7 ms·

The jumbo jet faces a make or break year at Boeing, Airbus

39 points by jannes 12y ago

51Cards 12y ago
Boeing saw this coming years ago. When the A380 was in progress they announced the 787 Dreamliner design saying they felt the industry was moving towards smaller more efficient planes on more personalized routes. The fact that orders for the jumbos have dropped to zero might be proving them correct. I believe Airbus scrambled the design of the A350 XWB once they saw Dreamliner sales taking off.
- bane 12y ago
  I've heard similar, that Airbus went all in on the A380 while Boeing gambled on the smaller 787. Most of the industry seems to think that Boeing got it right and it's put Airbus in a tough situation.
  - stcredzero 12y ago
    Airbus has been in the 2nd mover position before, however. Boeing learned some hard and expensive lessons having to do with the complications around contracting out parts of a plane made from a much less ductile material. (Carbon fiber.) Airbus could still do a leapfrog on Boeing, imitating the economics of the 787, but managing to do it incrementally better.
  - larrys 12y ago
    Making decisions like that having major implications seems daunting. I wonder what strategies they use to dampen or hedge big decisions like that. Think of all the things that play out overtime that there is no way to predict. Such as the drop in jet fuel prices which we don't even know now if it is long term or just short term. And that's only 1 of probably hundreds of interacting factors that can make or break a strategy. One of the things that got me to stop reading business magazine years ago - all they did was appear to put laurels and awards on business people that happen to somehow bet on the ride side of history (as well as companies). An example of this might be Jack Welsh who was given credit for GE Capital and now years later they want to get rid of that part of the company and return to their roots.
    - deleted 12y ago
      [deleted]
    - SixSigma 12y ago
      Jack Welch "CEO of the decade" for, amongst other things, being the pioneer of "maximising shareholder value" later described it as "the dumbest idea in the world." [1] Jack did a lot of things right, but at scale bad ideas can get hidden in successes which take years to unwind. [1] http://www.forbes.com/sites/stevedenning/2015/02/05/salesforce-ceo-slams-the-worlds-dumbest-idea-maximizing-shareholder-value/ http://www.forbes.com/sites/stevedenning/2015/02/05/salesfor...
deleted 12y ago
[deleted]
guard-of-terra 12y ago
I'm a frequent flightradar voyeurist and I see that existing A380 fleet is busy to their limit. You can see A380 traffic jams over Dubai, they seem to be just right for Europe - UAE - Southeast Asia corridor. I doubt they are going away long-term. 747 is indeed scarce and mostly cargo.
- smackfu 12y ago
  Yeah, Emirates flies a lot of A380s, but the problem is they are the only ones who really embraced it. Other airlines bought a few to cover specific high volume routes, but went with other models for their bulk buys. https://en.wikipedia.org/wiki/List_of_Airbus_A380_orders_and_deliveries https://en.wikipedia.org/wiki/List_of_Airbus_A380_orders_and...
- rogerbinns 12y ago
  A heck of a lot of cargo is carried in the belly holds of passenger aircraft. The 777-300ER is especially a workhorse at this. The A380 can carry less cargo because more space is taken up with passenger bags because there are more passengers. An expectation is A380s used a lot more for intra-Asia travel. Those urban conglomerations in China are getting bigger and more plentiful, with similar things happening in other Asian countries to a lesser extent.
rogerbinns 12y ago
They neglected to mention the biggest reason for the big jets. There are greater numbers of dense urban areas, and runway building is not matching the increase in demand for travel. The runways limit the number of aircraft movements, so demand is handled by increasing the size of the planes. (It can take decades for new runways to be built. See London.) The big jets aren't expected to be useful on every route, but rather on central routes to big hubs. The counter argument is people prefer direct (point to point) routes aka long thin routes, for which you need a smaller efficient plane. Of course both are true, and the debate is really how much of each there will be over time. It looks like big urban areas in Asia will produce lots of A380 demand, if only they wait. The article mentions 50% off list prices, but for context list prices are a known joke in the industry. Each deal is kept secret, but gossip and calculations show that 50% is about normal these days. http://theblogbyjavier.com/2015/02/26/boeing-list-prices-increases-vs-discounts-increases-update-for-2014/ http://theblogbyjavier.com/2015/02/26/boeing-list-prices-inc... The aircraft manufacturing industry is fascinating with many parallels to software development, with the difference being well over 20 year life spans for products. Should you develop version 2 of your product with all the great things that come with that, but still have to support version 1 for a long time? Should you do continuous improvement on the product, but the result being differences for the same item? Other participants such as lessors get upset when you harm residual values of older product with new product, which then means they charge more for new product. Do you do benchmarking that shows you winning due to unrealistic configurations, or lose benchmarks by being realistic? How much can you get away with vapourware? What improvements (in hard numbers) do you promise for something that isn't developed yet, that has financial penalties should you miss, and makes the product less attractive if you underpromise? How do you do new/updated product without Osborning your existing product? I recommend this blog for following the industry - http://leehamnews.com/ http://leehamnews.com/ - and this one which is more focussed on engines - http://aeroturbopower.blogspot.com/ http://aeroturbopower.blogspot.com/
- dalke 12y ago
  The article says "Airlines still need jumbo jets but only for certain polar flights ... and busy routes where landing slots are scarce". I believe that second clause (italics mine) concerns the start of your comment.
rwallace 12y ago
There's a mention of smaller planes being more efficient, without details. I'm surprised at that: I thought bigger planes were more efficient (less fuel and other costs per passenger). Is that not the case? If not, why not?
- mattzito 12y ago
  As I recall its a 2-engine vs 4-engine situation. The big planes that need 4 engines have extra overhead and inefficiency. That's one of the reasons that the 777 is so popular, close to the size of a jumbo and only two engines.
  - trhway 12y ago
    With ETOPS into 3 hours 2-engine jets are now eating into the territory of the 3-4 engined (with 3-engined being problematic for other reasons) http://en.wikipedia.org/wiki/ETOPS http://en.wikipedia.org/wiki/ETOPS
    - jhayward 12y ago
      > With ETOPS into 3 hours 2-engine jets are now eating into the territory of the 3-4 engined It's even better than that - the 777 has been certified for 330 minutes ETOPS for a few years now. http://boeing.mediaroom.com/2011-12-12-Boeing-to-Offer-up-to-330-Minute-ETOPS-on-777 http://boeing.mediaroom.com/2011-12-12-Boeing-to-Offer-up-to...
wahsd 12y ago
It is amazing that both Boeing and Airbus are in a constant state of teetering on collapse.
flier 12y ago
Rogerbinns hit the nail on the head,it will be in Asia, India and maybe South America where the A380 will be used to transport the masses at an affordable price. That alas spells the death knell for the 747.

39 points by jannes 12y ago

Boeing saw this coming years ago. When the A380 was in progress they announced the 787 Dreamliner design saying they felt the industry was moving towards smaller more efficient planes on more personalized routes. The fact that orders for the jumbos have dropped to zero might be proving them correct. I believe Airbus scrambled the design of the A350 XWB once they saw Dreamliner sales taking off.

bane 12y ago
I've heard similar, that Airbus went all in on the A380 while Boeing gambled on the smaller 787. Most of the industry seems to think that Boeing got it right and it's put Airbus in a tough situation.
- stcredzero 12y ago
  Airbus has been in the 2nd mover position before, however. Boeing learned some hard and expensive lessons having to do with the complications around contracting out parts of a plane made from a much less ductile material. (Carbon fiber.) Airbus could still do a leapfrog on Boeing, imitating the economics of the 787, but managing to do it incrementally better.
- larrys 12y ago
  Making decisions like that having major implications seems daunting. I wonder what strategies they use to dampen or hedge big decisions like that. Think of all the things that play out overtime that there is no way to predict. Such as the drop in jet fuel prices which we don't even know now if it is long term or just short term. And that's only 1 of probably hundreds of interacting factors that can make or break a strategy. One of the things that got me to stop reading business magazine years ago - all they did was appear to put laurels and awards on business people that happen to somehow bet on the ride side of history (as well as companies). An example of this might be Jack Welsh who was given credit for GE Capital and now years later they want to get rid of that part of the company and return to their roots.
  - deleted 12y ago
    [deleted]
  - SixSigma 12y ago
    Jack Welch "CEO of the decade" for, amongst other things, being the pioneer of "maximising shareholder value" later described it as "the dumbest idea in the world." [1] Jack did a lot of things right, but at scale bad ideas can get hidden in successes which take years to unwind. [1] http://www.forbes.com/sites/stevedenning/2015/02/05/salesforce-ceo-slams-the-worlds-dumbest-idea-maximizing-shareholder-value/ http://www.forbes.com/sites/stevedenning/2015/02/05/salesfor...

deleted 12y ago

[deleted]

guard-of-terra 12y ago

I'm a frequent flightradar voyeurist and I see that existing A380 fleet is busy to their limit. You can see A380 traffic jams over Dubai, they seem to be just right for Europe - UAE - Southeast Asia corridor. I doubt they are going away long-term. 747 is indeed scarce and mostly cargo.

smackfu 12y ago
Yeah, Emirates flies a lot of A380s, but the problem is they are the only ones who really embraced it. Other airlines bought a few to cover specific high volume routes, but went with other models for their bulk buys. https://en.wikipedia.org/wiki/List_of_Airbus_A380_orders_and_deliveries https://en.wikipedia.org/wiki/List_of_Airbus_A380_orders_and...
rogerbinns 12y ago
A heck of a lot of cargo is carried in the belly holds of passenger aircraft. The 777-300ER is especially a workhorse at this. The A380 can carry less cargo because more space is taken up with passenger bags because there are more passengers. An expectation is A380s used a lot more for intra-Asia travel. Those urban conglomerations in China are getting bigger and more plentiful, with similar things happening in other Asian countries to a lesser extent.

rogerbinns 12y ago

They neglected to mention the biggest reason for the big jets. There are greater numbers of dense urban areas, and runway building is not matching the increase in demand for travel. The runways limit the number of aircraft movements, so demand is handled by increasing the size of the planes. (It can take decades for new runways to be built. See London.) The big jets aren't expected to be useful on every route, but rather on central routes to big hubs. The counter argument is people prefer direct (point to point) routes aka long thin routes, for which you need a smaller efficient plane. Of course both are true, and the debate is really how much of each there will be over time. It looks like big urban areas in Asia will produce lots of A380 demand, if only they wait. The article mentions 50% off list prices, but for context list prices are a known joke in the industry. Each deal is kept secret, but gossip and calculations show that 50% is about normal these days. http://theblogbyjavier.com/2015/02/26/boeing-list-prices-increases-vs-discounts-increases-update-for-2014/ http://theblogbyjavier.com/2015/02/26/boeing-list-prices-inc... The aircraft manufacturing industry is fascinating with many parallels to software development, with the difference being well over 20 year life spans for products. Should you develop version 2 of your product with all the great things that come with that, but still have to support version 1 for a long time? Should you do continuous improvement on the product, but the result being differences for the same item? Other participants such as lessors get upset when you harm residual values of older product with new product, which then means they charge more for new product. Do you do benchmarking that shows you winning due to unrealistic configurations, or lose benchmarks by being realistic? How much can you get away with vapourware? What improvements (in hard numbers) do you promise for something that isn't developed yet, that has financial penalties should you miss, and makes the product less attractive if you underpromise? How do you do new/updated product without Osborning your existing product? I recommend this blog for following the industry - http://leehamnews.com/ http://leehamnews.com/ - and this one which is more focussed on engines - http://aeroturbopower.blogspot.com/ http://aeroturbopower.blogspot.com/

dalke 12y ago
The article says "Airlines still need jumbo jets but only for certain polar flights ... and busy routes where landing slots are scarce". I believe that second clause (italics mine) concerns the start of your comment.

rwallace 12y ago

There's a mention of smaller planes being more efficient, without details. I'm surprised at that: I thought bigger planes were more efficient (less fuel and other costs per passenger). Is that not the case? If not, why not?

mattzito 12y ago
As I recall its a 2-engine vs 4-engine situation. The big planes that need 4 engines have extra overhead and inefficiency. That's one of the reasons that the 777 is so popular, close to the size of a jumbo and only two engines.
- trhway 12y ago
  With ETOPS into 3 hours 2-engine jets are now eating into the territory of the 3-4 engined (with 3-engined being problematic for other reasons) http://en.wikipedia.org/wiki/ETOPS http://en.wikipedia.org/wiki/ETOPS
  - jhayward 12y ago
    > With ETOPS into 3 hours 2-engine jets are now eating into the territory of the 3-4 engined It's even better than that - the 777 has been certified for 330 minutes ETOPS for a few years now. http://boeing.mediaroom.com/2011-12-12-Boeing-to-Offer-up-to-330-Minute-ETOPS-on-777 http://boeing.mediaroom.com/2011-12-12-Boeing-to-Offer-up-to...

wahsd 12y ago

It is amazing that both Boeing and Airbus are in a constant state of teetering on collapse.

flier 12y ago

Rogerbinns hit the nail on the head,it will be in Asia, India and maybe South America where the A380 will be used to transport the masses at an affordable price. That alas spells the death knell for the 747.