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21 December 2006

Deck the halls

All I can say is, "Wow, it's been an incredible year."

So many things have happened in our business in 2006 I don't even know where to begin. I guess I can just sum up by saying that with more than 900 orders and counting for the year, there's no way anyone could have predicted the amazing, sustained, strong demand for airplanes we've been seeing.

With 619 orders for the Next-Generation 737 so far this year, we have already smashed the single-year sales record for our single-aisles (which we set in 2005). I know that in the past year there's been a lot of buzz speculating about an all-new airplane in the 737/A320 size category. But quite frankly, the 737 is doing very well, and sets a very high hurdle to beat.

The 787 Dreamliner program has already set a record as the fastest-selling commercial airplane ever. We've seen major assembly get underway in recent months, as orders increased to 438 airplanes from 35 customers since launch. And we remain on schedule for first flight next year.

Boeing 747-8 Intercontinental Lufthansa poster image

Since the December 6 announcement, the halls of Boeing Commercial Airplanes have been decked with banners celebrating Lufthansa and
the 747-8 Intercontinental.

Just a couple of weeks ago, a major customer came on board for the Intercontinental when Lufthansa announced as the first airline order for the passenger model of the 747-8. This being coffee-crazy Seattle, some of us celebrated that day with espresso and lattes!

The 747 has logged 67 orders in 2006, including some 747-400 freighters - the most 747 orders in a single year since 1990. For the 747-8 alone, we've seen 73 orders since program launch a little over a year ago.

The 777 is having another solid year, with 61 orders so far, and the 600th 777 delivery just last week. The 767 program received orders for 10 airplanes - passenger and freighter - from two customers in 2006, increasing the backlog of 767 orders that will already extend the life of the program for several more years.

Boeing Business Jets is having a stellar year, with 21 orders, and the launch of the 747 and 787 VIP models.

And in Commercial Aviation Services, we expanded with some key, strategic acquisitions, such as Aviall and Carmen Systems, and we offered the GoldCare Lifecycle Support Solution, with seven aviation industry leaders now signed to the team.

I'd be remiss if I didn't also mention the blog itself. It's likely that by the end of this month we will have surpassed the half-million mark in terms of individual visits to Randy's Journal since we started this blog about 23 months ago.

I can't tell you how much that means to me personally, that people from all over the globe take the time to check out this page regularly. It shows what a continued commitment and interest our visitors have in the Boeing Company and in the dynamic world of commercial aviation. Your comments are fascinating, intelligent, often thought-provoking, and sometimes just plain bizarre. I can't answer them all, but I can assure you I do read them all.

This blog has been a real surprise to me over these past couple of years. It's been used as source material (!) in news articles, and has been cited in Web articles about corporate blogging. It's all been somewhat surreal, but the blog sure is achieving one thing, the big reason we started it - spreading to a wider audience the word about the important issues in commercial aviation and Boeing's vision of the future of flight.

In 2007 we hope to be making another small step - as we take our blogging software and design a little further. Like anything else that's new, this has been a learning process, and we appreciate all the feedback. I'm glad you've been along for the ride. And I can't wait to see what the next year has in store for our company and for the business of flying.

Until then, all the best to you, whatever your year-end celebrations may be, and we'll talk again at the start of the year!


15 December 2006

Virtual dreams

We've all been following the 787 program closely - I think that's understandable. There's no question that this is a big project. All eyes in the aviation world are on us as we head toward final assembly early next year. And like any all-new airplane program, it has its challenges.

But as we approach the end of 2006, the Dreamliner remains on schedule. We understand the challenges, and we're managing those issues along the way.

Boeing 787 virtual landing image

A "virtual landing" - the Dreamliner is on its way, as depicted in this new image.

This year we completed a number of important events in the development of the 787, with test articles completed and the first inner subcontractor shipments made. In addition, the 787 engines are performing as we expected and we're well in advance of where we've been in typical engine development at this stage in the past.

I'm sure you've heard that the airplane is "overweight." Well, most new airplanes at this point in the program are. We have a plan on how to bring the weight down. But the good news is, while the weight's up a little bit, our performance and operating costs assessments are actually better than what we had projected.

To quote Scott Carson, BCA's president and CEO, at a conference last week, "These are hard projects to do, but we're very satisfied with the progress we have made. We remain laser focused on the execution of our promises and commitments on this program as we move into next year. But we know it will be a challenging year and we'll learn a lot as we go through it."

Still, before we turn to 2007, let's acknowledge some big milestones so far. This year major assembly started on time, and our structure partners around the world are building their key parts of the airplane and "spinning" fuselage barrels. The "Systems" team has also made tremendous progress - opening new laboratories, testing our flight control system, and beginning to deliver the first production parts.

787 final assembly factory flow simulations image

Simulations such as this 787 final assembly factory flow diagram are the culmination of the challenge to digitally "build the airplane before you build it."

And as if to put a cap on things, the program just held a "virtual rollout" event at the Everett factory. This was a way for customers, partners, and employees to celebrate the 787 Dreamliner's solid progress over the past year, and to recognize the completion of detailed analysis of the build process of the airplane.

One of the cool things demonstrated during the event was the new "digital toolset," provided by Dassault Systemes, and a number of engineering-based simulations ranging from parts installations to final assembly factory flow.

The computer simulation is designed to prove the "manufacturability" of the 787. As program chief Mike Bair said, "Our tools have enabled us to model the entire production process from our partners' factories to our own. We have found errors in simulation that would have been costly to find in production and have been able to design corrections quickly to keep the program on track."

Boeing 747-400 Large Cargo Freighter image

The 787 program has unveiled a new paint scheme for the 747-400 Large Cargo Freighter and a new name for the giant freighter: "Dreamlifter." The second of three freighters will be arriving in Seattle next month already painted and ready for flight testing.

Now to 2007. It's the year when many of the program's major milestones will be completed. 787 production in the Everett factory will get underway. Rollout of the airplane and first flight will take place in 2007, as well as the beginning of the flight test program. Every year has been important so far, but next year will certainly be the most dynamic as we head toward deliveries in 2008.

As Mike Bair said last week, this is why we came to work for Boeing. "To create new airplanes that bring new levels of performance to our customers and new levels of comfort and convenience to the passengers of the world."

And I'd have to agree with Mike's conclusion that this has been an amazing journey - but the best is yet to come.


08 December 2006

Shape of the future

There's a great expression that applies very well to events this week: "The future is now."

Or better yet, the shape of the future is a beautiful, iconic airplane called the 747. With the fabulous endorsement from Lufthansa of the 747-8 Intercontinental, clearly passengers are going to be flying in this amazing machine for many years to come.

Boeing 747-8 in flight image

Lufthansa is the first airline to place an order for the 747-8 Intercontinental.

I, for one, never gave up on the 747. There was a time not too long ago when the media was writing the epitaph for the Queen of the Skies. Some have even been quoted this week as saying the 747 is on its "last legs." But does an airplane that has had 73 orders since its launch just over a year ago sound like it's on its last legs?

I'm reminded of what Joe Sutter told me earlier this year, when he pointed out that there have been lots of airplanes designed after the 747, but none have been able to fly faster or adapt better over the years. As Joe put it: "It's been able to absorb technology in every area - structure, aerodynamics, power plant, cockpit systems. It's just as modern as any airplane flying out there because Boeing has continued to invest in the product, and the basic product was right, so the investment pays off."

And the fact is, with the breakthrough engines from the 787 Dreamliner, an aerodynamically advanced wing with newly designed raked wingtips, an upgraded flight deck, and a longer passenger cabin that's completely redesigned based on the 787 interior, this is going to be a great airplane, and will be the most efficient large airplane out there, on a per seat basis.

A few words about the Lufthansa order. You couldn't ask for a better launch customer for the passenger model of the 747-8. Beginning in 2010, they'll take delivery of 20 747-8 Intercontinentals.

Boeing 747-8 interior display image

The new 747-8 interior is on display at the Customer Experience Center in Renton. It incorporates 787 innovations such as curved, upswept architecture, bigger bins, and mood-lighting technology.

Not only will the new 747-8s mean further efficiency through fleet modernization and a reduction of fuel and operating costs, but as Lufthansa stated this week, the 747-8 is a sustainable investment in environmental efficiency.

The 747-8 features advanced technologies from the 787, including the breakthrough new GE-nx67 engines. These technologies allow the 747-8 to reduce fuel consumption and carbon dioxide emissions by 15% compared to the 747-400s it will replace. In addition, the -8 will generate 30% less noise than its predecessor, and meets the London QC2 airport noise level standards.

Lufthansa says its 747-8s will be configured to about 400 seats, and that the -8 "slots neatly capacity-wise between the A380 with around 550 seats and the A340-600 with around 300 seats."

This is exactly how we envisioned the 747-8 fitting with A380 operators. Other 747 operators who may not need an airplane as large as the A380 will see the -8 as a perfect airplane for the top of their fleet.

747 

New Airplane.com home page image

Our new 747-8 Website features some pretty cool flight videos and further details on the Shape of the Future. Click on the image to go directly to the site.

Remember, the 747-8 Intercontinental remains in the 400-500 seat market. It is not a direct competitor in the over-500-seat market, where the A380 is offered. We've been saying for some time that we've positioned the -8 in the traditional 747-size market and timed it correctly for the 747-400 replacement cycle. For those few operators that need a larger airplane, sure, the A380 may be a choice.

But clearly, Lufthansa's order validates the market for the 747-8 Intercontinental. The 747-8 program now has orders for 49 freighters and 24 Intercontinental airplanes (20 to Lufthansa, and four split between two unidentified customers) in just over a year.

Joe Sutter's vision truly became the shape of the future for millions of travelers around the world. And today we're proud to be partnered with Lufthansa to help shape the future, once again.


05 December 2006

Out to launch

By now I'm sure you've read that Airbus has gotten the official okay to go out and launch the latest version of the Airbus A350 - the 2nd industrial launch for this airplane in 14 months.

And in general, it doesn't appear to be much different from what was announced at Farnborough. The only significant differences that we see at this point are in the areas of:

  • Timing
  • Composites

Airbus says we won't see the first A350-900 until 2013 - which is a year later than previously announced. The first A350-800 is now scheduled for 2014, and the first A350-1000 will not be delivered until at least 2015. This makes the initial A350 delivery at least five years behind the 787 Dreamliner.

And their biggest model, the -1000, which is to compete with the 777-300ER, won't be arriving until nine years from today. Mind you, we forecast a market of 1,450 airplane deliveries in this size category (200-400 seats) between now and 2015.

Enough said about timing.

The other change we see is in the commitment to more composites. They've dramatically reversed course and decided to join us in building an airplane with a composite fuselage, taking the total use of composites to about 50%. (I seem to recall that in talking about the early A350 they proclaimed that the "optimum" amount of composites for an airplane was about 30%.)

We see this change as a rational and smart decision. However their fuselage - as we understand it - is going to be constructed in a traditional manner, except with composite panels rather than aluminum panels. For an airplane like the 787, we think that sacrifices some of the benefits of going with composite material.

Airbus claims it is going with composite panels because of their "repairability." We chose to go with the barrel manufacturing approach because it is lighter and more efficient. The repairability aspects are comparable.

Airbus' view is that panels make it easier to repair. But in fact, repairs would be made in a similar way on either airplane. As I like to think of it, if you have a hole in the wall of your house, would you take down the entire wallboard to repair it? Of course not. You'd just fix the hole.

Elsewhere, I was surprised to see in some reports that Airbus continues to muddle its comparisons between the A350 and various Boeing airplanes in order to claim a seat-efficiency advantage. As I pointed out during and after Farnborough, why would you compare a 270-seat A350 with a 240-seat 787, when you can compare it with the 787-9 which seats 280? It's misleading when you don't compare like sizes to like sizes.

777-787 market coverage comparison image

The 787 and 777 - better market coverage, a more efficient fleet, and available sooner. (Note: 777s are shown in two seat classes, 9-abreast premium economy and 10-abreast standard economy.)

There's still a lot to understand about the A350 family, and we'll report more here as we learn more. But there's nothing contained in the Airbus launch announcement that alters the Boeing product strategy. The 787 and 777 continue to be the perfect combination to cover this very broad 200-400 seat market. Keep in mind that this segment is forecasted to make up 90% of all passenger widebody deliveries over the next 20 years.

Finally, there's a school of thought that says being second to market is good, because you can respond to whatever the competitor has done. In defense of this argument people have referenced the success of the Boeing 777 against the A340.

Well let me tell you why this is different. With the 777 we were about two years after the A340. But the key difference was a technology breakthrough - two engines over four engines, and the efficiency that came with that breakthrough.

With the A350 we're talking five years later, at least - and with comparable technology. So where is the breakthrough in the A350 that makes being second a significant advantage?


01 December 2006

Liberalization

Each time we update Boeing's Current Market Outlook, and really just about every time I deliver a presentation on the road, I talk about the concept of "liberalization."

And simply put, liberalization in this context refers to the phenomenon of commercial aviation around the world moving from being highly regulated to a more open and competitive marketplace.

Earlier this year an important study came out, taking a look at the economic impact of liberalization. And I've been meaning to share it with you and talk a bit about what it means for our business.

Over the past 25 years, three main forces have radically changed the airline industry: the regulatory environment, airplane/aerospace capabilities, and airline strategies/business models.

First, changes to government regulations have been critical in shaping the airline industry. Since the deregulation of the U.S. market in 1978, we've seen a dramatic shift in domestic and international markets. And we've also seen increased liberalization - even "open skies" - in international markets. This freer market access has had the effect of intensifying airline competition and causing airlines to focus more on what passengers want.

Second, airplane capability has reshaped airline networks. Today, airlines have a much greater selection of airplane types, with capacity and range combinations to meet competitive market demands.

And finally, this combination of changing regulation and improved airplane capabilities has shaped airline strategies and business models. The events of the recent down cycle accelerated the effects of these factors.

All of these forces will continue to drive our industry's evolution.

You can find out a lot more inside the study that I mentioned, The Economic Impact of Air Service Liberalization. It was conducted by a well-respected and credible third-party expert, InterVISTAS Consulting, and takes a look at the benefits of liberalization for the commercial aviation industry as well as for national economies.

Liberalizing air transportation directly affects economies by increasing flight frequencies and business and leisure traffic. And this increased travel demand drives GDP, jobs, travel, tourism, and exports.

Now, what about the effect of this growth on the environment? Well, as I've mentioned here in the blog before, it's important to understand that commercial aviation is one of the more efficient means of transportation. Enormous strides have been made by the aviation industry in reducing fuel consumption and the release of CO2 - about 70% since the jet age began. In fact, flying from point A to point B has less environmental impact than going by car or even high-speed train.

Boeing was one of the co-sponsors of the study. We took part because nobody had ever formally studied the issue in this manner. Before now, there was no hard data to support the conventional wisdom that liberalizing air travel had tangible economic benefits.

Although Airbus did not take part in the study, it's important to point out that both companies will benefit from liberalization since it so clearly leads to growth in air travel and the need for really good, efficient airplanes.

And I'm feeling more liberated just talking about how it helps both of us!