Into clear air?

An analysis of the program’s history shows that Boeing clearly put far too much faith in outsourcing of some of the design and the supply chain itself and those suppliers struggled with the task.

Losing control of production and the supply chain can be fatal as it was for the Douglas Aircraft Company in 1966, when it was forced into a merger with the McDonnell Aircraft Company that was consummated in 1967.

Douglas had over sold its hugely popular Super DC-8s and DC-9s and the rapid ramp up in production combined with shortages of engines and parts brought about by the Vietnam War turned its Long Beach facilities into a shambles with aircraft rolled out into the vast parking lot surrounding the factories with 100,000 man hours of open items.

Paine Field at Everett now resembles the ramp at Long Beach in 1967 with engineless 787s parked wherever there is a spare piece on concrete.
However at least six 787s are back in the air with the flight test program resuming in mid January after being grounded after the November 9 in-flight fire.

Boeing announced January 18 that it expects delivery of the first 787 in the third quarter of this year.

It added that “the new delivery date reflects the impact of an in-flight incident during testing last November and includes the time required to produce, install and test updated software and new electrical power distribution panels in the flight test and production airplanes.”

The manufacturer determined that a power panel in the 787 flight test aircraft ZA002’s aft electronics bay suffered a “failure” during the November 9 flight, leading “to a fire involving an insulation blanket” that caused main cabin smoke necessitating an emergency landing and the suspension of all flight testing.

Hardware and software fixes were worked with Hamilton Sundstrand and thoroughly tested before a resumption of flight testing in late December and full certification flight testing in January.

Boeing’s VP and GM of the 787 program Scott Fancher, said that the revised timeline for first delivery accommodates the work it believes remains to be done to complete testing and certification of the 787. “We’ve also restored some margin in the schedule to allow for any additional time that may be needed to complete certification activities,” Fancher added.

Outsourcing

Boeing executives are tight lipped on the genesis of the 787’s production outsourcing plan but some clues may be gleaned from the philosophy of Boeing’s then largest single shareholders President and CEO Harry Stonecipher and Boeing board member John McDonnell.

Stonecipher was chosen in 1994 to lead McDonnell Douglas by McDonnell who was then Chairman and Chief Executive of the company founded by his father James S. McDonnell.

At McDonnell Douglas Stonecipher continued McDonnell’s risk adverse derivative approach which incredibly saw McDonnell Douglas produce no new commercial wings after the DC-10.

In fact according to the late Jackson McGowan who was President and CEO of the Douglas Aircraft division from 1968 to 1972, John McDonnell, who at the time was VP Finance & Development, killed off the DC-10 Twin despite orders from a host of European carriers which preferred it to the A300.

After a spectacular career with Douglas, Jackson McGowan resigned in 1973 at the age of just 55. “I knew damn well that with the McDonnells’ influence, Douglas was not going any place,” McGowan told Australian Aviation in an exclusive 2004 interview.

Later in early 1980 Delta was a key launch customer for the twin-aisle six across 180-seat DC-11 and wanted 60.

But MDC wanted another airline on board and larger progress payments to help its cash flow.

Then-SVP of Delta Robert Oppenlander summed up the situation in the December 1 1980 edition of Business Week: “They (MDC) wanted to launch a new plane without taking any risk. That ain’t the way it works.”

Later MDC baulked at a major deal for the MD-12 with Taiwan because of the risk.

Insiders at Boeing tell Australian Aviation that the only way that the 787 was going to take flight was to spread the risk to an unprecedented level.
One senior executive would only tell Australian Aviation “it looked good on paper.”

Thus it appears that the McDonnell culture of frugality at all costs likely had a telling influence on the 787 risk sharing production model.

At last year’s Farnborough Air Show Boeing Chairman, President and CEO Jim McNerney told Australian Aviation that “in retrospect, our 787 game plan may have been overly ambitious, with too many firsts at once, in the application of new technologies, in revolutionary design and build processes, and in increased global sourcing of engineering and manufacturing content.”

And the list of firsts is without unprecedented in the jet era.

First and foremost is the all composite fuselage and composite wing for a large commercial aircraft and the fuselage required a new method of production.

On the inside was the not insignificant move to the all electric aircraft.

Driving this move was Boeing’s determination that the 787 would be the most efficient airliner ever built and a major part of that efficiency would come from the engines.

To help engine-makers achieve this paradigm shift in efficiency, it went back to the drawing board of the 787 power generation needs, which resulted in an aircraft that took aviation back into the global mainstream of electrically powered systems.

Traditionally, aircraft components such as the cabin pressurization, deicing and environmental control systems have been powered via hot, high-pressure air taken or bled from the high-pressure compressor.

If these systems were to be electrically powered, there was no need for bleed air.

No bleed air meant no pneumatic system and no complex array of piping, ducts, pumps, control valves, brackets and heat exchangers that usually make up the heavy and expensive titanium bleed-air assembly.

Also gone was the not-insignificant amount of monitoring and maintenance required

Boeing also went to a higher pressure (5000psi) hydraulic system similar to that on the A380.

Another change was all electric brakes.

On the technology leap McNerney told Australian Aviation added while Boeing had certainly “stumbled on the execution” it was “steadfastly confident in the innovation of the 787 and the benefits it will bring to airlines.”

Other Boeing executives lay blame with the lack of oversight and quality control.

Outsourcing is hardly new and dates back decades.

McDonnell Aircraft Company got its start in 1939 building parts of the Douglas DC-3.

Micro design

Outsourcing is the cornerstone of the production for both Boeing and Airbus although till the 787 total design had remained firmly in the hands of the lead manufacturer.

On the 787 much of the micro design work has been given to the structure and parts manufacturer along with the local integration.

Aside from spreading the risk building the 787’s all composite wing and fuselage construction dictated a very different model, while Boeing wanted to harness the composite expertise of Alenia and the Japanese industrial partners.

The 787 partners are hardly new to aerospace and have a rich history of extremely successful programs with Boeing, Airbus and McDonnell Douglas.
Former VP 787 Development and Production Scott Strode pointed out to Australian Aviation in 2006 that because of advances in technologies such as composite materials, existing facilities could not accommodate either the kind of work or the amount of work that comes with a program like the 787,” he says.

In all 3 million sq. ft. of facilities have been built for 787 production not counting the new second line being built in South Carolina.

Where once Boeing would have 50 Tier One suppliers sending parts directly to Everett or Renton on the 787 there are eight and those partners work directly with subsystem suppliers who in turn work with component suppliers.

For example, Alenia is sourcing parts from three of its plants in Italy and they are working with five nonrecurring and 12 recurring suppliers in Italy and Europe.

During the design phase of the 787, Alenia, like other Tier 1 suppliers, had 200 engineers working in Everett, while Boeing had a handful of engineers based at Alenia.

That number of Boeing people is now significantly increased.

For example Alenia has sole responsibility for design, construction and testing of the horizontal stabilizer.

Another example of the new production system is French supplier Latecoere which constructed a factory in the Czech Republic to build the 787’s doors, while Pfalz-Flugzeugwerke GmbH headquartered in Speyer, Germany, is making titanium tubing at its facility in Izmir, Turkey.

How much of the 787’s delay was a lack of design oversight, or supply chain monitoring or simply working an entirely new process with a relatively new material to the structures being built will probably never be known but it is possibly the sum of the parts.

However clearly Boeing has not been on top of the program and has relied too much on all the suppliers doing the right thing.

More than any other program the 787’s success was dependent on the sum of all the links and there were clearly some very weak links.

In a number of cases and for varying reasons Boeing has been forced to buy into its supply chain and now owns the entire South Carolina operation, where the second 787 line is being built.

Late last year Boeing Commercial Airplane President and CEO Jim Albaugh said that Boeing was “pulling back inside some elements of engineering on the 787-9, specifically activities surrounding composites.”

Albaugh told Air Transport World that he thought it was “important that Boeing builds some of everything, not everything, but some of everything and having the ability to do a composite wing or tail.

However Albaugh lauded Mitsubishi, manufacturer of the 787-8 wing, saying the Japanese giant is “performing very well.”

And even for those suppliers that have been performing well the 787 has been a nightmare with continual interruptions to production and in some cases a cessation of production and layoffs with some smaller companies going to the wall.

There are also reports of warehouses in Seattle full of 787 seats that had been ordered for 2008 and 2009 delivery slots.

As well as production snafus the 787 has had some design issues that have required extensive rework including the wing to body join and problems with the Rolls Royce Trent 1000 engine.

These problems were the primary cause behind the 5th and 6th delays respectively.

ETOPS

Away from the blame game on the production McNerney refuted claims at a January 26 earnings call that ETOPS testing was a problem. “We’ve largely gotten most other things done.”

“ETOPS is fully in the schedule and is contemplated to be completed before first delivery,” he told a global dial in audience. “We don’t want to deliver these airplanes without ETOPS and neither do our customers and neither does the FAA, by the way.”

According to the Seattle Times John Hickey, the FAA’s deputy associate administrator for aviation safety, visited Seattle in December and warned 787 executives that in the program’s current state, the jet would not qualify for ETOPS certification.

The Seattle Times said the FAA’s concern was that the electrical fire and a Rolls-Royce engine failure in a ground test last August had raised reliability questions.

Boeing however is mitigating any problems by adding a seventh 787 to the flight test program and this aircraft will be dedicated to ETOPS certification.

It’s likely that Australia and New Zealand will feature heavily in the 787 ETOPS testing.

The 787 ETOPS testing differs from the 777 being fault and condition based instead of cycle based.

New York based Buckingham Research also flags ETOPS concerns.

In a January 18 client report it warned that that if the FAA does not comply with Boeing’s request for a rapid ETOPS certification it may push delivery to the final quarter of this year. Buckingham also noted that while Boeing had produced 30 787s to date many require extensive rework and that only 6 to 7 would be delivered this year.

Also seeing risk in the latest delivery prediction of the third quarter is another New York based analysis group Bernstein Research which has proved unerringly correct in its warnings on the 787 program.

In a January 23 client report Bernstein warns that “there is risk to this schedule, given the uncertainty in timelines for addressing software issues.

With the program now roughly 39 months behind schedule, we believe that Boeing will likely need to slow production rates.”The research group also expressed concerns that Boeing may have difficulty raising margins on the 787 because pricing is largely fixed on the existing orders, with the aircraft effectively sold out through 2018; and because Boeing will be much more dependent on suppliers for cost reduction than it was on earlier programs like the 777.

While Boeing is building out shadow capability to manufacture large composite structures, Bernstein expects that “will be costly and add undesired complexity to the supply chain.”

It also warns of supplier cost challenges which will be exacerbated by an unhappy supplier base, with negotiations still in progress with the large structural suppliers on assertions for compensation for design changes and delays.

On the positive note however Bernstein points out that, “Spirit recently announced that its negotiations with Boeing were completed on its first block of 787 production units.

We see this as positive for Boeing because Spirit accepted a blanket agreement for compensation, which also includes additional cost reduction targets.”

On the cost side Bernstein sees the next 787 variant, the 787-9, as a challenging program that will require significant resources, while the 787-10 would be even more challenging.

Questions remain

“We have lost engagement with the aircraft” is how one airline executive sums his airline’s view of the 787. The program has cost airlines an incalculable amount in lost revenue, cost savings and new business opportunities.

Air New Zealand’s CEO Rob Fyfe told Australian Aviation at the height of the GFC that the 787 delay was worse for the airline.

Fyfe said at the time that Air New Zealand had to hold up key expansion plans “because only the 787 is suited to the new routes. We have had to substantially modify our plans and we may get locked out of a new route if a competitor launches services first.”

A major aspect of the problem has been the rolling nature of the delays with six months being too short to make an investment decision and the “shortness” of the delay indicating that Boeing had a handle on the problem.

While the program is now three years late of even greater concern is the ramp up in production to support the huge backlog.

In January while an ANA spokeswoman welcomed the latest delivery schedule from Boeing saying it “was welcome because it eases uncertainty’ she also insisted that ANA is looking to Boeing for assurance that it can meet this latest delivery date.

“We will also be seeking a full schedule for delivery of all the 55 aircraft on order from ANA to allow us to prepare properly for the introduction of the new aircraft and plan our new route network and fleet expansion strategy.”

According to Bernstein Boeing will delivery 8 787s this year with 61 in 2012, 78 in 2013 and 107 in 2014.

At the close of 2014 Boeing would have built 254 of the 847 787s it has on order.

A combined peak rate from the second line coming on stream is thought to be 12 a month which would take production through to the end of 2018.
There are an additional 481 options and price rights and if the aircraft delivers as expected those would be quickly converted to firm orders.

Qantas still hopes to launch international services with the 787 before the end of next year, rather than mid-year, in the colours of Jetstar.

“Delivery delays to date have been frustrating but this latest update from Boeing gives us certainty around a delivery time,” a Qantas spokesman told Australian Aviation.

Speaking to media in Singapore on January 27 Jetstar CEO Bruce Buchanan said that the airline’s first 787 would be delayed [six months] till late 2012.

Jetstar will get a tranche of eight 313-seat two class 787-8s initially which will release that airline’s A330s back to Qantas to enable the retirement of the oldest 767s that are now at 20 years plus.

These 8 will be followed by 35 787-9s and later 7 more 787-8s.

Jetstar will receive 7 of the 787-9s from mid-2014 for southern European services and the balance will be in Qantas colours, although some suggest that up to 25 787s will be operated by Jetstar in currently planning.

The Qantas 787s are expected to be in a three class – business, premium economy and economy – configuration.

Those aircraft will be used for a variety of missions both long range, regional and domestic with the final mix well and truly in the melting pot.
Qantas has another 50 787 options.

Airlines such as Air New Zealand are looking hard at the 777-200LR to fill the void for the 787-9.

The airline is the launch customer for the -9 and is yet to be advised of any delay in that delivery program, although it is being pressured to make some decisions surrounding its first production aircraft.

McNerney maintains that the first 787-9 will be delivered late in 2013.

Few have cancelled the 787 because the stark reality is that nothing else will perform the range mission and deliver the operating cost and fuel savings and be delivered any earlier.

Upbeat

Boeing’s McNerney was surprisingly upbeat at the company’s full year results and said that he expected to deliver “about 12 to 20 787” and a similar number of 747-8s this year – well above analyst’s forecasts.

McNerney claimed that the latest delay has not affected Boeing’s production ramp up and it expected to be producing 10 787s a month by late 2013.
“We had a very conservative view and a significant amount of margin in our production ramp-up plans. It was going to finish earlier than the end of 2013 by our internal plan, but that’s largely eroded at this point due to the slide,” said McNerney.

Boeing maintains that it has retired most of the high risk elements of the 787, and 75% of testing has been completed.

While between 20 and 25 787s need re-work McNerney says that level of completion –lack of travelled work – on the latest aircraft currently at line 31 is much higher.

Boeing’s fortunes and that of the 787 program will likely change dramatically when the first 787 lifts off from Tokyo’s Haneda Airport and flies probably a short sector to Osaka.

The technology crazy Japanese will hype the aircraft and slowly the “787 buzz” will return.

For not since the DC-3 has an aircraft promised so much and despite the agonizing delays that have caused pain across the globe the belief is still there that Boeing will deliver. It must!