Sunday, November 23, 2014

Airbus Had a Week

It was all about the window and not the aircraft, so Boeing would reel back and commiserate as Airbus took in 17 billion in orders last week. Especially the Delta Airways order really bites. It's a slap across the chin in French fashion. All because of a window? That is correct, you can have the best offering of aircraft the most advanced, but other important items are in play, and it has nothing to do with what's best or the most efficient equipment. That window is the year 2018. Much like an "end of the year car sales" Timing is everything for a customer.  It is the "window of time" I am talking about, that bites Boeing. Here are a few check list items met by Airbus that Boeing couldn't touch. 

  • Delivery window for Airbus is right where Delta Airlines needs it.
  • Price for those deliveries were revamped with its A330 NEO and a sweet deal on the A350.
  • Fleet renewal capitalization window for Delta had its cash ducks in a row in a narrow time.
  • Fleet expansion/operations inconvenience, and training window mitigation had to be exact.
  • 787-9 orders could be bumped further back into limbo.
  • Decision includes a certainty for meeting corporate goals and objectives within this window. 
In spite of all the wonderful things Boeing could offer, the Airbus deal was destine to fit Deltas corporate sensibilities? Boeing's Achilles heel was exposed as mentioned in an earlier blog. Boeing has done a masterful Job of loading the 787 order book up leaving it stuck in the cement of backlog. The only way out is to build more 787's faster. Airbus looks at this predicament and chuckles. Boeing has outdone themselves in catching up. Now Airbus can cherry pick on Boeing's heel. Delta Airlines is a case in point. Pin prick and cut Boeing with a thousand slices until it bleeds out.

However, Boeing knows this, as lessons again were learned during this week on the Delta Airlines deal. Boeing was squeezed out of Delta's delivery window and Airbus stepped in.  The answer is found on the production floor. They will need 12, 787 a Month sooner rather than later. They will have to stop Airbus from cherry picking around the “Time Window". The "Air War" is reaching a fever pitch in the market place. Boeing needs a bigger window (of time) throughout its line of aircraft. They need to synchronize with its customers and regain some order book flexibility relevant with any Airbus' timeliness.

The competition is after Boeing's backlog situation, not the aircraft performance metrics. Even those metrics are very important to operations and advertisement departments, but the other side of the buy quotient is the time window. Which can negate those advantageous operational metrics when competing advantages are slim. Boeing has lost the Time window in this case and it needs to gain it back. It is a difficult task measuring a backlog build-up. When you have over 837 units yet to be built. It's a balancing act with corporate goals, aircraft model perceptions, and competitive advantages at stake.

  • Boeing needs a big backlog for Stock Holders
  • Boeing need a smaller backlog for customers who are ready to order
  • Boeing needs a bigger backlog for bragging rights, and advertising
  • Boeing needs a smaller backlog, accommodating more market flexibility
  • Boeing needs a bigger backlog optimizing plant production and lowering production cost
  • Boeing needs a smaller backlog as it has saturated its capabilities with orders.
Without intensive study on this matter you see Airbus in the smaller backlog position and Boeing in the higher backlog position. Somewhere in this observation Boeing is tasked with controlling the backlog. It can only be done on the factory floor. Boeing must aggressively market its family of aircraft. It must not turn an order off from a Boeing offer. It must have its foot on the throttle and take on all orders in a timely fashion. The problem lies in its production capacity, and how it can lay-up on its production or increase it for more deliveries. It has to have the same commitment and flexibility with its suppliers. This build up model becomes complex and Airbus has thought long and hard on how it can expose Boeing. It has done so with the Delta order. Delta assented with its 14 billion dollar order.

Boeing must build its production lines handling a five year backlog at maximum, and a three year minimum. That backlog can be feathered by using lower or increasing monthly production numbers achieving a five year optimal plan. Boeing has done this to some extent with its extra 787 line in Everett, WA. and its plant expansion in Charlotte, SC. However, if they take on a slug of more 787, 737 and 777 orders in the next two years, they will have to re-work production capacity to remain competitive from the window of time perspective. If the factory pace goes beyond five years from an increase of sales, and enters into seven year back log category, they will need to increase production taking the backlog back to five years levels or lower.  Otherwise they will be exposed by Airbus again. 

Boeing can win the Air Wars if they have an effective change management plan where flexibility is the core function. Having the square footage, equipment, and supplies at the ready for any implementation of plant and facility change needed, at the drop of a memo.

It should read,

  • We need 52 a month 737's for the next six months and further, 
  • We need 12 a month 787's this year
  • we need 10 777's fiscal 2020 all generations
"do It!"

cc "Everybody"

I believe that memo was sent several years back at Boeing. The Delta Airline deal with Airbus is a “too little too late” for Boeing.