Mo Yahyavi Talks 747
October 12th, 2009
Rate Increase On 747 Line Dependant On Orders
Performance On Track, Further Improvements On The Cards
747-8 Intercontinental Design Release Over 80% Complete
Just over a week ago I got the opportunity to sit down and have a wide-ranging discussion with 747 VP and General Manager Mo Yahyavi, prior to the news that the 747-8F first flight would be delayed. Excerpts of those talks are detailed below.
A Boeing veteran for over twenty years, Yahyavi came from the P8-A Poseidon program in early 2009 to lead the biggest civilian jet the company has ever produced. Aside from the mutual cultural heritage he and I shared, Yahyavi picked up from where 747 Chief Engineer Michael Teal left off on a previous round of talks, and explained that progress has been laden with challenges but that confidence is riding high when it comes to seeing the airplane finally making its first flight in the very near future.
With the annual Christmas factory shut down coupled with thin flight test resources to cover two potential first flights (of the 747 and 787), pushing back the big quad made the most sense - notwithstanding the financial loss on the program or indeed, the efforts gone into ensuring that the airplane meets and beats its performance parameters.
“There’s been really good progress, as you can see behind you, in the last nine months.
There are 20-day intervals between each airplane in the build process – we have lots of lessons learned from the first airplane, as you can imagine, we transferred those immediately to the build of the second and the third airplanes.
I’m pleased to say that the second and third airplanes are coming together faster and better than expected. Our plan is to install the engines on the second airplane and we have the engines in the factory ready to go.
Our focus is on completing the remaining tests left in the factory on the first airplane which is ground vibration tests (GVT), after that we’ll finish our factory gauntlet tests and the gauntlet tests involve simulating the airplane flying (obviously without the fuel!) to fool the airplane so it thinks its flying to check all the in-flight systems.
We are in the process of completing the factory functional tests which are over 60% complete. So as soon as we finish the GVT and factory gauntlet tests, we’re gonna move the airplane out to paint and to fuel, then we do more (engineering authorisation) testing then we get the engine runs and then we do another flight-line gauntlet test which is again fooling the airplane to think its in flight but with fuel on board.
After that we’ll do taxi tests and then we fly.“
Weight Watchers
One area that was a concern was the extra weight that had crept into the program. As Teal had opined earlier, weight saving efforts are being phased in with each line number moving forward and Yahyavi hopes that by the time the first 747-8 Intercontinental emerges (in BBJ format for a VIP customer), the real work to lower operating empty weight can begin in earnest.
“The weight saving is directly related to the performance of the airplane, we want as light as possible an airplane that we can get. We’ve had a typical weight challenge, its not huge, we have identified around half of that and its being implemented throughout the production system as the design becomes available we’re incorporating into the production line as it comes through.
Our goal and objective is to get all these weight savings incorporated by the time we have the first 747-8 Intercontinental delivery or even before that, which is line [number] 1440 which is around twenty airplanes into production.
We’ve got standalone focussed resources on weight-saving on the airplane in production and we’re making good progress.
On the 747-8 Intercontinental (specifically), we’re meeting our (obligated, contractual) guarantees – there are no issues with weight on our current status – but we’re not gonna stop there. We’re gonna continue reducing the weight to give better performing airplane to our customer. Our goal is to go beyond our guarantees.“
You Can Blame Me!
One of the most contentious, if not outright controversial moves was to use a single engine supplier for the 747-8 program. Derived from the GEnx-1B, the GEnx-2B’s shares around 80% commonality with the former engine. With so much emphasis over the last few years on fuel consumption, efficiency and noice, the decision to go with one engine may prove to be a successful choice - particularly as this strategy has not harmed the likes of the 737 Next Generation or 777-200LR and 777-300ER sales.
“The way we measure our performance is at “airplane level”. Our second 747-8F you see there in the background is our air performance flight test airplane. We’ll measure nautical mile fuel burn on the airplane and it’s a method that’s been used “forever” at Boeing.
We have a very good airplane with a brand new wing design, which is similar to concept and approach to the 787 and is regarded as high performing and we believe our wing design and in general our aero-smoothness and aerodynamic design of the airplane itself gives us forecast data that we’ll meet our (advertised) guarantees and we’ll also do better (than our performance obligations).
Regardless of the status of the (GEnx-2B) engine – on SFC and fuel burn we’ll meet our goals. But we’re not gonna stop there, as you know, we’ll continue with our partner GE and we’ll make sure that they’re plan for engine fuel burn improvements (for the GEnx engines) and they’re on a good schedule on that. I’m aware of the plan and we will encourage them to improve the engine performance, regardless of the airplane performance. We’ll want GE to address their engine performance.
I should also point out that I’m the man responsible for selecting the engines that power the 747-8 family, so you can blame me!“
Future Prospects, Rate Increase Is On The Cards
The lingering question of whether there’ll be any future orders for the 747-8 family was one Yahyavi was expecting and his response to it was succinct. With the 747-8 program currently in a loss position, the pressure to cut costs, improve production and integration processes while at the same time secure new business in a heavily depressed market place is one that Yahyavi is acutely aware of.
Yahyavi however, feels that the cyclical nature of the industry means the inevitable turnaround in fortunes could come faster than some may predict and he says he wants to be poised to captalise on that.
“The 747-400 freighter was the best in its class – I don’t think that it had any competitor.
We’ve built upon the 747-400 and you can see the sales success on the 747-8F. Again, it’s the best in its class and when the freight market gets back to its usual business cycle (after this current downturn); we see the 747-8F as a good strategic move for the company.
Let’s look at the 747-8 Intercontinental. Remember, we have over 400 747-400s that are flying all around the world and it’s a niche market. There’s no airplane competing in that niche market.“
Yahyavi pointed out that with performance enhancements, reduced fuel burn, lower emissions and noise means that when current 747-400 operators come to replace those jets, the 747-8 Intercontinental, he believes, will be their airplane of choice.
Interestingly, Yahyavi notes that Boeing is studying the possibility of increased production rates on the 747-8 line once the model finally enters service in the fourth quarter of next year. Is that a prelude of more orders to come and add to the backlog?
Let’s put it this way, Yahyavi was distinctly upbeat about sales prospects for the 747-8F and 747-8 Intercontinental in the near future and end Lufthansa’s isolation as the only airline with an order for the latter model.
“The 747-8 Intercontinental is an attractive passenger airplane, testimony of that is Lufthansa who’ve ordered this – a highly respected and successful airline and we’re in talks with other airlines that are very much interested in the 747-8 Intercontinental. As the market turns around, you will see some of those 747-400 operators, that they need this sized airplane with the enhanced improvements (green and improved fuel burn, for example) and they’re going to come and order it.
They’re gonna want this airplane.
My worry is how am I going to be able to respond to that increased rate – when the up-tick cycle comes, everyone wants airplanes, so we’ve got to be ready for that.
We’re constantly talking to customers when they want to talk. But yes, I’m very busy these days!
Once we get into the flight test program, plus when the market turns around and demand (for new airplanes) goes up, we’ll see a lot more “activity”.“
Three 747-8F’s will be involved in the 3800-hour flight test program.
First delivery to Cargolux is expected in the fourth quarter of 2010.
All images owned/copyright of FleetBuzz Editorial.com.
Entry Filed under: Boeing, Boeing 747, Boeing 747-400, Boeing 747-8 Intercontinental, Boeing 747-8F, Boeing 747-8I, Mo Yahyavi
20 Comments Add your own
1. Tweets that mention &hellip | October 12th, 2009 at 05:27
[...] This post was mentioned on Twitter by Jon Norris. Jon Norris said: RT @FleetBuzz: Mo Yahyavi Talks 747-8 http://is.gd/4eSlS [...]
2. Vero Venia | October 12th, 2009 at 08:18
Mo Yahyavi said “Let’s look at the 747-8 Intercontinental. Remember, we have over 400 747-400s that are flying all around the world and it’s a niche market. There’s no airplane competing in that niche market.”
Yes, the 747-400 is in a niche market. The 747-8i will be in a niche market as well.
The 747 VP and General Manager is realistic about his product.
In my humble opinion, anything bigger than 400 seats is in a niche market. Now, the question is how much effort you want to make to address that small market.
If you look at the link below, you can see that the first passenger 747-400 was delivered in 1989. In 2005 the last passenger 747-400 was delivered.
http://tinyurl.com/747-400-deliveries
I don’t expect many 747-8i to be delivered between 2011 and 2030, especially because we all know that today there are very capable twins.
Perhaps there will be just enough 747-8i and 747-8F during the above mentioned period to make the program profitable.
3. keesje | October 12th, 2009 at 13:41
747 VP and General Manager Mo Yahyavi knew at this stage the program was delayed and a charge of $1 Billion would have to be made to pay for real program problems.
If Airbus had done this to you I cannot imagine what you would have written. Blood & chainsaws spring to mind.
Bottom line is the program is at a loss and Everybody seems to doubt if the -8i version is still a good idea. (or ever was)
http://news.xinhuanet.com/english/2009-10/12/content_12218124.htm
4. boeing investor | October 12th, 2009 at 14:38
Keesje, you cannot claim with a straight face that the A380 is also not in a loss position either.
Regardless, the 747-8 family will yield better income for Boeing than the A380 will for Airbus.
5. Vero Venia | October 12th, 2009 at 15:10
During the second quarter 2009 earning report, Boeing has already announced the forward loss position of the 747-8 program. There is nothing new in it.
http://www.boeing.com/news/releases/2009/q2/090422a_nr.pdf
you should read the latest press release with an interesting part about the tax benefit.
http://boeing.mediaroom.com/index.php?s=43&item=865
Quote: “The third-quarter tax benefit related to the 747 charge and the previously announced 787 charge is expected to be approximately 31 percent. The full-year tax benefit for both charges is expected to be approximately 37 percent. Boeing will update its 2009 financial guidance on October 21 when it reports third-quarter results.”
Most of the 787 R&D cost and a majority of that from 747-8F program have been spent. But Boeing has just taken 3.5 billion of charges, most of which is non-cash charge. These charges will induce a lower profit and thus lower tax. The estimated tax benefit is in the excess of one billion dollars. Many engineers don’t understand this accounting principle. But the reality is that at the end of the year Boeing will spend one billion less tax (or will keep one billion dollars in the pocket).
Next year (2010) will be a very tough year. There are strong indications that production output will be lowered. It means that 2010 turnover will plunge. It is very interesting for Boeing to “forward-spread” a possible revenue slowdown in 2010. In reality, a big chunk of the 747-8 (future) loss has just been recorded. I won’t be surprised if Boeing announces another important charge on the 747-8 program in the third quarter of 2010.
This is a very interesting financial maneuver from James Bell and Jim McNerney. Hey! That’s what a CFO and a CEO are paid for.
Let’s wait Boeing 3Q09 earning report and the the guidance for full year 2009 that will be webcast on 21st October.
4. boeing investor | October 12th, 2009 at 14:38 says, “you cannot claim with a straight face that the A380 is also not in a loss position either.”
What the hell has the A380 to do with this? But yes, I agree that the A380 is certainly in a forward loss position too.
6. Paula K | October 12th, 2009 at 15:27
@ Vero Venia :
“Yes, the 747-400 is in a niche market. ”
Perhaps the replacement market for the 747-400 is, but certainly not so when the 747-400 entered service - the total number of that model alone was highly successful (not including sub-variants).
“I don’t expect many 747-8i to be delivered between 2011 and 2030, especially because we all know that today there are very capable twins.”
Yup, and you can probably throw in the A380 for good measure in there too.
7. Vero Venia | October 12th, 2009 at 15:27
I have repeated ad nauseum and will repeat again and again that the VLA market is a niche market.
Mr Mo Yahyavi seems to agree with my opinion, which is a very good thing. The recognition of the small market size of the 747-8i is essential. It means that the actual delivery threshold for the profitability of the program is recognized to be a small number, whatever that number is.
I wish to stress again and again that the 747-8 has three advantages compared to the A380 (although the A380 has nothing to do with FleetBuzz’s posting):
1. It has two versions: freighter and passenger
2. It has only one engine for both versions mentioned in the point one above
3. The GEnx-2B shares the same core as the GEnx-1B. GEnx-2B shares 80% of GEnx-1B’s LRU.
It is absolutely clear in my mind that most of GEnx-2B development cost has been shared with the dev cost of the GEnx-1B. GE won’t get bitten by the small number of 747-8 sold.
Boeing will have two playgrounds to make money out of the 747-8 program.
However, the situation of cargo and passenger market in 2009 is really crappy as indicated by IATA in its latest statistics.
http://iata.org/pressroom/facts_figures/traffic_results/2009-09-29-01.htm
8. Ed | October 12th, 2009 at 16:44
Vero Venia said in reply # 2;
“If you look at the link below, you can see that the first passenger 747-400 was delivered in 1989. In 2005 the last passenger 747-400 was delivered.
http://tinyurl.com/747-400-deliveries”
I believe this is only for the basic B-747-400 model, it does not include the 6 passenger versions of the B-747-400ER bought by QF, some of them were delivered after 2005.
Keesje said in reply #3;
“747 VP and General Manager Mo Yahyavi knew at this stage the program was delayed and a charge of $1 Billion would have to be made to pay for real program problems.
If Airbus had done this to you I cannot imagine what you would have written. Blood & chainsaws spring to mind.
Bottom line is the program is at a loss and Everybody seems to doubt if the -8i version is still a good idea. (or ever was)”
Yes, Keesje, we all know that. But, you seem to have forgotten the Airbus A-380 has done this, three times. The A-380 project is at a loss, even with the 200 airplanes it has sold. It will never make any money for EADS/Airbus until well past airplane # 500, and counting.
But the biggest possibility for sales in the VLA market is going to be in the “F” versions, at ;east for the next 15-20 years, or so. Here is where Boeing’s approach to the VLA, via the B-747-8, really shines. They have started with the “F” version, and then will go into the “I” version. This puts Boeing in a more favorable position than Airbus is in, because they essentially dropped the A-380-800F version, which was never a competitor to the B-747-400F/ERF or B-747-8F. The big WhaleJet will never be able to compete in the oversized cargo market, mainly because of its designed failure due to keeping the upper deck a cargo deck, and the additional costs for unique cargo handling equipment to load/unload cargo from the top deck. Airbus is stuck now with that design, should they ever restart the A-380F, or try to convert A-380s in a P2F conversion. Why? Because the top most cargo deck has to remain in the design to maintain structual integrity, it is needed to support the sides and upper portions of the fuselage, or it will collapse upon itself. This leaves the only possibility of oversized cargo being loaded/unloaded onto the second and upper decks through a swing open tail, ala the B-747-400LCF airplanes for the B-787 program production. Even with that type of modification, the WhaleJet Freighter is still restricted on floor strenght and the high sized cargo, like oil drill rigs, whaih the B-747F can take.
Vero Venia said in reply #8;
“I wish to stress again and again that the 747-8 has three advantages compared to the A380 (although the A380 has nothing to do with FleetBuzz’s posting):
1. It has two versions: freighter and passenger
2. It has only one engine for both versions mentioned in the point one above
3. The GEnx-2B shares the same core as the GEnx-1B. GEnx-2B shares 80% of GEnx-1B’s LRU.
It is absolutely clear in my mind that most of GEnx-2B development cost has been shared with the dev cost of the GEnx-1B. GE won’t get bitten by the small number of 747-8 sold.
Boeing will have two playgrounds to make money out of the 747-8 program.
However, the situation of cargo and passenger market in 2009 is really crappy as indicated by IATA in its latest statistics.
http://iata.org/pressroom/facts_figures/traffic_results/2009-09-29-01.htm”
That hits the nail right on the head and is the reason why the B-747-8 will be more successful than the A-380, even though the two airplanes do not compete head to head.
9. Louis | October 12th, 2009 at 18:49
I trust Boeing to do the right thing. History proves it. My money is in Boeing and I have the time to wait for results. It is good reading your comments. Thanks for the info……………Louis
10. Paulo M | October 12th, 2009 at 19:00
The way I see it is this programme will have success in whatever the size of its niche market turns out to be. The effort that has gone into the plane is admirable, the performance is almost where I hoped it would be.
I started looking at 747 development around 2000 at the time of the 747-X and 747-X Stretch. The 747-8 is already everything those two promised to be - at considerable discount. Indeed, the 787 has been the enabler. But of course, the wing changes show that the performance gain has not been achieved solely by GE. It’s a nice effort.
I will not get into any 748-vs-388 commentary - I will only agree with the comments posted. I think Boeing’s credibility is in the toilet now. The problem with the 747-8 is trying to get through the 787-induced credibility problems and seeing the effort for what it is, and I think 747 VP and General Manager Mo Yahyavi is genuine.
The 747 has been such a strong programme for Boeing that I’m inclined to believe in it far more than I do in the 787. This is because the 787 development is alien to any one who has never seen a cleansheet design pushed to market by Boeing. But I guess the effort is right up there with the 707 and 747. It’s an incredbile effort. Of course the reality is that the 787’s market is far larger than the 747’s.
11. Vero Venia | October 12th, 2009 at 19:14
8. Ed | October 12th, 2009 at 16:44
The last 747-400ER was delivered on 30-Jul-2003 to Qantas.
The last passenger version of the 747 was delivered in 2005.
The next pax 747 delivery will be a 747-8i.
12. NH | October 12th, 2009 at 21:12
Vero,
It looks like Boeing is trying to make the best of a bad situation by bringing forward some of those long-term production losses that made up the $1B writedown. Yes, the tax reduction means they won’t actually ‘lose’ the whole billion, but I wouldn’t see it as any more positive than that.
My take on the situation is that the $1B writedown appears to have been driven by two separate problems - engineering resources and the market. Sadly the engineering-related charge was the biggest chunk ($640M), and the one that hits BCA the hardest reputation-wise when they are already reeling from the 787 delays; ultimately, Boeing dropped the ball on that one. The other $360M related to slower production rates is what it is; ultimately a product of market forces beyond Boeing’s control.
I agree with Paulo M, the 787 is the reason the 748 is here today - and it is the reason the 748 is getting a bumpy ride today, both engineering-wise (resources) and PR-wise (Boeing credibility). To borrow a quote from The Simpsons: “The 787! The cause of, and solution to, all if the 748’s problems!” (though it might be more applicable if “cause of” and “solution to” were reversed in order).
The 787 can ultimatley afford the program difficulties because it’s market is so big, it’s essentially an unconditional profit maker. The 748 doesn’t have that luxury.
And a question for Saj: your article said that not all of the weight issues will be resolved before aircraft 20. What kind of performance hit (range/payload/fuel burn) is expected on the initial aircraft? The 748I will meet performance guarantees, will the F?
13. FleetBuzz Editorial.com | October 12th, 2009 at 21:16
NH,
Despite the increased weight on the 747-8F (prior to airplane #20), those airplanes will meet/may slightly surpass their performance guarantees.
14. Vero Venia | October 12th, 2009 at 21:37
12. NH | October 12th, 2009 at 21:12 says, “My take on the situation is that the $1B writedown appears to have been driven by two separate problems - engineering resources and the market. ”
You need to separate the two issues. First financial/accounting trick and second the extra delay.
The accounting trick is clearly to save cash, instead of burning it as tax payment.
The extra delay is clearly due to flight test resource availability issue and other manufacturing/engineering issues. They have decided to delay the flight in order to relieve the pressure. The market is really crappy anyway.
The delay could have taken place without the charge. They could have taken a charge without having the extra delay.
Why do you want to put extra resource and extra pressure to fly the aircraft when the market does not want the aircraft immediately?
Remember the case of the MSN047 and MSN050 from the A380 program. That’s a huge amount of money sitting on the tarmac.
http://plane.spottingworld.com/A380_production_list
15. NH | October 13th, 2009 at 05:11
13. FleetBuzz Editorial.com | October 12th, 2009 at 21:16
Let’s hope so - if nothing else than to prove the art of good engineering isn’t completely dead!
14. Vero Venia | October 12th, 2009 at 21:37
Ah Vero, so close yet so far…
Sorry, I just don’t 100% agree with your theory on this, maybe 85%.
Yes, the smaller $360M writedown is market and schedule driven (lower production rates due to lower demand). However the $640M writedown sounds much more engineering-related (reworking parts, production issues, etc); the $640M is down to not enough engineering resources being dedicated to the program. And I don’t mean recently or between now and the new year - I mean at the design stages for the past two years, ever since the 787 started slipping and consuming more and more of BCA’s finite resources. The 748 program simply took second place.
And sorry, but I don’t buy the “financial/accounting trick” as anything more than a way to make a bad situation slightly less bad by lumping it all into 2009 to save on near-term taxes and improve 2010’s performance. (If you are implying it to be anything more than that.)
Now as for the schedule slip - the fact that the 748 has suffered this late delay means that BCA chose not to spend EVEN MORE money and precious resources on getting through the remaining final production rework issues to make an end of year first flight possible. It’s simply not worth the money. The market situation simply provided a reason not to spend too much money and effort trying to overcome the delay since (as you point out) the near-term demand is low.
So $360M was market driven; the $640M was resource driven; and the schedule slip was resource-caused, but with market reasons to not fix it.
I just get the impression you think this all is mostly down to market forces (and accounting), but I think the market is the minor player here, and even if we were in boom times right now, we would still have seen either the same first flight delay or the $640M would have grown to account for more resources spent on overcoming that delay.
16. NH | October 13th, 2009 at 05:17
(An afterthought…)
“Ah Vero, so close yet so far…”
Just to clarify Vero, I meant that our own personal theories were close yet far from eachother’s, nothing more disparaging than that.
17. Vero Venia | October 13th, 2009 at 07:26
16. NH | October 13th, 2009 at 05:17
So you think it’s better to push the “system” to produce aircraft and send them to storage like the two A380 (MSN047 and MSN050)?
If I were Boeing I would consider the market situation to relieve the pressure on the financial and human resource.
The market is bad, really-really bad. The YTD FTK is down by 18% (eighteen percent). when people were expecting a 6% increase only one year ago. Cargo yield is crap. Cargo operators are suffering. They simply don’t need more capacity.
Passenger RPK is down by 6% (six percent), when people are expecting a growth of 5%.
There is another issue above the market conditions. It’s the financing. It’s still quite difficult to fund aircraft purchase and lessors are still under pressure.
http://verovenia.wordpress.com/2009/03/26/super-massive-black-hole/
But, I can understand Mr Yahyavi’s optimism. 747 orders will come back when the traffic will recover. But in the next eight months, they need to slow down the production. They need to push the 747-8 entry into service by another six months (on top of the latest delay of three months) if they don’t want to end up with parked aircraft.
I would not be surprised if the 747-8 entry into service will be delayed by another three to six months. It would be a good thing.
Indeed, production of all types of aircraft must decline in 2010.
http://verovenia.wordpress.com/2009/05/08/jet-lag/
18. NH | October 13th, 2009 at 15:41
17. Vero Venia | October 13th, 2009 at 07:26
I didn’t say they should’ve pushed the system. I said that if they did push for a 2009 first flight, they would have seen and even bigger loss. I think Boeing did the right thing in the circumstances. Where we differ is that I believe the bulk of the delay and write-down loss of $640M was fundamentally caused by a lack of engineering resources. It just so happens that the market conditions meant the delay is palatable and BCA didn’t therefore feel they needed to spend more money to avoid it.
I agree with you on how bad 2010 and even 2011 looks for deliveries, and Boeing does too, which is why they took the $360M hit to pay for lower production rates of the 748. If they are going to spend $360M, I hope they are smart enough to get it right and correctly match the airframe production rate to what their customers can absorb into their fleets, assuming economic recovery continues.
19. Callahan H. | October 14th, 2009 at 12:03
The difference between Boeing and Airbus is that with Boeing it’s at the end with the Dumbojet whereas Airbus is only at the beginning with the Superjumbo.
20. Dougloid | October 15th, 2009 at 15:46
Inspector Callahan sez:
The difference between Boeing and Airbus is that with Boeing it’s at the end with the Dumbojet whereas Airbus is only at the beginning with the Superjumbo.
Here’s another Harry Callahan quote: A man’s got to know his limitations.
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