8 ms·

The $15B jet dilemma facing Boeing’s CEO

45 points by samizdis 5y ago

rossdavidh 5y ago
So, they were in a real bind with the 737MAX crashes. Airbus looked likely to take away all new sales, while Boeing had no time to get a replacement ready. Then, the pandemic resulted in a more than year-long delay in most airplane sales. It appears that Boeing has used this "time out" to...do nothing. They are in more or less exactly the same situation they were in over a year ago. This looks like GM in the late 1970's.
- hyperbovine 5y ago
  In fairness, lots of us got nothing done during the pandemic.
  - rossdavidh 5y ago
    Fair point.
- iSnow 5y ago
  Are we really sure they are not working on a next-generation plane behind the scenes? I doubt they would just sit there and do nothing after the MAX fiasco.
  - zardo 5y ago
    IIRC their development cycle for a ground up design is about 30 years.
    - pmcollins 5y ago
      from wikipedia’s 747 article: > Boeing agreed to deliver the first 747 to Pan Am by the end of 1969. The delivery date left 28 months to design the aircraft, which was two-thirds of the normal time. surely they can do a ground up design in under 5 years?
      - bobthepanda 5y ago
        The 747-8 was announced in 2005, and started passenger service in 2012. Planes have increased in complexity in the last 50 years. It is legitimately very difficult to make a plane as cheap and efficient as airlines want, and as safe and (relatively) quiet as regulators want. Boeing and Airbus are not a duopoly because of a lack of attempts. And even they screw up; the 747-8 and A380 turned out to be duds because they were too hard to fill and four engines needs more fuel than two.
    - iSnow 5y ago
      Going by Wikipedia, they saw the need for a new plane (the later named 787) by the late 90's, announced it in 2003 and delivered the first plane in 2011. https://en.wikipedia.org/wiki/Boeing_787_Dreamliner https://en.wikipedia.org/wiki/Boeing_787_Dreamliner
- AnimalMuppet 5y ago
  They got the MAX flying again. So, quite a bit more than "nothing".
  - ChuckMcM 5y ago
    While true, getting the MAX flying was a business continutity thing (I suspect, but can't prove obviously, that they would end up divesting their passenger jet division if they had to write off the MAX in its entirety) But it is also true that what is going on inside Boeing is not exactly visible to people outside of Boeing. Further, ripping out a previous process and replacing it doesn't really generate externally visible signs, typically it is visible by better results.
Gravityloss 5y ago
I wonder how the planes looked and how the investment in a new aircraft vs operating an old one looked like if the fuel price increased a lot, because of emissions regulation. I understand now fuel is really cheap and is not taxed (compared to for example private cars). Boeing could design an efficient airliner and then use its political muscle to get strict emissions regulations going in the US at least.
- BitwiseFool 5y ago
  When is a more fuel-efficient jet not a good idea?
  - MattGaiser 5y ago
    When fuel is so cheap that the capital expenditure is not worth the cost of the new jet.
    - BitwiseFool 5y ago
      True, and I'm no expert in planning but here's my thinking. Fuel can only get so cheap, but there's no limit to how expensive it can get. So while the capital expenditure will be high, the odds of fuel getting much more expensive down-the-line is almost certain, no?
      - MattGaiser 5y ago
        > the odds of fuel getting much more expensive down-the-line is almost certain, no? Not really. Jet fuel prices peaked in 2008, without adjusting for inflation. [0] So fuel consumption has been a lot less important over the past few years. It is also questionable whether carbon taxes will be placed on jet fuel in many cases. At least in Canada it tends to be exempt. [0] https://transportgeography.org/contents/chapter5/air-transport/jet-fuel-prices/ https://transportgeography.org/contents/chapter5/air-transpo...
      - FredPret 5y ago
        Correct, but there’s another cycle on top of this - resource production. More expensive fuel, more intensive oil exploration and refinement. Make oil expensive enough and Shell et al will find hydrocarbons offworld if need be.
FridayoLeary 5y ago
Seeing as its a duopoly, i don't understand why boeing are unsafe sitting back, smugly safe in their mediocrity.
- MattGaiser 5y ago
  Even a duopoly can turn lopsided if one sucks more than the other.
- mikro2nd 5y ago
  Perhaps because it's in the process of becoming a triopoly as Chinese investment in airliner production ramps up?
  - selectodude 5y ago
    China is still 25 years behind on jet engine development.
    - estaseuropano 5y ago
      Isnt Boeing too behind on engine development and just buys them from RR?
      - SonicScrub 5y ago
        Not just Boeing, every aircraft manufacture does this. Many aircraft clean-sheet designs are done as a technology partnership with a major engine manufacture such as Pratt & Whitney, Rolls Royce, or General Electric. And that's pretty much how it's always been done. It's as ludicrous to say "Boeing is behind on engine technology" as it would be to say Ford is behind on their silicon chip manufacturing.
        coredog64 5y ago
        The 777 was enabled by the new, super high powered GE-90s. The size of those engines needed to be taken into account at the initial design. Or, to kick HN's favorite Boeing whipping boy, the 737 MAX can't have new engines, only improved SNECMA ones, because the knock-on effects of changing the nacelle size/location would be such that you might as well design a new airplane.
neonate 5y ago
https://archive.md/BQKj5 https://archive.md/BQKj5
hindsightbias 5y ago
If your drawing board has been blank for the last 6+ years and the next 5-10 years then your only strategy is for the gov't to keep you afloat.
- genmud 5y ago
  We have tried nothing and have run out of ideas!
jetrink 5y ago
There seems to be an assumption that if Boeing is allowed to fail, no other American company or companies could ever fill its place and compete with Airbus. Is this really the case? Boeing had to get the Commerce Department's help to kill Bombardier, a Canadian aerospace company, when they couldn't compete with its narrow-body airliner. Boeing lost to SpaceX, a young company, in the Commercial Crew Program.
- sofixa 5y ago
  Commercial aircraft is a very know-how and capital investment heavy business with huge risk and long lead times. The number of companies that could replace Boeing is very small ( Lockheed Martin, maybe General Dynamics) and none of them seem to want to ( Lockheed exited the business decades ago).
- tw04 5y ago
  I don't think the US is willing to risk the disruption to the military pipeline if they were to fail. You would literally have to have a "planned breakup" that would likely take a decade to dismantle. Bankruptcy isn't an option. Could it EVENTUALLY be replaced by other companies? Sure. Would the US military be OK having their logistics on weapons disabled for 12+ months? Seems unlikely.
  - dingaling 5y ago
    Boeing's military division is discrete from commercial with the exception of the P-8 and KC-46. Not just geographically but also in terms of inherited knowledge and philosophy.
  - bryanlarsen 5y ago
    Why is bankruptcy not an option? The government would never allow a chapter 7 (liquidation), but a chapter 11 (reorganization) bankruptcy should not significantly disrupt operations.
    - throw0101a 5y ago
      See also Chrysler and GM: * https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reor... * https://en.wikipedia.org/wiki/Chrysler_Chapter_11_reorganization https://en.wikipedia.org/wiki/Chrysler_Chapter_11_reorganiza...

45 points by samizdis 5y ago

So, they were in a real bind with the 737MAX crashes. Airbus looked likely to take away all new sales, while Boeing had no time to get a replacement ready. Then, the pandemic resulted in a more than year-long delay in most airplane sales. It appears that Boeing has used this "time out" to...do nothing. They are in more or less exactly the same situation they were in over a year ago. This looks like GM in the late 1970's.

hyperbovine 5y ago
In fairness, lots of us got nothing done during the pandemic.
- rossdavidh 5y ago
  Fair point.
iSnow 5y ago
Are we really sure they are not working on a next-generation plane behind the scenes? I doubt they would just sit there and do nothing after the MAX fiasco.
- zardo 5y ago
  IIRC their development cycle for a ground up design is about 30 years.
  - pmcollins 5y ago
    from wikipedia’s 747 article: > Boeing agreed to deliver the first 747 to Pan Am by the end of 1969. The delivery date left 28 months to design the aircraft, which was two-thirds of the normal time. surely they can do a ground up design in under 5 years?
    - bobthepanda 5y ago
      The 747-8 was announced in 2005, and started passenger service in 2012. Planes have increased in complexity in the last 50 years. It is legitimately very difficult to make a plane as cheap and efficient as airlines want, and as safe and (relatively) quiet as regulators want. Boeing and Airbus are not a duopoly because of a lack of attempts. And even they screw up; the 747-8 and A380 turned out to be duds because they were too hard to fill and four engines needs more fuel than two.
  - iSnow 5y ago
    Going by Wikipedia, they saw the need for a new plane (the later named 787) by the late 90's, announced it in 2003 and delivered the first plane in 2011. https://en.wikipedia.org/wiki/Boeing_787_Dreamliner https://en.wikipedia.org/wiki/Boeing_787_Dreamliner
AnimalMuppet 5y ago
They got the MAX flying again. So, quite a bit more than "nothing".
- ChuckMcM 5y ago
  While true, getting the MAX flying was a business continutity thing (I suspect, but can't prove obviously, that they would end up divesting their passenger jet division if they had to write off the MAX in its entirety) But it is also true that what is going on inside Boeing is not exactly visible to people outside of Boeing. Further, ripping out a previous process and replacing it doesn't really generate externally visible signs, typically it is visible by better results.

Gravityloss 5y ago

I wonder how the planes looked and how the investment in a new aircraft vs operating an old one looked like if the fuel price increased a lot, because of emissions regulation. I understand now fuel is really cheap and is not taxed (compared to for example private cars). Boeing could design an efficient airliner and then use its political muscle to get strict emissions regulations going in the US at least.

BitwiseFool 5y ago
When is a more fuel-efficient jet not a good idea?
- MattGaiser 5y ago
  When fuel is so cheap that the capital expenditure is not worth the cost of the new jet.
  - BitwiseFool 5y ago
    True, and I'm no expert in planning but here's my thinking. Fuel can only get so cheap, but there's no limit to how expensive it can get. So while the capital expenditure will be high, the odds of fuel getting much more expensive down-the-line is almost certain, no?
    - MattGaiser 5y ago
      > the odds of fuel getting much more expensive down-the-line is almost certain, no? Not really. Jet fuel prices peaked in 2008, without adjusting for inflation. [0] So fuel consumption has been a lot less important over the past few years. It is also questionable whether carbon taxes will be placed on jet fuel in many cases. At least in Canada it tends to be exempt. [0] https://transportgeography.org/contents/chapter5/air-transport/jet-fuel-prices/ https://transportgeography.org/contents/chapter5/air-transpo...
    - FredPret 5y ago
      Correct, but there’s another cycle on top of this - resource production. More expensive fuel, more intensive oil exploration and refinement. Make oil expensive enough and Shell et al will find hydrocarbons offworld if need be.

FridayoLeary 5y ago

Seeing as its a duopoly, i don't understand why boeing are unsafe sitting back, smugly safe in their mediocrity.

MattGaiser 5y ago
Even a duopoly can turn lopsided if one sucks more than the other.
mikro2nd 5y ago
Perhaps because it's in the process of becoming a triopoly as Chinese investment in airliner production ramps up?
- selectodude 5y ago
  China is still 25 years behind on jet engine development.
  - estaseuropano 5y ago
    Isnt Boeing too behind on engine development and just buys them from RR?
    - SonicScrub 5y ago
      Not just Boeing, every aircraft manufacture does this. Many aircraft clean-sheet designs are done as a technology partnership with a major engine manufacture such as Pratt & Whitney, Rolls Royce, or General Electric. And that's pretty much how it's always been done. It's as ludicrous to say "Boeing is behind on engine technology" as it would be to say Ford is behind on their silicon chip manufacturing.
      - coredog64 5y ago
        The 777 was enabled by the new, super high powered GE-90s. The size of those engines needed to be taken into account at the initial design. Or, to kick HN's favorite Boeing whipping boy, the 737 MAX can't have new engines, only improved SNECMA ones, because the knock-on effects of changing the nacelle size/location would be such that you might as well design a new airplane.

neonate 5y ago

https://archive.md/BQKj5 https://archive.md/BQKj5

hindsightbias 5y ago

If your drawing board has been blank for the last 6+ years and the next 5-10 years then your only strategy is for the gov't to keep you afloat.

genmud 5y ago
We have tried nothing and have run out of ideas!

jetrink 5y ago

There seems to be an assumption that if Boeing is allowed to fail, no other American company or companies could ever fill its place and compete with Airbus. Is this really the case? Boeing had to get the Commerce Department's help to kill Bombardier, a Canadian aerospace company, when they couldn't compete with its narrow-body airliner. Boeing lost to SpaceX, a young company, in the Commercial Crew Program.

sofixa 5y ago
Commercial aircraft is a very know-how and capital investment heavy business with huge risk and long lead times. The number of companies that could replace Boeing is very small ( Lockheed Martin, maybe General Dynamics) and none of them seem to want to ( Lockheed exited the business decades ago).
tw04 5y ago
I don't think the US is willing to risk the disruption to the military pipeline if they were to fail. You would literally have to have a "planned breakup" that would likely take a decade to dismantle. Bankruptcy isn't an option. Could it EVENTUALLY be replaced by other companies? Sure. Would the US military be OK having their logistics on weapons disabled for 12+ months? Seems unlikely.
- dingaling 5y ago
  Boeing's military division is discrete from commercial with the exception of the P-8 and KC-46. Not just geographically but also in terms of inherited knowledge and philosophy.
- bryanlarsen 5y ago
  Why is bankruptcy not an option? The government would never allow a chapter 7 (liquidation), but a chapter 11 (reorganization) bankruptcy should not significantly disrupt operations.
  - throw0101a 5y ago
    See also Chrysler and GM: * https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reor... * https://en.wikipedia.org/wiki/Chrysler_Chapter_11_reorganization https://en.wikipedia.org/wiki/Chrysler_Chapter_11_reorganiza...