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Boeing likely feels that the commercial space is too unpredictable with increasingly low margins. This, I suspect, would be their rationale for cutting corners

Boeing likely feels that the commercial space is too unpredictable with increasingly low margins. This, I suspect, would be their rationale for cutting corners at the time. Not that that corner cutting should be excused. The defense space, on the other hand, likely has larger margins and is a bit more recession proof. Both Airbus and Boeing have been seen to be struggling for different reasons at different times in the past decade, but they are really the only two players in the space. Commercial flight has been a race to the bottom for years now and I think it is feeling like a less attractive space to be in.

nradov 4y ago
Comac is intent on becoming a third competitor, and with sufficient Chinese government support they might eventually get there. That will accelerate the race to the bottom in the commercial airliner market.
- robonerd 4y ago
  They've got a long way to go. Per wikipedia they have orders for 1383 planes but have only delivered 71. Compare that to Embraer which has already made 1621 E-Jets.
- genmud 4y ago
  I think they will have significant difficulties ever bringing a product to the US or EU market. Having observed business dealings related to Comac when they first came about, I’m actually surprised any planes have been built at all. I personally thought it was a government sponsored honeypot to steal/license/bribe engine or other aerospace technology more than anything and when you hear about their ties to Chinese intelligence[1], that opinion might not be far from the truth. 1 - https://www.industryweek.com/the-economy/article/21118569/how-china-stole-an-entire-airplane https://www.industryweek.com/the-economy/article/21118569/ho...
  - nradov 4y ago
    Well sure, obviously Comac (and their suppliers) are major beneficiaries of Chinese government corruption and industrial espionage. Just like every other large Chinese industrial company. The Communist Party considers aviation to be strategically important to limit dependence on foreign companies so they'll put in whatever resources are needed to make Comac viable. No one expects them to get many sales in Europe or North America, but with subsidies they can score a lot of sales in Russia, Asia, Africa, and South America.
Victerius 4y ago
> Commercial flight has been a race to the bottom for years now Which is exactly how a free market works. When there is a profit to be made from the sale of a product, so basic microeconomics theory goes, competitors will arise to undercut current players, until everyone's profit margin converges to zero. This mechanism is supposed to incentivize innovation and productivity improvements.
- beisner 4y ago
  There are extreme barriers to entry for airplane manufacturing. You can’t just get a couple million dollars from some VC and have an MVP 747 in 6 months. There’s a reason that only 2.5 (.5 being COMAC) companies in the world that produce commercial airliners. A new player has to have tens of billions of dollars in investment and also be willing to wait 10-15 years before a single plane is approved by the FAA and other regulatory bodies, and unless you have a radically different airframe (Boom, etc) your company will directly compete on price with Boeing and Airbus, who have a 100 year head start. There’s also a strong incentive to not let Boeing go under, because 1.5 airline companies is dramatically worse for [safety, cost, innovation] than having 2.5. So not only is it NOT a free market (MASSIVE long-term investment plus enormous warranted regulatory burden), but we don’t want it to be one! Because we don’t ever ever want Boeing or Airbus to fail because that would be devastating to national security and safety etc. All this is to say that “a race to the bottom” in this context is maybe more harmful than in other markets, because there really isn’t much backpressure (outside regulatory oversight) to keep standards high.
  - etempleton 4y ago
    I have to imagine part of the move is to convince politicians on both sides that Boeing is an important and strategic asset to the United States and should be supported accordingly. Using the fear of a Chinese company entering the space should to convince most.
  - iancmceachern 4y ago
    I agree with everything here. I want to add that in addition to all the other barriers to entry you listed that a very robust support and repair infrastructure needs to be in place. These planes need careful care and feeding. Also want to add that Embraer is another .5 in your list, Brazilian plane maker that actually makes quite a few fairly large planes. https://en.m.wikipedia.org/wiki/Embraer https://en.m.wikipedia.org/wiki/Embraer

nradov 4y ago

Comac is intent on becoming a third competitor, and with sufficient Chinese government support they might eventually get there. That will accelerate the race to the bottom in the commercial airliner market.

robonerd 4y ago
They've got a long way to go. Per wikipedia they have orders for 1383 planes but have only delivered 71. Compare that to Embraer which has already made 1621 E-Jets.
genmud 4y ago
I think they will have significant difficulties ever bringing a product to the US or EU market. Having observed business dealings related to Comac when they first came about, I’m actually surprised any planes have been built at all. I personally thought it was a government sponsored honeypot to steal/license/bribe engine or other aerospace technology more than anything and when you hear about their ties to Chinese intelligence[1], that opinion might not be far from the truth. 1 - https://www.industryweek.com/the-economy/article/21118569/how-china-stole-an-entire-airplane https://www.industryweek.com/the-economy/article/21118569/ho...
- nradov 4y ago
  Well sure, obviously Comac (and their suppliers) are major beneficiaries of Chinese government corruption and industrial espionage. Just like every other large Chinese industrial company. The Communist Party considers aviation to be strategically important to limit dependence on foreign companies so they'll put in whatever resources are needed to make Comac viable. No one expects them to get many sales in Europe or North America, but with subsidies they can score a lot of sales in Russia, Asia, Africa, and South America.

Victerius 4y ago

> Commercial flight has been a race to the bottom for years now Which is exactly how a free market works. When there is a profit to be made from the sale of a product, so basic microeconomics theory goes, competitors will arise to undercut current players, until everyone's profit margin converges to zero. This mechanism is supposed to incentivize innovation and productivity improvements.

beisner 4y ago
There are extreme barriers to entry for airplane manufacturing. You can’t just get a couple million dollars from some VC and have an MVP 747 in 6 months. There’s a reason that only 2.5 (.5 being COMAC) companies in the world that produce commercial airliners. A new player has to have tens of billions of dollars in investment and also be willing to wait 10-15 years before a single plane is approved by the FAA and other regulatory bodies, and unless you have a radically different airframe (Boom, etc) your company will directly compete on price with Boeing and Airbus, who have a 100 year head start. There’s also a strong incentive to not let Boeing go under, because 1.5 airline companies is dramatically worse for [safety, cost, innovation] than having 2.5. So not only is it NOT a free market (MASSIVE long-term investment plus enormous warranted regulatory burden), but we don’t want it to be one! Because we don’t ever ever want Boeing or Airbus to fail because that would be devastating to national security and safety etc. All this is to say that “a race to the bottom” in this context is maybe more harmful than in other markets, because there really isn’t much backpressure (outside regulatory oversight) to keep standards high.
- etempleton 4y ago
  I have to imagine part of the move is to convince politicians on both sides that Boeing is an important and strategic asset to the United States and should be supported accordingly. Using the fear of a Chinese company entering the space should to convince most.
- iancmceachern 4y ago
  I agree with everything here. I want to add that in addition to all the other barriers to entry you listed that a very robust support and repair infrastructure needs to be in place. These planes need careful care and feeding. Also want to add that Embraer is another .5 in your list, Brazilian plane maker that actually makes quite a few fairly large planes. https://en.m.wikipedia.org/wiki/Embraer https://en.m.wikipedia.org/wiki/Embraer