Wednesday, August 9, 2017

The Culture of Demand Chapter 4. Orders and Deliveries, The Tip Of The Iceberg.


We are talking about airplanes here and not cruise ships hitting Icebergs.  However, it’s so important to be World’s Biggest at something. May as well be at airplane making and Boeing remains the World’s Biggest deliverer of airplanes. Which is good only if enough backlog exists for that YOY status report. Airbus once was World’s Biggest until Boeing built more production and infused the 787 line found in two cities while taking a page out of the Airbus play book.

Image result for 737 and Iceberg

So Orders do eventually matter over time and Airbus has so many it can’t build airplanes fast enough or can it deliver to not so happy customers in waiting. Boeing says production is the key to its nirvana in Seattle. Airbus says we have more orders than Boeing every day somebody is listening. I hope no one wants an airplane soon from Airbus. This chapter could go on forever as Airbus is building about 90 WB‘s a year and Boeing is building about 175 WB’s a year when including 767, 787,777 and 747 types. Airbus has its A330, A350 and A380 lines churning as fast as it can.

The most important note, if taking notes is that a delivery = CASH! Orders equals bragging rights. Boeing beats Airbus with its cash account and Airbus just brags a lot even after Airbus John Leahy retires. 

The main thing for Airbus is that if it can’t deliver in a timely manner it will lose orders and customers. Those are called cancellations. This is a big Airbus metric to watch.

Boeing is a producer and that makes airline customers happy. A customer can get a timely delivery from Boeing and a customer can delay a delivery when it wants to as Boeing has a fairly stable backlog (unfilled orders). The definition of backlog is unfilled orders from customers who happen to have ordered. Airbus has an immense single aisle backlog greater than Boeing’s single aisle backlog. Airbus needs to build single aisle with more production, and it must keep suppliers happy too by not overburdening the parts supplier into oblivion. 

Airbus tried a new tack, duo engine offering for its A320. All went well when one engine maker stumbled. The P&W gear driven jet engine has teething woes much like what the 787 went through when exposing its own all new technology after the first 787 delivery. The P&W engine is often parked on a factory bench for further inspection and repair.

Airbus is having supply chain issues and engine issues when it should be delivering 70 single aisle A320’s a month. Instead, it is shooting for 60 A320’s a month. It only delivers about 5-7 A350’s a month. Boeing delivers about 12, 787 a month. It also delivers copious amounts of 777-ERs which is a very big dual aisle aircraft. In fact it is running out of 777’s work orders as a diminishing 777-300ER backlog is a backdrop to the 777X program. Boeing should be fine if it executes the 777X program well after the 777X first delivery.

The main thing both manufacturers face, are the business Icebergs creeping up on its supply chains, engine makers, and fickle customers. If either airplane maker strikes one of those Icebergs it will be hard to deliver its customer a value, I only mean the commercial airline (customer). The commercial carrier so desperately needs to deliver value to its own customers, you them as passengers and so forth…