Tuesday, April 19, 2016

Parts N Stuff Delay Airbus in Pursuit of Boeing

Remember when Boeing had parts issues then battery issues and so forth. Well Karma comes around as a self-predicting outcome even for Airbus as it houses 24 NEO's and a half dozen A350's within its vast holdings in Europe. The tight dogfight between Boeing and Airbus suggest Boeing will once again out deliver Airbus during 2016.  The parts bin and technological development has stumbled Airbus into a P&W standoff for single aisle A320's as newly run A320's sit idle awaiting its PW engine upgrades.

The ticking clock will build its parking lot into a massive headache. Boeing lined up its unfinished 787's outside on Paine Field until moving some into Change Incorporation and Re-work warehousing. They have just cleared the last of those obstinate first builds from the rain swept tarmac since 2011. Five years later Airbus becomes a lady in waiting and waiting for seats, parts and engines.

It will skew the Airbus cash flow and dash another year for its hopes of becoming the world's largest airplane maker. Two different continents two different results tests the respective airplane makers on how they handle the hick-ups. Boeing has cleared its forest of problems from the last decade. Airbus has just entered into the "issue zone" during a time of critical order making for both giants. Any delay with delivery can handicap Airbus during this year and it has already during the first four months of 2016  made it impossible to catch-up with Boeing as it has already hit its stride of twelve 787 a month production pace. Next time Boeing increases single aisle production, it will be at a 47 airplane a month rate.

Boeing has made it the key talking point of its strategy making more airplanes than its competitor. It realized during 2010 the NG series needed a production change since it was losing sales to Airbus from a pure backlog point of view. They sought a level of backlog that would benefit the customer ordering pattern within a customer's five year plan. Both the 737 and 787 backlog fell outside this five year window causing the wait time to be a critical part for gaining additional sales.

Airbus has already begun a reaction with Boeing's production onslaught and has set its production goals upward meeting the demand within a relative time frame for its customers. The problem for Airbus that its own supply chain is having teething woes, not the Aircraft. The critical moment is 2016. Airbus needs to sort out game changers like seats and other critical parts in order to compete with a fully operational Boeing production stream. 

The production forecast is as important as the ordering forecast as it will give opportunity for its customers if delivery matches market demand. This is a long held observation in the dynamics of production and sales relationship. Henry Ford first mass production of its automobile made production the key selling point for its Ford motor car. A customer didn't have to wait and it could own a car meeting a superior standard in a short amount of time.

Boeing referred back to the industrial age early in the 20th century. Build it just in time, creating cash flows and advancing efficiency at a higher rate than its competitor. Airbus is struggling at this time five years after Boeing struggled and now the comparison will be if Airbus recovers faster than Boeing did during the next five years.