On the upside

The company recorded a 21. 5 per cent jump in net profit in 2011 to US$4. 02 billion on the back of a 13. 6 per cent lift in sales from the commercial division to US$36. 17 billion. It delivered 477 commer-cial aircraft in 2011. Overall revenue rose 6. 9 per cent to US$68. 74 billion.

“The numbers look good and we certified the 787 and 747-8, while launching the 737 MAX,” said Mr McNerney. We also strengthened our defence and space busi-ness, particularly in the international arena and we are building on that. ” He emphasised that the key priorities were to build production and profitability: “We are performing to plan on 787-9, 737 MAX and 767 tanker. ” Adding that the commercial business is an unprecedent-ed opportunity, he said: “We have 4,000 planes worth $308 billion in backlog. ” Asked by Australian Aviation if cus-tomer confidence had returned after the 787 design and production problems he said: “We took a big leap on the 787, the biggest leap since the 707 and that is a big leap – but that is not by way of an excuse. We lived on the bleeding edge and we have learned a lot. ” He predicted significant advances being harvested over the next two decades, saying that the 787 technologies were the basis of that and had “de-risked” the next 20 or 30 years: “We’re glad we did it but we are not glad we lived through it.

“And by the way – we did the right air-plane,” he said with a wry smile, pointing out that when these sorts of leaps are done with the wrong aircraft, the outcome can be disastrous.

Addressing a specific question from Aus-tralian Aviation on customer support, he said Boeing’s customers were behind them: “I think so. It has been a difficult situation. Believe it or not they encouraged us even in the darkest times because they knew what it [787] could do for their operations. ” “This will make the aerospace industry a more effective industry. This is a $400 bil-lion project. This is a big deal. ” Moving on to the orders outlook for the 737 MAX (a winglet mockup for which was displayed at Farnborough – above), Mr McNerney said that in a year or so the company expected parity with Airbus and the A320neo: “We started a year or so later on the MAX. I would anticipate that in a year or so it will be a 50/50 split.

“In terms of firm orders, we are 549 and they are at 1,300. We have over 1,000 com-mitments. Stay tuned . . . ” Later that week, Boeing announced the massive and decisive United Airlines order for 100 737 MAX 9s along with 50 737-900ERs. And in early August came a major commitment from Silk Air, an A320 operator, for 23 737-800s and 31 737 MAX 8s with 14 options.

On the subject of the Airbus move to set up an A320 production plant in Ala-bama, he did not believe it would make any difference to airlines’ buying decisions, saying: “I think the commercial business is one that doesn’t care where you produce the plane. It cares about quality, cost, reli-ability and standing behind the product.

“If Alabama helps Airbus in these areas it will be a good move. If it complicates life and makes it difficult to focus on these areas then it will be a bad move. ” Questioned on the reported $160 million of subsidies to Airbus to set up in Alabama, Mr McNerney said that some form of subsidies is compliant under WTO rules: “Many of those local incentives are OK. Launch aid, however, is not in compliance. ” On a more holistic note he was asked about the likelihood of a third major aircraft manufacturer emerging. “I think it’s highly likely. I personally feel the Chinese will be a third major player, whether its five years or 20 years. First will be a narrowbody and later a widebody. When you look back 20 years from now you will see the Chinese as viable competitors. ” But he suggested that by then Boeing would have moved on from current designs: “Innovation is our strategy. I think that is a place we can stay ahead for many, many decades, particularly in the widebody field. That is why it is so important to keep pushing technology even if we have some stumbles along the way. ” On the future production timeline, Aus-tralian Aviation raised the issue of overlap of the 737 MAX, 787-10, and 777-8X/9X. His reply – all three would be built.

“We have very recent experience on two major developments [787 and 747-8]. All of the developments mentioned are derivatives. One a simple stretch with the -10, to a more complicated 777X. The MAX is in between. ” Mr McNerney was quietly confident about the challenge: “These (MAX and -10) are less ambitious than the 747-8 and certainly less than the 787. That doesn’t mean we are going to pile all these on top of each other. We are very mindful of dovetailing these together to have margin if things go wrong. ” The 777X, he said, was a very exciting aircraft: “The 777X will be the most com-plicated. It will take the most resources, be the most costly, with the most risk associ-ated with it. We have a pretty clear view of what it is. ” The most likely combination would be an all-new composite wing on an aluminum fuselage with a new engine.

He said that Boeing had looked at all combinations from simply new winglets and a new engine right through to an all-new aircraft.

On the timetable for the 777X, Mr Mc-Nerney said Boeing was working closely with customers and moving toward a launch next year with an EIS “late this decade or just into the next”. He said also that the 787-10 would be launched by the end of this year.

Looking ahead to partnership structures for the 777X, he underlined that there would not be as much risk-sharing as on the 787: “There will be a little more than the original 777 but less than the 787. We will do more design work. ” He said managing a global supply chain with a design element was a problem: “We delegated too much on the 787. Delegat-ing design particularly with new materials introduces a lot of mischief. ” The 777X project would be more verti-cally integrated than the 787 and when the company had more definition on the design it would talk to its suppliers.

Responding to a question, he said the Japanese suppliers had been excellent partners for many decades: “There is a lot of history and in fact we have grand-children [third generation] at Boeing and Japan working together. The Japanese heavies have built and invested in a great deal of infrastructure, which can be used for generations. ” Mr McNerney introduced an interesting element to the question of accelerating pro-duction well ahead of growth in the global economy.

“I see GDP growth at between zero and three per cent. That is pretty low. So why do we see faster ramp-up? It relates to replacement. When you buy a new plane the payback with fuel at $100 [per barrel] is very quick. ” A 787 replacing a 767 would burn 20 per cent less fuel and have 30 per cent lower maintenance burden. “The payback on new technology is very quick. ” On the military outlook, particularly in light of US defence cutbacks he said that Boeing was well positioned: “We have a record backlog driven by overseas busi-ness. It was seven per cent three years ago, is now 25 per cent and will be 30 per cent. We have had a real concerted effort to sell internationally and our commercial aircraft footprint helps as do our partnerships. ” On the C-17 he said Boeing had two to three years of production left and the com-pany had possibilities: “We are talking to a lot of people. But if the US Air Force does come back, then by the end of the decade it [C-17 production] would end. ” Asked if there would be enough defence work for the big three – Lockheed Martin, Boeing and Northrop Grumman – he predicted: “Boeing is best able to absorb whatever happens. We have a competition advantage in a negative situation. ” But Mr McNerney said some industry consolidation might be a possibility. To the suggestion from Australian Aviation of Lockheed Martin re-entering the commer-cial market, perhaps in a joint venture with the Chinese, Mr McNerney said it was an interesting combination but that “I have learned not to comment on other people’s companies or marriages. They are never what they look like. ” Moving back to the commercial space he said Boeing was watching progress with Pratt & Whitney’s GTF closely: “Looks like Pratt is doing a nice job introducing it. We are watching with great interest as we look at the next generation narrowbody and widebodies. ” Asked if this meant a GTF on the 777X, he said he didn’t know: “I wouldn’t rule out their ability. But they have four develop-ments right now. ” He added that no deci-sion had been made on sole engine source for the 777X.