Arran Aerospace On Airbus, Boeing
October 20th, 2008
In the first of a two-part Q&A special, FleetBuzz Editorial.com speaks exclusively to Doug McVitie, Managing Director at Arran Aerospace.
McVitie is a highly controversial figure in the aerospace arena and is equally regarded and respected as an industry heavyweight, building on years of first hand experience at Boeing’s main rival, Airbus.
As Director of Sales Intelligence at Airbus, McVitie lead a variety of sales successes around the world and routinely participates in global conferences and air shows. He is a leading figure in aerospace consultancy and one of the few genuine analysts whose acumen is amongst the best in the world despite the influx of media munching pretenders.
Doug McVitie
1. Having seen EADS win and then lose out on the USAF KC-X Tanker replacement programme, what is your assessment of EADS’ moves to venture into the USA and do you see the company teaming up again with Northrop Grumman to participate in a new contest after the next US Government takes office in January 2009?
So many of EADS’ strategic comments under CEO Louis Gallois these past 27 months have been little more than empty tub-thumping rhetoric, so I’m completely sceptical about the company’s willingness or even ability to develop longer-term US-based manufacturing operations.
Assuming they don’t throw in the towel altogether (as, ridiculously, Gallois was threatening to do with the A400M), I can’t see any other US partner than Northrop Grumman being permitted by the DoD to bid on the KC-X.
2. Airbus is closely watching the setbacks on the Boeing 787 and has admitted that it too is battling weight issues on its new A350XWB family.
Of the challenges the company faces with the new A350XWB, what would you identify as the key areas for concern so that Airbus doesn’t fall into the same trap of experiencing delays as it did with the A380 and those of its rival Boeing?
Probably Airbus’ major areas of concern on the latest iteration of the A350 are quite simply indecision and management under-performance: basically, they still don’t really know what they’re doing with this aircraft family and as usual, there is much talk but little detail even ahead of design-freeze, which at most recent count was now planned for early 2009. Airbus wanted to copy the 787’s barrel-fuselage approach but for a variety of reasons (patents, delays, capability, unions) it is now focused on a patchwork, panelled approach which will adversely affect the aircraft’s potential weight savings over traditional aluminium designs.
Boeing’s 787 problems stem largely from its mismanagement of the outsourcing issue which characterises the 787 programme, while Airbus has taken virtually no steps to internationalize production of the A350XWB despite, once again, empty rhetoric about “50% outsourcing”. Airbus will need to learn how to walk the walk after all the talk of recent years – that’s its major problem.
3. Boeing has repeatedly said that it would only consider a revamp or replacement of the 777-300ER if it perceives the A350-1000 to be a real threat. As of writing, Airbus is struggling to keep the weight down of the A350-1000 and is, by its own admission, nowhere near reaching the advertised range – much to the displeasure of at least one key customer – is the -1000 perhaps a “stretch too far” for Airbus and does this airplane market itself more towards being a niche player between the 777-200LR and 777-300ER rather than the latter’s replacement?
I can’t see any way in which the A350-1000 as currently envisaged could be conceived as any kind of 777-300ER replacement. The concept is still too nebulous, Airbus is trying to run before it can walk and I’m sure Scott Carson’s not losing any sleep over this proposed European aircraft.
Despite all the media hype and some US bloggers’ vacuous ranting, the reality remains the A350-1000 is a proposal, that’s all. Like the A380 before it, the A350 has significant weight issues which will almost certainly confine its future to that of a niche player, particularly if Emirates gets its claws further into the aircraft definition. And since Emirates effectively owns Airbus, you can count on this happening.
Image courtesy of Boeing
4. Do you think that Boeing should perhaps abandon the derivative approach and replace the 777-300ER and 747-8I with something new, using knowledge and experience garnered on the 787?
No, absolutely not. There are considerable advantages from a derivative approach, not least customer loyalty and building on an already extensive installed based, as Boeing proved to great effect with the 747 over the past four decades.
Similarly, the 747-8i is the correct approach to appeal to the maximum number of existing 747 customers who want a derivative but growth aircraft rather than an all-new, sub-optimal type like the A380. “Follow the market” and “evolution, not revolution” are the watchwords of a conservative industry like aerospace.
5. During an interview with a senior Boeing executive at the Farnborough Air Show this summer, he commented that a stretched A380-900 would be “ridiculous”. What are your views on this proposal (sought largely by Emirates) and will it ever see the light of day?
A few markets might have one day demanded a stretched A380 but there is little prospect this program will survive long-term, and any talk of a stretched A380 today when there isn’t an A380 flying with more than 500 seats is further proof that Airbus gave up being a commercial organisation years ago (if it ever truly was one) and instead is closer to an aviation DreamWorks®.
In other words, a stretched A380 belongs in fantasy-land – it’s not an idea taken seriously by an industry which as a whole is increasingly disgruntled with Emirates’ sabre-rattling. Before the AIG rescue, both ILFC and Emirates were noticeably becoming a little too big for their boots. Stark parental financial reality is dragging ILFC back now but with Emirates’ heavy dependence on Airbus for much of its future growth, it too is surely in for further serious if not exactly similar disappointments.
6. While hindsight is a gem, was Boeing perhaps too quick to terminate the 747-500X and 747-600X projects in 1997, despite the hefty price tag rumoured to be upwards of almost $7bn? Could these jets have stolen a march on Airbus’ plans for the A380?
Boeing did the right thing to decline to go ahead with the 747-500X and -600X. You have to be able to read the markets, and they did. Nothing would have stopped Airbus from its politically-motivated A380 white elephant. It’s not as if Airbus suddenly saw a gap in the market after Boeing held back. Grandiose plans and market reality rarely mix. Boeing went with the latter, Airbus is suffering now from the results of choosing the vainglorious former.
7. In a recently published article, I highlighted how the A350 and A380 have huge orders reliant on just a few key customers in the Middle East region. You commented that these carriers are holding Airbus to ransom – has Airbus laid too many eggs in one basket in its pursuit for sales and market share rather than profitability?
It certainly has. Airbus is almost entirely at Emirates’ mercy now, a position of strategic acquiescence which is absolutely staggering in its gross naïvety, incredible short-sightedness and downright long-term lunacy. The tail is wagging the dog, and the dog is barking happily away in French: who cares about tomorrow when we have jobs today?
8. Power 8 has, by and large, been all talk and very little substance – in fact, during 2007, EADS headcount went up. Is this cost saving project dead before it even makes any impact?
Power8 was another example of a clueless management paying lip-service to shareholders disgusted at the incompetence and alleged corruption surrounding Airbus, the A380 and EADS. Once again, all talk, no trousers. But Airbus management don’t actually care whether Power8 works or not (if they did care, they’d have put someone responsible and capable in charge of forcing the programme through). Why should they bother? The current French president has declared Airbus a ‘strategic industry’ (sic) which he won’t let fail, so where’s the incentive to run the company properly? Airbus has a Kevlar™ safety-net, like all the best corporate circuses.
Thanks go to Doug McVitive and Arran Aerospace for kindly arranging this Q&A session. Doug has kindly welcomed feedback and will be happy to discuss issues raised here both publicly and privately.
To contact Doug privately, in the first instance, please email me here.
Part Two will be posted later.
Please ensure to check back when it’s published.
Comments are both welcomed and encouraged.
Sphere: Related ContentEntry Filed under: Aeroplane, Aerospace, Air Transport, Air Travel, Airbus, Airbus A350, Airbus A350XWB, Airbus A380, Airbus Orders, Airlines, Airplane, Airplane Order, Airplanes, Airport, Airports, Aviation, Boeing, Boeing 747-8, Boeing 747-8F, Boeing 747-8I, Boeing 777, Boeing 777-200LR, Boeing 777-300ER, Boeing 777F, Boeing 787, Boeing 787-3, Boeing 787-8, Boeing 787-9, Boeing Commercial Airplanes, Boeing Orders, Dreamliner, EADS, Emirates, FleetBuzz.com, Jim McNerney, Randy Tinseth, Scott Carson
10 Comments Add your own
1. ikkeman | October 20th, 2008 at 8:03 am
Man, this is a nasty piece of one sided vitrol. Your piece has certainly made a impression, Doug McVitie.
“evolution, not revolution” - like the 707 and 747…
I can’t see … of 777-300ER replacement. So you can’t see the biggest version of a line of aircraft specifically positioned between the upper reaches of the 787 and the lower reaches of the 777 as a potential 777 replacement?
Because the concept is to nebulous (undifined right?) - isn’t the whole point of a nebulous concept that it stil has room to wiggle - realign itself with market changes.
Airbus wanted to copy the barrel approach - since the beginning I’ve heard talk of alu-lithium - not barrel bakeing.
2. Chris C | October 20th, 2008 at 10:09 am
Excellent Q&A, thank you Mr. McVitie. A few people will have their feathers ruffled when reading this, no doubt, but it is a very good, clear and accurate Q&A.
3. mike j | October 20th, 2008 at 10:52 am
I like where McVitie says,”…Boeing’s 787 problems stem largely from its mismanagement of the outsourcing issue which characterze the 787 programme,…”
Perfectly said!
The average Boeing worker has been stating this since…
Boeing’s mismanagement is no better nor worse than Airbus’s.
And Boeing sort of has a “…kevlar safety net, like all the corporate circuses…” same as Airbus.
After this US “economy bailout” $850 Billon, the American Taxpayer is funding Boeing via AIG and ILFC etc, just like Airbus is funded by French Taxpayers. So it is not hard to determine whether Boeing is really a commercial-company or government-owned, just like Airbus.
And Boeing gets many of its sub-assemblies from EADS too.
4. Ken | October 20th, 2008 at 1:28 pm
Doug nails it again, god forbid if the Middle East Carriers suffered a catastrophic event of any kind. Airbus’ market share would drop through the basement.
Another factor playing against Airbus is the so called expansion of the economic zone in Dubai, which is now beginning to feel the effects of the economic crunch.
To attract travelers and their money to the area, they have been building at a pace unseen in recent memory, the fault in their theory is its not designed to attract the common vacationer.
Dubai is a very very expensive place to visit, normal everyday working blokes can’t afford to go there, unless you want to sleep on the beach, so who are they trying to attract?
I sometimes wonder if they are trying to build another Las Vegas in the desert sands? for the rich.
The point is, if Dubai collapses so does Emirates, because after all its their money who supports the Airline, must be nice to have a sugar daddy paying the bills.
And as Doug said, Airbus has put all their eggs in one basket.
Basically Airbus has very few options left, as everyone knows the A380 and the A400M are the giant sucking sound you hear when you walk past the plant, Euro’s are being drained out the company at an unsustainable rate, the only aircraft making any profit are the A320’s and very slim margins at that.
The recent share price for EADS is a good indicator of investor confidence in the company, I’ve never seen dive so far so fast.
So where is Airbus making money? the A350 is as Doug says basically a paper airplane, Airbus really doesn’t know if it’s financially viable to proceed with the project, in fact I think they are very nervous about proceeding, this aircraft could be the stake through the heart of Airbus, despite Sarkozy.
And the capper, order cancellations and deferrals, Airbus has put itself in a very bad position, and will suffer far more than Boeing will under the current economic crisis, Airbus pandered to the LCC carriers in the East, Boeing concentrated on the Flag carriers, and as a consequence Airbus will suffer far more.
Enough ranting, despite the current conditions and a respite for Boeing waiting for the strike to be settled. The advantage is to Boeing, giving them time to sort out supply issues, and time for airlines to step back and take a deep breath. I think they will suffer very few cancellations.
All players know the fuel prices will bump back up, 787 customers still know that they need an economical aircraft to offset the fuel prices, and the 787 order book will increase.
Airbus is the opposite, A380’s are stagnant and will remain so, A350’s are still paper, A340’s are gone, A330’s will soon be gone, and whats left.
For Airbus a very cloudy vision of the future.
5. Aurora | October 20th, 2008 at 2:22 pm
The A400 project seems to be on hold for now while EADS & the Airbus governments wrangle over the future of the program. EADS is said to want the customer to waive penalties for late delivery or it will halt production. Obviously this project is (financially speaking) “under water”. Frankly, I don’t see where the Airbus governments are in a position to play “hard ball” here and will most likely accede to anything that EADS wants. What’s the alternative? The An-70? Buy C-17s or C-130s and have their defense euros go to the Americans? No, they’ll fold and this program will likely be restructured into something resembling a “cost plus” contract.
I’m just grateful that we were able to dodge the bullet (for now) and avoid the U.S. taxpayer funded Airbus production line in Mobile, AL. What a scam that would have been! Depending on the outcome of the U.S. presidential election, they may try again.
6. DonS | October 20th, 2008 at 4:16 pm
Re the Airbus- Northrup tanker assembly plant in Mobile
I’ve maintained for several years that when the smoke clears, it will be a split contract for the tankers. Thus creating jobs in the US and avoiding a few more years of gotcha.
7. Brian | October 20th, 2008 at 7:33 pm
Some questions for Mr. McVitie and further discussion:
“Like the A380 before it, the A350 has significant weight issues which will almost certainly confine its future to that of a niche player, particularly if Emirates gets its claws further into the aircraft definition.”
Two issues here. First it would seem that your principal concern for the 350-1000 as a 300ER replacement is that the aircraft is overweight. The same has been true of the 380 and yet it looks like from what has been said recently Airbus is on track for some significant weight reductions in the 380 which will get it back to what was originally promised (range/performance wise) if not beyond it. Given what’s going on with the 380 is your negative view on the 350-1000 more short term or do you feel that no matter what Airbus does with the aircraft that it will never compete with the 300ER and if so why?
Second, you also mention that Emirates having its claws in the product definition will further hurt the aircraft. What is it that Emirates wants that will hurt the aircraft in the broader market and why?
Other than the obvious dangers of being totally beholden to a specific region or carrier (aka a downturn in the region that wipes out your order book) what problems does being beholden to the Middle East create for Airbus?
You say that Boeing has taken the correct approach with the 747-8I and yet to date only Lufthansa has ordered a meaningful number of passenger variants. And some high profile 747 operators (Singapore and BA) have rejected the 8I and ordered 380’s. Do you feel that Boeing will eventually sell a significant number of passenger 8Is and if so to whom?
Thanks to Mr. McVitie for taking the time to provide such valuable insight. I’m looking forward to seeing Part two of the Q&A and hopefully to some good discussion here.
8. Brian | October 20th, 2008 at 8:23 pm
One further question for Mr. McVitie. Another blogger has reported that Qantas is likely to order the A350-1000 http://cathaypacific1946.blogspot.com/ There does seem to be at least some substance to his remarks given the Qantas has publicly been uninterested in the 300ER and impatient for a 787-10 to be defined. I’m curious what your response to his blogpost regarding Qantas and the 350-1000 would be.
9. Bryan | October 31st, 2008 at 8:35 pm
Is this Mr. Aboulafia’s twin brother???
It was making a little sense until he said something about Airbus leaning from being a true company to a dreamworks organisation. You’ve gotta love fleetbuzz.
10. keesje | November 28th, 2008 at 10:20 am
“Is this Mr. Aboulafia’s twin brother??? ”
I think Richard is more funny, Doug seems more angry at his former employer, just trying to hurt them any way he can. How did he leave?
The observation seems totally based on feelings. No doubt he’ll notice he hurted his credibility if he reads this back in a few weeks..
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