Company Watch - Boeing.


New York (AirGuideBusiness - Company Watch) Nov 18, 2012

Boeing has finished defining in broad terms its newest single-aisle airplane, the 737 MAX, recently completing a major milestone in development known as 'Firm Concept'. The company said the program transitions to finalizing configuration details by mid-2013. "The program has achieved this development milestone by defining the significant changes needed to deliver the performance we've committed to our customers," said Beverly Wyse, vice president and general manager 737 program. "The team has a firm plan in place to incorporate all the changes necessary to realize a 13 percent fuel-use reduction within the scope and schedule of the program." Fuel-use reduction changes include new LEAP-1B engines from CFM International, a redesigned tail cone and Advanced Technology winglets. Other changes allow these fuel-saving features to be integrated into the overall airplane design. Boeing also decided to incorporate limited systems changes to the 737 MAX. These include an electronic bleed air system that will be supplied by Honeywell and large-format displays, supplied by Rockwell Collins, for the flight deck of the 737 MAX. "In keeping with our commitment to customers to continuously improve the 737, we also are making an investment in the future capability of the 737 MAX flight deck with the new, more advanced displays," said Wyse. The 737 MAX flight deck will have four new large displays with significant growth capability while maintaining a common look-and-feel with the Next-Generation 737 display formats that preserves commonality with training across the 737 family. "With large-format displays we can offer our customers future capability in the flight deck as pilot and training needs evolve, giving the 737 MAX a competitive advantage and 737 MAX operators even greater value," said Wyse. The team also has defined the high-speed aerodynamic lines for the 737 MAX. Through analysis and testing conducted in high- and low-speed wind tunnels, the 737 MAX design team has further refined the geometric shape of the airplane, eliminating the need for the small bump on the nose-gear door that appeared in earlier design iterations. "Removal of the bump demonstrates how far our design work has progressed," said Michael Teal, chief project engineer, 737 MAX. With Firm Concept, the factory plan for the 737 MAX also has been defined. The factory plan includes a 737 MAX transition line where the initial 737 MAX airplanes will be assembled before integrating the new airplane into the existing 737 production lines in Renton, Wash. "The 737 MAX remains on track for first delivery in 2017," said Teal. "Now we are focused on the finer details of the configuration and we are confident we'll be ready to begin detailed design in mid-2013." Nov 16, 2012

Earlier this month, Boeing announced the delivery of its 7,370th 737, which flew off to new customer Lion Air of Indonesia on Nov. 5. Add to these 7,370 planes already delivered another 2,845 as-yet-undelivered 737s sitting in Boeing's backlog, and the 737 tops 10,000 units ordered quite handily. But that does pose a problem for Boeing. Boeing's most recent 10-Q filing with the SEC lays out the problem clearly. Boeing owes its customers 2,845 planes. It's currently producing the birds, however, at the rate of only 35 per month. That's up from 31.5 planes per month earlier this year, but even so, it means that Boeing's backlog on the 737 alone now runs to six years, nine months -- and that's if it sells not a single new 737. (In fact, though, sales of the new "MAX" variant are already through the roof, recently topping 900 units of this model alone.) On the one hand, that's a nice problem to have. There's not a lot of businesses out there that can guarantee you a rock solid revenue stream nearly seven years long. On the other hand, though, look at this from the perspective of the customer. Say you need a new plane now. Say you want to place an order with Boeing. How are you going to react to being told "get in line, we'll have it ready for you in... 2018"? Think you might give Airbus a call and see if they can turn around your order any faster than that? Think you might even give an upstart like Canada's Bombardier a chance to win your business, if they offer a sweet enough deal on a shiny new CSeries? You can actually see this happening, in fact, over in China, where Boeing's backlog on the popular 737 is likely contributing to the success of local plane builder Commercial Aircraft Corp, which just landed 50 new orders for its C919 regional jetliner. This week, domestic operators Hebei Aviation and Joy Air each signed up for 20 new C919s. Meanwhile, General Electric's GE Capital Aviation Services has doubled its initial order of 10 C919s. Boasting engines and avionics from recognized Western airplane parts suppliers like GE and Rockwell Collins, COMAC is even starting to attract interest from international buyers, including a sister airline of British Airways. So what's Boeing to do if it wants to keep its current customers happy, and not discourage potential new buyers? Simple: It must build planes faster. Already, the company has announced plans to ramp production up to 38 planes per month by early next year, followed by a jump to 42 planes per month in Q2 2014. The Boeing 737 Technical Site thinks they'll go even further, recently asserting that Boeing has a plan to open a new assembly line and increase production to 60 aircraft per month. That's nearly twice today's pace -- two entire passenger planes, fully outfitted, rolling off the assembly line every day. Incredible as that sounds, Boeing seemed to confirm the theory in a statement yesterday, noting that a new production line under construction in Renton, Wash., that will be building the 737 MAX will "eventually" be used "for future rate increases." According to the company: "We don't have any specific plans when that next rate increase will be, but we're pretty sure it's coming." For the record, investors seem to see a big opportunity coming, too. Wall Street analysts expect to see double-digit profit growth at Boeing over the next five years. But the Foolish question to ask here is: What if it doesn't come? What if the growth of the global air travel industry gets delayed? After all, it's not as if it's all that hard to cancel even a supposedly "firm" order in the airline business. Why, just a few months ago, Qantas wiggled out of an order for 35 Boeing Dreamliners, citing little more than a "change" in its "circumstances." And it's not only Qantas finding its need for new planes may be less urgent than it once thought. Last quarter, revenue at Delta Air Lines grew a bare 1% in comparison to the previous year. Sure, China's doing better than that. But rumbles of an economic slowdown can be heard even over there. If you take Chinese travel agency as a rough proxy for the industry, for example, well, revenues were up 20% at Ctrip last quarter. That's a good number. Don't get me wrong. But does even a 20% growth in business in China justify predictions that Boeing will need to nearly double the rate at which it builds its planes to keep up with demand? Seems to me, the danger here is that Boeing cold be overbuilding to satisfy demand -- demand which may evaporate in the absence of a strong economic rebound. Nov 16, 2012

Cathay Pacific announced a long-term fleet renewal program in March 2011 that would see it ordering new aircraft in order to gradually retire its older Boeing 747 aircraft. Although able to bring forward the dates for retiring some of these jet, others will remain in service for about another five years. During this time, the aircraft will be partly retrofitted with a new economy and premium economy, but with business and first class remaining on board until the aircraft are retired. It means there will continue to be an inconsistency in the business class product, with a mix of the new business class on the long haul fleet, and the herringbone-style seating. Cathay has completed revamping its long-haul products, the airline has now moved on to regional products. This will include improvements to both business class and economy. He added that the changes made to CathayOs regional products will also be considered for its sister regional airline Dragonair. Cathay's aim is to have all aircraft on flights of more than eight hours offering a premium economy product. The long-haul fleet is going to evolve into a four-class and three-class. When itOs a three-class aircraft, it will be without first class, so premium economy will be available on all long-haul jets. For Cathay, Australia is considered long haul, and will certainly have premium economy, while Japan is considered regional and it will only be offered on select flights. The Middle East, at around seven hours, represents a grey area, so premium economy may be provided on some aircraft. Also, Cathay sees premium economy as a superior version of economy class, rather than an inferior business class product. Nov 16, 2012

UATP and the Latin American and Caribbean Air Transport Association (ALTA) will host Airline Distribution 2013, the interactive global forum dedicated to distribution issues facing today's airline industry. Airline Distribution 2013 will take place 16-18 April at the InterContinental Miami. "Airline Distribution is an excellent opportunity for attendees to learn from industry experts and their experiences with today's complex distribution issues," said Ralph Kaiser, President and CEO, UATP. "We look forward to hosting this forum with ALTA. With more than three decades of experience in the industry, ALTA will provide an immeasurable amount of knowledge and information to the attendees." Airline Distribution is UATP's annual conference that focuses on significant distribution issues affecting airlines worldwide. It is a neutral forum that allows attendees to contribute...

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