2016-05-19 11:11:54
Building a new plane to take on Airbus would be a huge risk for Boeing
May 14th 2016 | SEATTLE
BOEING S factory at Everett, near Seattle, is the largest building in the
world, as befits the world s biggest planemaker. From within its cavernous
halls a new passenger jet emerges every working day. After an empty fuselage
enters at one end of the factory, it can take as little as a month for some
models to emerge as a working aircraft at the other end. Still, Boeing s lead
in the field of commercial airliners, which looked almost unassailable a decade
ago, is under threat from Airbus.
Since 2012 the European firm has won more orders than Boeing, and may
eventually outpace it in annual deliveries. For Boeing, which celebrates its
centenary this year, staying ahead of a competitor which has been in business
for less than half that time is a matter of pride as much as it is a commercial
imperative.
One option under consideration at Boeing is to build a new plane for the
middle of the market , to replace its ageing 757. An aircraft that would carry
between 220 and 280 passengers on routes up to 5,000 miles would plug a gap in
its fleet, between short-haul narrow-body jets and wide-bodied planes for
long-haul travel. But Boeing should be wary of the risks involved. Airbus has
outclimbed its American counterpart largely because Boeing made such a mess of
developing another new plane, the 787 Dreamliner, a long-haul jet that entered
service in 2011.
The Dreamliner programme, announced in 2003, was supposed to cost $6 billion
and see the plane take to the air in 2008. The final bill was closer to $32
billion; and the 787 arrived three years late, the result of a combination of
technical failures and supply-chain snafus. With engineers, designers and other
resources diverted into getting the Dreamliner aloft, plans for the rest of its
fleet were delayed.
That gave Airbus an opportunity to take a lead in narrow-bodied jets. Boeing s
737 and Airbus s A320 family of planes typically carry 120-200 passengers on
shorter hops of up to 3,000 miles. These planes are the biggest sellers at both
firms. Two-thirds of the planes delivered by Boeing last year and nearly
four-fifths of Airbus s were narrow-bodies.
In 2010 Airbus took Boeing by surprise with the announcement that it would
update its A320 with new engines and tweaks to its design, making it 20% more
fuel-efficient than previous models. Preoccupied with the 787, Boeing was slow
to respond with its own revamp, the 737MAX. Airbus now has 5,479 orders for its
family of A320 planes; the first of the A320neos entered service this year.
Boeing has just over 3,000 orders for its new plane, the 737MAX, which is not
destined for first delivery until next year.
Boeing s troubles with the 787 also helped Airbus in the market for wide-bodied
jets. Boeing remains ahead of Airbus, with 1,357 orders for its fleet compared
with 1,267 for Airbus s range. Although the pair sell far fewer of them,
wide-bodied planes bring handsome rewards. Some 80% of Boeing s revenues came
from wide-bodies in 2014, though they account for just a third of production by
number of planes. The delays and cost overruns of the Dreamliner programme mean
that, although it is selling well, it is not profitable and a write-down is
likely. There have been knock-on effects: a new variant of Boeing s 777, the
777X, is not due until 2020, giving Airbus s A350 time to win orders.
Analysts think Boeing s engineers have enough to do until 2020 revamping the
737 and 777 successfully, without other distractions, says Jason Gursky of
Citi, a bank. And the damage inflicted by the 787 will make Boeing think twice
about designing a new plane to sit between its long- and short-haul models.
Airbus s experience with the A380 superjumbo, developed at huge expense but not
yet with enough orders to justify its existence, offers another warning. It is
also unclear that the market will be big enough to justify a new plane: some
airlines are already ordering long-range versions of Airbus s A321neo or
smaller versions of the A330 to plug the gap. (Putting a new engine on the
plane, a much less risky option, is impossible with the 757, because the
airframe is too old to accommodate new fuel-efficient engines.)
Cutting aside
Other routes to boosting Boeing s market share lie open. Cost reduction is one.
Airbus out-competes Boeing by using a fifth fewer employees to build each
plane. So Boeing is slimming. In March the firm said it would cut the workforce
in its commercial-jet division by 10% a loss of 8,000 jobs and investors are
demanding more. Machines are replacing manpower: robots rather than humans now
rivet together and seal the wings for the 737 and 777.
Changing working practices will improve productivity too, says Walter Odisho,
Boeing s vice-president for manufacturing. Moving production lines of the sort
seen in car factories are being rolled out by the planemaker in Seattle. And to
save time workers spend walking round the factory floor, employees are being
given hand-held computers and automated trollies, so they can communicate with
their managers and get the tools they need without stepping off the production
line.
The planemaker says that it is unlikely for several years to take a firm
decision on whether to proceed with a new plane. But Boeing has two overriding
instincts: developing new planes and beating Airbus. It will need to resist the
first for a while in order to do the second.