is net and what is gross.

It’s certainly a concept to be mindful of when you consider the order books of our two companies throughout the year. Clearly, Boeing’s low cancellation rate speaks to the quality of our customer base and backlog.

And as we say here in Washington state: “How do you like them apples?”

 

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