March 2008 Archives

Southern latitudes

SANTIAGO – I’m in Chile this week for the FIDAE air show. It’s been a few years since my last visit here, so it’s great to be back and meeting with some old friends.

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A spectacular view of Santiago.

Over the weekend I wrapped up several days in Sao Paulo, Brazil.

My last visit to Sao Paulo was back when we were selling the Sonic Cruiser. So you get the picture that it’s been a while since I’ve been there as well!

I had some nice visits with airline customers, hosted a media roundtable with Brazilian daily papers and news wires, and had a briefing with aviation trade reporters. I’ve also done some television – a visit with Bloomberg TV, and a broadcast on a new business oriented cable television program called “Siga o Mestre.” That means “Follow the Leader.” It’s on the TV Ideal channel in Sao Paulo. I happened to be one of their first interviews in High Definition.

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My appearance on Brazilian channel “TV Ideal” was a lesson in the new realities of Hi-Def TV: lots of makeup required.

That’s why, in order to hide my flaws, I needed a treatment of spray-on makeup before the taping!

On the broadcast, we talked about the value of technology, how Boeing’s sales team works with airlines to provide the right products, about our progressive environmental plans, and the robust Latin America economy.

Speaking of which, air traffic growth here is one of the world’s highest, and the largest air carriers are as profitable as any in the world. Here at FIDAE, which happens to be the world’s 4th largest air show, I’m talking about this incredible growth - as you can see in the chart below.

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Latin America has seen nearly one-third more commercial airplane orders in 2007 than the previous record set in 2005. The efficiency and economy of the recently-ordered airplanes will help airlines manage costs and earn profit while boosting capacity. 587 total orders since 2000, of which 493 have come in the last 3 years.

One of the region’s most respected airline CEOs cites “the three Cs” of success: capital, capacity, and cost. All three have improved dramatically here in recent years. And it means airlines are able to invest in revitalizing their fleets and pursuing growth strategies.

We’re forecasting that Latin American airlines will need more than 1,700 new airplanes valued at $120 billion over the next 20 years. So, like other dynamic regions of the world, it’s an exciting time here, not only for airlines, but for air travelers.

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Taking retirements into account, the Latin American fleet has grown by 175 airplanes over the last 8 years. In addition to fleet growth, we have also seen airlines replacing older generation aircraft - such as A300s, 727s, and DC9s - with newer generation aircraft.

Today, Latin America has some of the youngest airline fleets in the world. And, like some of those in the Asia-Pacific region, these leading airlines are among the most capable, fuel efficient, and environmentally progressive.

And something to watch for as we go forward - added capacity is giving the region’s carriers an operating scale they have never enjoyed before, enabling them to compete with the many U.S. and European carriers that serve the region.

I’d say that these trends really are the Wings of Change.

Best aircraft types

As you may know, the 747 was the focus of my previous role here at Boeing. So I know it’s a pretty special airplane. And now the readers of Global Traveler have cast their votes in favor of the Queen of the Skies as the “best” aircraft type.

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The Dreamliner-inspired interior for the 747-8 Intercontinental graces the cover of Global Traveler’s “The Best in Travel” edition. (Click on the image to go to a pdf of the article.)

These “well-traveled readers” made their choices known on a variety of “bests.”

Chosen best airline in the world, for example: Singapore Airlines. Best airline for international first class: Emirates. Best airline for domestic first class: American Airlines. Best airline for business class: British Airways.

You can check out the entire survey here. There’s a lot of interesting material there. But for me, the most significant result is in the selection of the top-10 best aircraft types. It’s the first year that Global Traveler has asked readers to vote on the airplanes they fly.

Of the top-10 aircraft named as “best” by GT readers, the Boeing 747 and 777 were the number 1 and 2 choices, respectively.

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The 747-8 Intercontinental. The “best” airplane, even better.

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This is a digital depiction of the latest interior architecture of the 747-8 at the door 2 entry. It’s designed to welcome you into a comfortable space. The arching entry, with warm tones and soft LED lighting gives a sense of openness. The stairs invite passengers into “a private jet” that is the premium space of the upper deck.

The 747, the magazine writes, “continues to lend itself well to the redesigned cabins imposed on it as airlines upgrade their offerings.”

The 767 ranked as 4th best, with the 757, 737, and MD-80 rounding out the 6th through 8th spots. As the magazine puts it, “Boeing dominated the list.”

787 process

I attended the JPMorgan Aviation and Transportation Conference in New York over the past couple of days. You can watch the Webcasts of some of the presentations, including mine, at the J.P. Morgan conference site.

And as many of you have read or seen, coming out of that event there’s been some speculation about design issues for the 787 Dreamliner.

We’ve addressed that topic in a statement from the 787 program:

It is a normal part of the development of a new airplane to discover need for improvements, and that is what we are experiencing on the 787. The robust test process in place on the 787 program has confirmed the majority of our designs but we have found the need for some improvements.

The center wing box issue has been addressed. The fix is being installed on Airplanes 1-6 in the Everett factory. Installations have begun on the four airplanes currently in Final Assembly. All airplanes after Airplane 7 will have the solution incorporated from the beginning.

The fundamental technologies being used on the 787 are proving to be reliable and effective. The material choices and manufacturing techniques for the airplane are sound.

Boeing is working its normal processes for developing a new airplane. The test process is working when issues are discovered and we are reacting appropriately by implementing normal design validation and fixes when we find issues.

Tanker blog

My colleagues at Boeing’s Integrated Defense Systems (IDS) have launched a new blog, and I think it might be worth your while to check it out.

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A depiction of the Boeing aerial refueling tanker in action.

Tanker Facts is a place to go to find out the latest news about the Boeing KC-767 Tanker and to get updates on the protest. I’ve added Tanker Facts to our “Boeing Links” section so you can keep in touch with the new blog in that way as well.

I’ve appreciated the many, many comments on the tanker that you’ve contributed, and you can continue the dialogue here or in the comments area of Tanker Facts.

Growth and consolidation

With all the continued talk of mergers both in Europe and in the United States, the average observer might think a dramatic consolidation is taking place in our industry. In fact at the recent Geneva Forum on Aircraft Finance and Commercial Aviation, a poll revealed that 85% of participants there predicted an increase in consolidation over the next two years.

But the truth is, the market is actually not consolidating. It’s going in the other direction. If you take a close look at the total number of airlines in operation, as well as frequency growth in the marketplace, you’ll see that nothing could be farther from the truth.

What we’re actually seeing is that the number of airlines in the world has increased by 150% over the past 20 years, and frequencies continue to grow by about 5% a year. We also continue to see growth in city pairs, or nonstop markets.

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This chart shows the vitality of the airline marketplace. The reality is, while consolidation talks go on, over the last 20 years we’ve seen continuous growth in the number of carriers.

Over the last 10 years, approximately 1,300 new airlines entered the industry and about 850 airlines exited it. Since more airlines enter the industry than exit in any given year, the total number of airlines increases.

So what’s going on? Are these things inconsistent with the talk of consolidation and possible airline mergers? Well, first of all in terms of “consolidation,” yes, we’ve seen a few airlines over the past several years consolidate – KLM and Air France, for example, and U.S. Airways and America West.

But overall we’re really seeing growth in the number of airlines worldwide. Growth that is primarily fueled by new business models, whether they are additional low cost carriers, all-business class airlines, new regional carriers, or other models.

It’s a more diverse marketplace today than it’s ever been. And as the market gets bigger we expect this trend to continue.

New and innovative airline business models create additional value for passengers and are then incorporated by other airlines. In the end, passengers are better served with more convenient travel for lower fares, and in many cases, in more comfortable surroundings.

Airlines are looking for a way to better compete in light of rising fuel prices and new outside competition as markets liberalize. So as we go into the future expect to see more new airlines, new business models, new ideas - a constant and continuous increase in the airlines operating around the world. That growth brings in new people, new ideas, new technology, and that helps make all the airlines better.

And for us, it helps to further diversify our customer base. Which helps our position in this very cyclic business.

As we look to the future, there will be some consolidation. But that’s going to be offset by new opportunities for new airlines and new business models as the market gets larger.

Protest filed

Just a brief note to update you - with today’s release:

Boeing Protests U.S. Air Force Tanker Contract Award

Tanker decision

This evening Boeing announced it has decided to file a formal protest of the Air Force aerial refueling tankers contract award.

Boeing chairman, president, and chief executive officer Jim McNerney said today, the team has taken a very close look at the decision “and found serious flaws in the process that we believe warrant appeal. This is an extraordinary step rarely taken by our company, and one we take very seriously.”

You can read the news release linked below:

Boeing to File Protest of U.S. Air Force Tanker Contract Award

Take it to the limit

We’ve had an overwhelming response and a good conversation going on in the comments to the Tanker posts, and we will be following that issue as we go forward.

But I wanted to take a moment catch up on some other news. We just wrapped up a series of tests on a 787 Dreamliner fuselage barrel. And the tests couldn’t have gone any better. When I allude to “take it to the limit,” like the old Eagles song, I’m not kidding.

Turns out the barrel did better than expected under a condition with more than two-and-a-half times the force of gravity - at 200% limit load.

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The composite barrel is completely enveloped by the test rig equipment during the structural testing for the 787 Dreamliner in Everett.

In Everett, Boeing engineers have been putting the composite technology, design, and construction through a series of static stress testing scenarios beginning late last year. The tests were done on a Section 46 (mid-fuselage) barrel as part of Boeing’s certification efforts for the 787.

During stress tests, parts of the airplane are pushed, pulled, and twisted by hydraulic jacks. This series of tests concluded last week with what’s called “destruct sequences.”

The tests were incremental. First, they put the barrel to “limit load.” This is a test that simulates the most extreme conditions expected in the life of the airplane.

Then, they went even further – putting the barrel at 150% of limit load. This is called “ultimate load,” and it’s the level required for certification.

Well, turns out the barrel showed no signs of damage after these tests. So they pushed the barrel past what’s known as “ultimate load.” Well beyond ultimate load. It’s a destruct-condition, and as I mentioned, it’s beyond two and a half times the force of gravity. And obviously well above even the most extreme conditions an airplane would experience.

At this point, the team observed audible indications of damage but the piece did not reach the point of destruction - even at this extreme load.

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An array of monitors and screens inside the “control room” provided the team with plenty to focus on as data and video images of the barrel were displayed during testing. You may notice in the bottom photo, team members sporting retro flattop haircuts, starched white shirts, narrow ties, and horn-rimmed glasses - it’s their way of honoring the history and contributions of their predecessors - the pioneers of their field.

You might be interested to know that the tests put the barrel through a variety of scenarios simulating both standard and extreme flight conditions:

  • Maneuvers at two and a half times the force of gravity without structural failure
  • Maneuvers at negative gravity forces
  • Maneuvers to simulate abrupt elevator up and elevator down conditions
  • Emergency landings
  • Engine out response conditions
  • Performance during normal loads with the presence of visible damage to the composite materials
  • Emergency landing at six times the force of gravity
  • Extreme maneuvers with unrestrained cargo

These tests are all essential to clearing the Dreamliner for first flight. Now, the next step for engineers is an extensive inspection of the barrel and a study of the test results in detail – with an eye toward optimizing the 787 design.

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The 787 barrel testing team. They put in a lot of long hours – including over the holiday break – and did an exceptional job to achieve these test results.

We’re going to be doing some additional testing on the composite barrel section, to learn more for our own background. And then there will be additional static testing required, which we’ll do on a full airplane structure before first flight. That test airplane is in final assembly in the factory right now.

Tanker debrief

Over the past several days, the Air Force tanker announcement has generated more commenting here than any subject since I started blogging. A lot of well thought-out and spirited comments.

One of the reasons I enjoy my job is that I do have the opportunity to share a dialogue with you - a knowledgeable community that is passionate about aviation.

As we noted Friday, it’s been a disappointing time. And as you might imagine, Boeing would like to further understand the selection and the decision. Along those lines, Boeing has issued a statement today requesting an immediate debriefing on the competition. You can read it below.

In the meantime, thank you for all of your comments - and keep them coming.

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Boeing Requests Immediate KC-X Tanker Briefing

ST. LOUIS, March 4, 2008 – The Boeing Company [NYSE: BA] today made public a request for an immediate debriefing from U.S. Air Force officials on the KC-X tanker competition.

As of today, the company has yet to receive a briefing on why it was not selected for the KC-X program, a decision the Air Force announced February 29. The Air Force has indicated that the briefing would occur on or after March 12, a delay the company says is inconsistent with well-established procurement practices.

“A delay of this length in the formal debriefing is unusual,” said Mark McGraw, vice president - 767 tanker programs. “Consistent with past practice and recent experience, we would expect this briefing to occur within days, not weeks, of the selection announcement. Given that we are already seeing press reports containing detailed competitive information, we feel that our request is more than fair and reasonable.”

Boeing viewed the tanker competition as a priority and an opportunity to give the Air Force the best tanker to meet its requirements. The company based its proposal on the stated criteria in the Air Force’s Request For Proposal (RFP), the formal document that defined the requirements for the air tanker system.

“We bid aggressively with specific focus on providing operational tanker capability at low risk and the lowest total life cycle cost,” said McGraw. “For instance, based on values disclosed in the Air Force press conference and press release, the Boeing bid, comprising development and all production airplane costs, would appear to be less than the competitor. In addition, because of the lower fuel burn of the 767, we can only assume our offering was more cost effective from a life cycle standpoint.

“Initial reports have also indicated that we were judged the higher risk offering. Boeing is a single, integrated company with its assets, people and technology under its own management control – with 75 years of unmatched experience building tankers. Northrop and EADS are two companies that will be working together for the first time on a tanker, on an airplane they’ve never built before, under multiple management structures, across cultural, language and geographic divides. We do not understand how Boeing could be determined the higher risk offering.

“Initial reports also indicate there may well have been factors beyond those stated in the RFP, or weighted differently than we understood they would be, used to make the decision. It’s important for us to understand how the Air Force reached their conclusion. The questions we are asking, as well as others being raised about this decision, can best be answered with a timely debrief indicating how our proposal was graded against the stated requirements of the RFP,” said McGraw.

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UPDATE: March 7, 2008

Uncertainty Remains About Process After Air Force Tanker Debrief

UPDATE: March 10, 2008

Decision Time Nears for Boeing to Protest Air Force Tanker Award

 

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