Tom & Jim

“We did not do the job on the 787 supply chain execution. But we are fools if we do not learn from it. There are things we are going to do very differently going forward.”

He added, “If you don’t convert failure into success you don’t stay in business too long. Fortunately we have had more successes than failures and we have learned from those failures. It’s my job to make sure the institution learns from this and to ensure that the people in charge next time have learned.”

McNerney noted that a second 787 production line may not be started until after introduction of the 787-9 in 2012.

The Dreamliner will hit a production rate of 10 per month by the last quarter of 2012.

McNerney explained that program execution is “now a religion” and “we don’t want to jeopardize the 787-9 introduction” by moving people to support a second line.

However, he nevertheless was bullish on the Dreamliner, saying, “It’s a game-changing airplane and a step-function change like the 707 was.”

He added that the production model for the 787 was sound, “but the execution overwhelmed our company and our partners. There are three key elements in building an aircraft: Design, materials and manufacture. Changing everything at once–materials you make the airplane with, design tools you use, the partners and the scope you give them–was a challenge. Each part was sound. . .strategy but I think in retrospect we would have gone more slowly on the industrial side. The design is right and materials are a breakthrough but the scope of work was too much for our partners.”

Beyond the 787, McNerney said Boeing is looking hard at an all-composite 777 replacement. Commenting on a potential a re-winged 777, he said the company is examining various options to compete with the A350-1000. “We are waiting to see how much of the A350-1000 promise is reality,” he explained. “We have about a year or so.”

He said that if the A350-1000 is competitive, Boeing possibly will look to counter with a re-winged 777.

“But we may not have to do that much,” he said. “Eventually we will have an all-composite 777 and the bigger the diameter the better the strength-to-weight ratio.” He added that a composite 777 would be 20 to 25 per cent lighter than the 777-300ER. “It will be a very, very efficient airplane and it will fly a long, long way.”

Barely a week after the show Boeing shocked the aviation world by announcing its sixth delay on the 787s first flight because of excessive stress on both sides of the 787’s body in the “upper wing join area.”

A fix is being worked and tested and a new timeline is expected within a month with an overall delay to the program of two to three months.

The 787 delays are infuriating airlines such as Qatar Airways, whose CEO Akbar Al Baker launched a spray at Boeing at the air show saying the airline was considering plans to cancel the entirety of its Boeing order owing to repeated delays.

Qatar has 60 787s on order including options and 24 777s including freighters and options.

“The writing is in the wall for Boeing and they don’t care. They’re too busy having lunches and dinners,” CEO Akbar Al Baker told media adding that QR’s issues have “gone way beyond” compensation.

“Boeing doesn’t realize how much they’re hurting their customers’ plans. They’re very much mistaken if they think we’re going to give them much more time on the issue. Then Boeing will be left with a load of parked planes. It may be that we become an exclusive Airbus customer.”

Boeing VP-Sales-Middle East and Africa Marty Bentrott acknowledged that “customers are very concerned by the delays. Qatar Airways is a very important customer to us and we’re optimistic that we’ll be able to work through it.”

To add salt to the Boeing wound QR placed a firm order for 24 A320 aircraft at the show

Adding some perspectives to the 787 problems is New York based Bernstein Research which points out that “assuming Boeing successfully delivers a game-changing aircraft, the company could capture an extended competitive advantage over Airbus on future designs.”

The research company notes that the scale of those advantages are not yet clear but in “aero structures, the move to a single composite barrel had significant weight advantages because there are far fewer joints than on the Airbus A350 panelized approach. Joints ultimately add weight to the airplane and add complexity to the manufacturing process. Therefore, the 787 should have advantages over the Airbus design in the long term, although Boeing is potentially disadvantaged in the near term.”

Backing up McNernery’s bullish assessment Bernstein expects that “Boeing may also be able to use techniques learned on the 787 to produce innovative cross sections for future [777] designs.

But Bernstein, which had earlier warned of “more surprises” on the 787, is not happy about the latest delay given Boeing’s management bullish outlook at Paris on the first flight.

“We had expected significant delays in the 787 flight test program, particularly due to the large amount of data that will need to be analyzed during an intense period of parallel test flying. The first flight delay was unexpected because of the confidence expressed by management during the prior week at the Paris Air Show that first flight would occur by the end of June,” the report said.

“We see the problems with the delay in first flight as reinforcing our concerns about the flight test program and management processes at Boeing. This may turn out to be a minor issue with no substantive impact on the airplane’s structure or on the confidence Boeing has in its computational models.”

“On the other hand, more significant modifications to Boeing’s models could be required or broader structural modifications might be needed, which could lead to an extended delay. At this stage, we are assuming that the reinforcement will be straightforward.

Bernstein points out that the A380 also had a structural problem with its wing which turned out to be painless.

“When the Airbus A380’s wing broke at 147% of maximum load (below the required 150%), the reinforcement caused no real disruption, as its efficacy was readily demonstrated with computational models.”

If the [787] modification is straightforward, Boeing will be able to continue systems testing and aircraft production.”

But in a blunt warning Bernstein’s report said that “our concern is not the specific technical issue that Boeing faces today on the 787, but a performance pattern that suggests to us that we will see more incidents like last week’s as the program moves through an unusually aggressive flight test and certification program. As we have described in multiple reports, we believe that the combination of a technologically advanced program, a distributed supplier base, and a more entrepreneurial approach to program management has led to the current situation.”

Airbus President and CEO Tom Enders takes no joy at McNerney’s and Boeing’s problems and while optimistic that the A350 would be plain sailing he wasn’t bullish.

Sitting in his Paris Air Show “office” overlooking the company’s A380, Enders reflect on Australian Aviation’s perspective that aircraft were becoming so complex delays were inevitable.

Enders saw the problem more about people and the lack of skills, because of high turnover due to the cyclic nature of the industry.
We have a firm understanding of the root cause of A380 delays. “If you raise the question why, why and why [the delays occurred], the answer is that managers, workers and engineers did not have the right skills and the right motivation. It was the people factor. We have learned from that.” He added that the industrial complex is almost in place to build the A350 and he is impressed with the progress. “The spirit is high,” he said.

Enders noted that Airbus is carefully planning the next-generation aircraft’s production and delivery schedule. “Airbus has certainly learned from our mistakes [on the A380] and from our competitor’s mistakes [on the 787]. What it has shown us is that with these brand new aircraft we are pushing the envelope. They are very complex machines.”

But he said learning from past problems is only half of the answer to avoiding trouble on the A350 program; the other side of the equation is anticipation of new problems. “There are new materials, new processes and new partners,” he commented. “It’s a bit like fighting a war.

Generals tend to fight a war the same way they fought the last but it doesn’t work out. There will be plenty of challenges on the A350.”

Enders was emphatic that Airbus would still use British workers and technology to build the A350 even if the U.K. doesn’t contribute to the development costs. “The work share is already decided.”

Enders added however that GE Aviation probably will not join the A350 program. “That’s a huge mistake on their side,” he told Australian Aviation.

“The program will be very successful. Certainly some airlines would like [an engine] choice but I don’t see it as an impediment to the program.” Rolls-Royce Trent XWBs will power the A350 and he said Rolls is working hard on delivering more thrust if required.

Enders said that the company’s focus for 2009 is on supporting customers and transitioning its order backlog into deliveries rather than chasing new orders.

“This is not the time to expect huge orders, but there are still orders coming in because of varying demand from region to region and airline to airline,” Enders said.

Enders noted that “specialists” have indicated the economic downturn may have reached its bottom.

“There is no certainty but it does feel to us that there are reasons to hope that the recovery will begin next year,” he said. He expressed confidence that the air transport sector will remain a long-term growth industry with strong underlying demand, projecting around 5 per cent annual average passenger traffic growth over the next 20 years.

“What counts for our financial health is not orders but turning our backlog into delivery,” Enders said, pointing out that the manufacturer has a healthy backlog of some 3,500 aircraft.

To help secure deliveries, he conceded that government export credit agencies in France, Germany, Spain and the UK have stepped up their efforts and are participating in about 40% of Airbus deliveries this year compared with about 20% last year.

Enders added that all scheduled deliveries for this year have secured financing and hoped credit agencies would increase their participation to 50% of aircraft deliveries in 2010.

Airbus is maintaining its adjusted target to deliver 14 A380s this year. It expects to deliver around 480 total aircraft in 2009, down only slightly on 2008’s 483.