Wheeldon Spins Wheel Of Fortune On Industry
Having had the privilege to talk to so many analysts and strategists, it is with great pleasure to welcome yet another industry heavyweight to FleetBuzz Editorial.com.
Based in London, Howard Wheeldon is senior strategist at BGC Partners. He covers the global aerospace and defense industry and has been in the field for over 30 years. Howard is a regularly seen on CNN and CNBC, offering detailed insight into all areas of defence and civil aviation.
He kindly took time out of is busy schedule to offer his views on a variety of issues pertaining to the industry today.
- What is your long term view of Boeing’s IDS division, regardless of the recent decision by the company to protest the KC-767 Tanker loss to the
US Air Force?
In terms of performance and noting the rather slow progress improvement prior to 2007 I have no real issues with IDS and I particularly welcome the recent leadership changes that the company has instigated. From a program perspective the F/A-18G Growler of which some 90 aircraft will eventually go to the US Navy is on schedule and other aircraft programs such as F-15E for
Meanwhile IDS is showing its strength as a weapons system integrator and activities in anti submarine warfare, intelligence, surveillance and reconnaissance, combat and control, comms and missile defense all look very well placed. Space and partnerships also look soundly placed.
In Rotorcraft, despite some minimal difficulties V-22 appears to be performing well in the field and has in my view excellent long term international potential. Equally important is Chinook [CH-47 / MH-47] and particularly the ability to win the now resumed CSAR-X competition followed its cancellation by the GAO. While I am necessarily concerned that Boeing may not win all of CSAR-X when the replacement award is announced in the fall I am at least satisfied that Rotorcraft as a whole for IDS looks very well placed.
Perhaps my greatest concern on IDS remains the future of C-17 Globemaster production. Obviously I am aware that the Pentagon requested no closure funding for the C-
Speculation has been rife for months that the delayed 787 Dreamliner is draining both resources and time from other jets, most notably the 777 Freighter and the 747-8 Freighter. Do you think Boeing can manage to keep its two large freighters on time, and importantly on budget?
I do not believe the delays or financial expense of the 787 program are responsible for any delay on 777 or 747-8 Freighter programs. If there is any slowing down it is market driven i.e. that potential orders within the current cycle are limited and that there is no reason to hurry either potential program.
I am though not concerned on budget issues. As to the wider question you ask – I have always had my doubts about the 747-8 freighter considering that the 777 will ultimately do the job well enough from a customer perspective.
It is clear Boeing will not be delivering anywhere close to 109 787’s by the end of 2009. Stabilisation of the current supplier/logistics network is a priority now - do you envisage Boeing bringing some of this work “in house” on its next all new widebody jet?
Yes, I believe it is inevitable that Boeing will bring some component product back in house on 787 although not on a large scale. But, I do not believe Boeing will see the international aspect of 787 program manufacturing partnership as a failure.
There are lessons to be learned and Boeing accepts this.
No other large capital component manufacturer has ever attempted what Boeing has done on the 787 on such a wide international partnership basis. It was seen by some as a recipe for disaster but in reality it is only a few segments that have failed.
Parts shortages and the ability of component partners to meet the challenge have been a disappointment but were inevitable. So too, as in most airplanes, is the occasional redesign – in this case the centre wing box.
Overall, what is your assessment of the 787 Dreamliner program thus far? What can Boeing do to restore its respect and trust?
We are left to view that Boeing will now announce a further six month production delay meaning no aircraft are delivered before the fall of 2009. Given that Harry Stonecipher only authorised the plane in December 2003 that in itself is a remarkable achievement for an aircraft that is so vastly different to any other commercial airliner.
You ask about restoration of respect and trust? I say actions speak louder than words and what we do not want are further mistakes.
I think Boeing should take a more humble approach and accept publically that they have been too ambitious. You and I know that the pressure to get this plane into production was not so much directed by airlines and competition but by investors.
In an ideal world I do not want to hear more promises – what I want is to have confidence that soon the problems will be resolved. That requires a different form of transparency language to the one that we have been hearing from Boeing of late.
In relation to the 777, would Boeing be better off investing in an all new airplane to compete against the rival Airbus A350XWB family?
No, the 777 still has a great future and Boeing has got more than enough on its hands. I would not wish to see a replacement for 777 before that of the 737 – and you should note that I am NOT particularly anxious to see the wraps coming off a new 737 until the 787 is a complete manufacturing success.
Airbus has a seemingly large gap in its product line up, with the A380 seating 525 (tri class) and the A350-1000XWB seating 350 (tri class): do you see Airbus plugging that gap with a derivative or all new airplane?
Traditionally, as in A320 family, Airbus has downsized to compete with any threat as it did when it wrongly feared 717 could be a threat. I do not see them doing that again for a long while.
Both John Leahy and Randy Tinseth have spoken about their A320 and 737 replacements. With airlines pushing the drive for efficiency, we’ve seen over 900 orders for the 787 before its even flown. Do you think that there could be a repeat of sales success for whichever narrowbody airplane enters service first, or do you see a good split between both products as we do today?
As to the second part of the question – ten years from now we will probably be looking at Boeing and Airbus achieving equal share in the narrow body market. However, by then the Chinese, Russians and Japanese may all be hovering close to producing similar planes. Post 737 and A320, what that says is the market may never again be the same.
Many airlines have raised fuel surcharges as wholesale oil/fuel costs rise to unprecedented levels - do you think that this will create a domino effect in airlines cutting schedules, raising fares and less customers then fly? And what of the record orders placed? Where do you see the biggest risk(s) of cancellation/deferrals?
Of immediate concern is that airlines may have ordered too many planes in the medium/large category. I do worry about the underlying affordability of 787, 777 and Airbus A380 and A340 planes and how some airlines will manage to finance them.
But, I do also believe that although we are bound to see an increasing number of order deferrals and maybe some few cancellations as some airlines go under this will not seriously impact short and medium term prospects for Airbus or Boeing.
How do you think Airbus and Boeing will cope with the current economic climate?
Of course, Airbus has its own plate of problems related to the dollar, future financing and the ridiculous ownership structure. It must also, as Boeing will no doubt also need to do but to a much lesser extent, face up to whatever the WTO rules on aircraft subsidies.
It has been a distinct honour to have had Howard give his wealth of industry insight and I’m confident that another opportunity to do so again is just around the corner.
A very big and warm thank you to Howard!
Sphere: Related Content2 comments March 31st, 2008
