Report that Boeing has Initiated RFP’s for 777x Production Sites
This is a brief follow-up commentary associated with Boeing’s current efforts in exploring a production site for the newly announced 777x aircraft which is being developed and planned to transport upwards of 400 passengers. Our last specific commentary related to the new 777x noted Boeing’s threat to source design engineering and perhaps production outside of Seattle unless the company could get a supplemental longer-term agreement from its labor unions on wage and benefit costs. Reports further indicated that lobby efforts with the State of Washington resulted in a package of tax and other incentives valued at $9 billion through 2040 in order to keep the bulk of the 777x program activities in the state Washington.
We were reviewing our various Internet focused content alerts earlier in the week and ran across an Associated Press syndicated report that indicates that the Governor of the state of Missouri is calling back legislators to consider additional governmental incentives in hopes of persuading Boeing to source 777x production in that state. The report indicates that the state faces a December 10 deadline to submit its proposals to Boeing. Obviously other states are bidding for the same massive prize, and the AP article quotes a Boeing spokesperson as indicating that requests for proposals were sent to a dozen locations. The states of Alabama, California, South Carolina, Texas and Utah are among states reported as having discussed efforts to recruit Boeing. The process kind of smacks of an auction, namely who will provide the most lucrative cost incentives.
Another irony is that the majority of the states mentioned already have a significant presence from Boeing, including Missouri, which is where portions of defense related production reside. A previous report from the Wall Street Journal cited Huntsville Alabama, Long Beach California, Charlstown South Carolina and St. Louis Missouri, among two other locations as designated design engineering sites for the new 777x program. That list seems to correlate with the listing of potential states bidding for production, thus co-location of design engineering and production appears to be under consideration.
One of messy and perhaps bitter aspects of the 787 Dreamliner program was Boeing’s decision to open a second production facility in Charlstown South Carolina because of needs to dramatically step-up production in a three year delayed program. Upon the announcement, Boeing’s principle Seattle based labor unions filed a petition with the National Labor Relations Board (NLRB) alleging that Boeing was sourcing to avoid a union workforce and collective bargaining. The NLRB later ruled in favor of union arguments and that apparently remains as an overhang of tensions among both parties.
Let’s hope that this type of scenario does not again play out with the 777x. In any case, the drama as to what the supply chain of 777x turns out to ultimately be has many chapters to follow.
A well-known principle in public relations is that when companies have some bad news to share, it is best to do so late on a Friday or in the early weekend when business and general media is taking a breather. When it comes to Boeing and the 787 Dreamliner program, it seems that Friday and the weekend has consistently been utilized to make news releases.
This weekend, Boeing formally advised its customers of an icing risk on its new 747-8 and 787 Dreamliner aircraft, which will cause certain airlines to alter flight routes. The problem is specifically associated with aircraft engines powered by General Electric, after six reported incidents when GEnx engines suffered temporary loss of power at high altitude because of ice crystal build-up in these engines. Boeing has advised all 15 operating carriers to temporarily avoid flying these aircraft near the threat of high altitude level thunderstorms.
Thus far, Japan Airlines has elected to remove 787’s from two international routes that have risks for high altitude thunderstorms, substituting different aircraft. Other affected airlines will probably follow with altered scheduling and replacement aircraft. Meanwhile both General Electric and Boeing continue to work on the fix to the problem.
It seems that the 787 program continues with disappointing news and the repercussions for customers and for Boeing and its supply chain partners continue.
In the category of what can only be described as bizarre, general, business and social media amplified this week’s incident of a massive cargo plane that landed at the wrong Wichita Kansas airport.
The story has very obvious supply chain related connotations since the modified Boeing 747 Dreamlifter aircraft was actually an integral part of Boeing’s 787 Dreamliner transportation and logistics replenishment network. This aircraft is one of four 747’s modified to haul aircraft body and wing parts between Boeing’s supplier factories across the globe. Readers will recall that the 787 supply chain extends globally with major suppliers in both Europe, Japan and other countries.
The plane was operated by Atlas Air Worldwide Holdings departed New York’s JFK International Airport on Wednesday for its scheduled flight to McConnell Air Force Base, which is adjacent to Boeing’s major aircraft structure supplier Spirit Aerosystems. The aircraft was cleared to land but mistakenly landed at the much smaller Jabara Airport, about 10 miles to the north. Communications between the flight crew and air traffic controllers indicate that the pilots were confused as to which airport the plane had landed. There is another adjacent airport to the south of McConnell. In its reporting of the incident, the Wall Street Journal included excerpts from the air traffic transcript which indicate the pilots initially believed that they has landed at the Beech Aircraft Factory Airport to the south.
In a credit to collaboration and ingenuity, both Sprit and Boeing devised an alternative plan to fly the aircraft from the smaller airport that did not have adequate runway length. Apparently a new flight crew was flown in to pilot the aircraft and achieve takeoff from the rather short runway with no local airport air traffic assistance. A massive modified tug was brought over from McConnell to turn the aircraft around in the smaller runway, but it reportedly broke-down, but eventually made it to Jabara. The aircraft successfully took-off on Thursday afternoon and landed at nearby McConnell to unload its cargo.
In past times, this particular incident would not have gained such global and instantaneous visibility. With so many airports close by to its destination, mistakes can be made. There is no doubt that the flight crew is embarrassed and will be subject to some scrutiny and perhaps punitive measures. However, this new era of round the clock news coverage amplified by the power of social media had the images and byline of a stranded cargo plane noted everywhere, and made this incident even more concerning.
Supply Chain Matters recently echoed newly voiced concerns penned in a Wall Street Journal editorial by noted pilot Sully Sullenberger who questioned whether air cargo crews may perhaps be working excessive hours with important and worrisome signs of fatigue. Luckily, this week’s incident had an eventual positive outcome. Both Atlas Air and Boeing however would be wise to insure that a thorough investigation is undertaken to determine what actually happened and how such a fundamental error actually occurred. This could have had a more tragic outcome.
In our past commentary we asked readers for comments as to whether they were concerned or have observed signs of air cargo pilot fatigue. The same question continues.
Aerospace industry supply chains had a significant event this weekend, one that will resound for years to come. The event was the Dubai Airshow, and there were two significant industry statements that will have long-term industry implications.
The first was a significant statement from certain Middle East’s Gulf airline carriers that they intend to be a dominant force in international airline travel in the coming years. That statement involved the placing of in excess of $150 billion in aircraft purchasing power with aerospace manufacturers. That is indeed a considerable statement of both intent and global customer influence.
Boeing was a major recipient, receiving what is reported to be $100 billion in new aircraft orders from four Middle East Gulf carriers. Boeing utilized the event to formally launch the development of the new 777X aircraft and by booking orders and commitments for 259 of this aircraft. Orders received involve two models of this new long-range aircraft capable of transporting approximately 350 to 400 passengers per plane. The 777x family includes two models: the 777-9X and the 777-8X. Each model of the 777x aircraft has a list price in the range of $350 million -$378 million. The orders came from three Gulf based carriers: Emirates, Etihad, and Qatar Airways. Dubai based Emirates which is already noted as the globe’s largest operator of 777 family aircraft, alone ordered 150 of the new 777x valued to be in the range of $76 billion. The orders were in addition to a previously announced deal for 34 777x planes from German based Lufthansa which was announced in September. In its reporting, the Wall Street Journal tagged the 777x announcement as “the largest product launch in commercial-jetliner history.”
Current plans call for deliveries of the new 777x to begin in seven years, around 2020, even all goes according to schedule.
Boeing further landed an order for 30 additional 787 Dreamliners from Etihad, which is reported to make this carrier the ultimate largest operator of the 787 when all are operational. Budget carrier Flydubai placed an order for 86 new 737 single aisle aircraft.
Airbus was also a recipient, landing orders for 50 of its new A350 aircraft while Emirates announced that it is buying an additional 50 of the gigantic A380 aircraft estimated to be in the range of $23 billion in order value.
Another major benefactor of this weekend’s orders was General Electric and CFM International. The consortium landed commitments for aircraft engines and services value to be $40 billion at list pricing. Among the highlights was an Emirates commitment for 300 GE9X engines valued at approximately $11 billion to power the 777x which GE describes as “the largest ever commercial jet engine award from an airline.” CFM International, the joint venture of GE and France’s Snecma (Safran) was the recipient of orders for 450 of its LEAP engines. Both aircraft engine producers now have a record backlog of orders.
Over and above the flurry of announcements regarding new equipment orders are other important implications which will collectively make up the second significant implication from this year’s Dubai airshow. The Associated Press and Yahoo Finance reported that with almost $78 billion in purchasing commitments, Emirates has cemented itself as Boeing’s and Airbus largest and most influential airline customer for years to come, one that will be favored by each of these aerospace OEM’s. Upon review of the order split among both OEM’s, Supply Chain Matters is of the believe that Emirates is also practicing proactive risk management by splitting its orders for replacing its existing fleet of intercontinental aircraft among both a yet to be designed and delivered 777x from Boeing, and more advanced staged A350 and A380 aircraft from Airbus. The A380 is already a released and operational aircraft while the A350 completed its first maiden flight in June. The industry track record for development and producing an aircraft of the size and technological complexity of the new 777x is fraught with multi-year delays from both of these global OEM’s.
The other statement coming from this weekend is what the Wall Street Journal reported (paid subscription or free metered view) as a crucial part of both the Emirates and Etihad 777x deals with Boeing. A joint venture with Mubadala, an Abu Dhabi government-owned conglomerate calls for Boeing to add its technical expertise in making advanced composite materials for jets utilized in the UAE. It is reportedly part of a broader effort to increase the presence of aerospace technology production in the region and add advanced technology manufacturing to existing economies of the region. While specific details are lacking, the effort could lead to added local sourcing of suppliers in this region, the type of deal that Boeing made with crucial Japan based airlines for the 787 Dreamliner program, that led to significant sourcing in that region.
Boeing is already in the midst of a controversial negotiation with its Seattle based labor unions over ultimate engineering and production sourcing of the 777x. The principle labor union in Seattle has already turned-down Boeing’s latest offer for a multiple-year labor agreement extension that could extend for as much as seven years. That leaves the ultimate decisions for engineering and supplier sourcing, along with final assembly up for grabs. As noted in our most recent Supply Chain Matters commentary related to the 777x, current public threats by Boeing to source major design engineering outside of Seattle along with major sourcing decisions related to the production sites provides shades of whether past supply chain related learning of multi-year program delays and snafus with the 787 program have been internalized.
November 2013 is a significant customer related milestone for certain aerospace supply chains. It represents the implications of the emerging prominence of the Middle East Gulf airlines and their growing influence on certain aerospace supply chains for many years to come.
On Supply Chain Matters, our principle goal in the various commentaries we pen regarding global based supply chain developments is to provide insights for our readers. Our intent is not to disparage any single company or organization but to help readers and students of supply chain management relate supply chain, product management and information technology developments to key learning.
If you search our content on the topic of Boeing, you will discover a lot of commentaries. Boeing’s past efforts in outsourcing major portions of product value-chain have resulted in a lot of snafus, or so it seems so. The Boeing 787 Dreamliner program will no doubt serve as a living case study as to lessons in outsourcing.
Thus, it was with some surprise yesterday when we were alerted to a Reuters published article, Boeing to place much of 777X design work outside of Seattle.
Apparently, Boeing senior management has endorsed the decision to source a significant amount of the design work related to the company’s next generation wide-body aircraft in areas outside of Seattle. The 777x is speculated to be able to transport over 400 passengers and Boeing has been reportedly aggressively promoting this aircraft to Asia and Middle East based air carriers.
The designated design sites are to be Charlestown South Carolina, Huntsville Alabama, Long Beach California, Philadelphia Pennsylvania, St. Louis Missouri and Moscow, Russia. What’s interesting about this news is that Boeing indicates that no decisions have been made regarding the involvement of its Puget Sound engineering teams, home to the core design group.
Is this the same group that was marshaled to fix the numerous problems that were encountered on the 787, including the operational grounding?
Boeing has reiterated that no final decisions have been made regarding the sourcing of production operations of the 777X although speculation revolves around the Charlestown facility. One would have surmised that a lesson from the 787 program was the importance of co-locating engineering design with manufacturing, especially during the critical development phases. The Reuters story hints strongly that the engineering design decision was more about migrating work to lower-cost, nonunion states. Reuters further speculates that the timing coincides with efforts to lobby the state of Washington on tax incentives to source 777X design and assembly work in Everett Washington. The Governor of Washington state reportedly only knew of the announcement at the time of the Reuters report.
Boeing re-iterates that it would apply “lessons learned” from the 787 and 747-8 programs, and that bringing skills from across the company will foster more efficient use of engineering resources.
We certainly hope so, but then again, the timing and tone would indicate different motivations.
The glitches surrounding operation Boeing 787 Dreamliner aircraft have once again landed in media. An underside body panel apparently fell off a 787 Dreamliner operated by Air India as it made a landing on Saturday, the latest glitch for the high-tech jetliner. According to officials, an eight foot by four foot (2.4 meters by 1.2 meters) section of fuselage fell from the underside of the jet as it landed landed within the perimeter at India’s Bangalore airport.
According to a posting from the Times of India, the aircraft was enroute from Delhi to Bangalore with 148 passengers on-board when this incident occurred. The aircraft itself was the ninth delivered to Air India and according to the Times report, had just recently entered service. The article includes a picture of the gaping hole which is described as the AC bay. However, by our view on just glancing at the picture, it would seem that a whole lot of fasteners would have let go. The Times article makes further mention that Air India had experienced problems with the interior electric ovens used for food preparation.
Both Boeing and Air India have indicated there was no safety risk for the passengers while Boeing continues to investigate this incident.