"There are no historic precedents or current parallels for the magnitude of financial exposure risked by an American airframe company" – George Ball, managing director at Lehman Brothers, 1982 "You can't win, you can't break even, and you can't quit" – Jean Pierson, former CEO of Airbus
Here's some inside insight you might find interesting.
I'm an engineer who worked in the aerospace industry for four years as an inspector. Half of my job was actual product inspection, the other half was paperwork. The amount of paperwork that had to be done for any change at all was simply not worth the trouble (according to the higher-ups, anyway), so minor errors frequently didn't go corrected (at least on paper) until they could no longer be ignored, at which point a huge swath of them would be corrected with a single revision, and then the entire manufacturing process for the affected component or assembly would have to be re-validated. This also requires 100% dimension inspection of a lot to certify future lots for sample inspection, though some dimensions (e.g. screw threads) require 100% inspection regardless. All of this adds up to a tremendous amount of time. I've never built a complete aircraft (in an industrial environment anyway, the less said about my family's home-built experiments, the better), but I'd wager that a slim majority of the man-hours required to build one goes to non-value activities such as paperwork. I'd also wager that if you actually printed out all the paperwork necessary to build a 737, from mill certifications for the raw material to inspection routines for final assemblies, those stacks of papers would probably take up more space than the actual plane; they'd certainly weigh more.
Unless the industry regulations are heavily streamlined, I'll never go back to work in it again. The pay is not worth the headache.
There's something counter-intuitive about how small the global commercial airline market is. If you told someone that the airlines around the world transport something like 10 billion passengers, or 6 trillion passenger miles a year, and you asked them how many new planes Boeing and Airbus need to produce each year to service that demand, I don't think the knee-jerk response would be...1,500 planes combined, at most? But that's apparently how the math shakes out.
This was a great writeup. Although it's a "long" post, it barely scratches the surface of the commercial airline business. You could easily write a book on the subject. In fact, it's been done: I heartily recommend "The Sporty Game: The High-Risk Competitive Business of Making and Selling Commercial Airliners" by John Newhouse, published in 1982, and "AeroDynamic: Inside the High-Stakes Global Jetliner Ecosystem" by Kevin Michaels, published in 2019. The latter goes into even more detail on the various suppliers and lower-level OEM for engines, avionics, airframe components, etc.
The story on engines is as interesting and risky as the story on airframes: the three remaining OEMs (Pratt & Whitney, Rolls-Royce, and General Electric) have all teetered on the edge of exiting the business over the last 60 years, and have also had roles in shaping (or forcing) the airframers' choices on development of new models. I won't try to match your level of analysis, but anyone interested in further information can learn a lot from the two books mentioned above.
Boeing, likely because of the bean counter cost cutting at all cost mentality, erred badly on the 787: management insisted that the suppliers for the major assemblies (e.g., the aft fuselage supplier) take on the task of doing all of the subsystem integration for that assembly. This was uncharted territory; the suppliers didn’t have the expertise to do this but Boeing told them they had to take this on or be dropped from the project. So when Boeing started getting major subassemblies, and integrating them on the shop floor, there were discrepancies galore, stuff that flat-out didn’t work, etc. Boeing tried sending skilled engineers to the suppliers to straighten out the situation, but it didn’t work - the effort was equivalent to turning the suppliers into full-fledged mini-prime contractors. So Boeing had no choice but to tackle the rework themselves, and for new assemblies relieve the suppliers of the work they simply couldn’t do.
This is what led to the shocking overrun on the 787, and the fallout from that terrible business decision - outsourcing large elements of the vehicle integration to suppliers who had no expertise in it and had never done it before - still reverberates throughout Boeing today. It may end up killing the company in the next decade.
I'm surprised to learn that development costs for car models are similar to that for commercial jets. Why is that? Isn't the jet a vastly more complicated piece of machinery?
All this goes back to Boeing's decision to have the undercarriage retract into the fuselage.New engines with the 737-300 onwards created problems with ground clearance but were able to be solved.
The 737 Max was, however, a step to far. Boeing should have resisted the pressure and designed a new wing with the undercarriage retracting into it.
It's not as if the problem had not occurred before. The 707 could not be stretched beyond the 707-320 because ground clearance was inadequate, unlike the DC8.But engineers were in charge of Boeing then.
The airliner industry might become a case where too strict regulation inhibits innovation which then actually reduces safety long-term.
And I wonder if airliner development isn't similar to nuclear power plant construction: You have to start a new project after the last one is finished just to keep the experience. Boeing hasn't begun a new clean-sheet design since the 787, and the last deep upgrade, the 777x, was also started 10 years ago by now.
How did Boeing go from an engineering-driven company to one focused on financials and stock price? Simple. Boeing has spent $43 billion on stock buybacks since Reagan deregulation made them legal. You can build a lot of airplane for $43B. But Boeing opted for buybacks to inflate its stock price and enrich its honchos.
The difference in complexity isn't as great as you imagine - in terms of the number of parts and assemblies involved, a new car is probably at least as complex as a new airliner. A car is an assembly of on the order of 100k parts that has to work perfectly, every time, under a very wide range of operating and environmental conditions, with relatively minimal maintenance (certainly compared to an airliner) for ca. 15 years. Also, fixed costs are very high - things like body stamping presses are extremely expensive. Even personnel costs are high, given the number of people required.
Amazing article but I don’t feel I understand what exactly makes a clean sheet design take so long or cost so much? Are all such engineering projects like that? Is it something specific to airplanes? (Though you mentioned cars being similar so maybe not)
Is it the actual man-hours of engineering design work? Is it the tooling? Is it government regulations? Some combination of the above? Something else entirely?
I’d love if you did a follow up to hone in on that.
I note that the 707, 727, 737 and 747 were all new planes developed and rolled out over a 20 year period, with fewer planes developed in the 50 years since. Could airline deregulation have been a factor in this?
Dear Brian, great summary and numbers. With respect to the A320 / 737 global competition you lack a few crucial insights. They are hard to find but canned easily deduced once you consider Boeing and Airbus/ EADS from a more holistic scale. Including military and global production along with geopolitical issues with respect to design and production along with WTO wars between the two and changing administrations in the US and respectively France, Germany, Spain and UK. Be happy to discuss. hajo.drees@berlininstitute-scm.com
There’s a book about the fall of Boeing but I think there are several volumes yet to be written. They’re simultaneously flubbing their space division and the Air Force One replacements. If it wasn’t real it would be considered too on the nose in a story about the fall of America.
Notably, Sukhoi has a somewhat successful clean sheet airliner to its credit this century and Irkut’s MS-21 is taking in some orders. Aeroflot has flown hundreds of Boeing and Airbus planes that are aging out or hard to service. Comac is about to compete with the 737 and A320 in earnest. China’s carriers have similarly been flying western designs since the end of Tupelov and Ilyushin. Pickings are getting slimmer for Boeing.
Here's some inside insight you might find interesting.
I'm an engineer who worked in the aerospace industry for four years as an inspector. Half of my job was actual product inspection, the other half was paperwork. The amount of paperwork that had to be done for any change at all was simply not worth the trouble (according to the higher-ups, anyway), so minor errors frequently didn't go corrected (at least on paper) until they could no longer be ignored, at which point a huge swath of them would be corrected with a single revision, and then the entire manufacturing process for the affected component or assembly would have to be re-validated. This also requires 100% dimension inspection of a lot to certify future lots for sample inspection, though some dimensions (e.g. screw threads) require 100% inspection regardless. All of this adds up to a tremendous amount of time. I've never built a complete aircraft (in an industrial environment anyway, the less said about my family's home-built experiments, the better), but I'd wager that a slim majority of the man-hours required to build one goes to non-value activities such as paperwork. I'd also wager that if you actually printed out all the paperwork necessary to build a 737, from mill certifications for the raw material to inspection routines for final assemblies, those stacks of papers would probably take up more space than the actual plane; they'd certainly weigh more.
Unless the industry regulations are heavily streamlined, I'll never go back to work in it again. The pay is not worth the headache.
Great post.
There's something counter-intuitive about how small the global commercial airline market is. If you told someone that the airlines around the world transport something like 10 billion passengers, or 6 trillion passenger miles a year, and you asked them how many new planes Boeing and Airbus need to produce each year to service that demand, I don't think the knee-jerk response would be...1,500 planes combined, at most? But that's apparently how the math shakes out.
This was a great writeup. Although it's a "long" post, it barely scratches the surface of the commercial airline business. You could easily write a book on the subject. In fact, it's been done: I heartily recommend "The Sporty Game: The High-Risk Competitive Business of Making and Selling Commercial Airliners" by John Newhouse, published in 1982, and "AeroDynamic: Inside the High-Stakes Global Jetliner Ecosystem" by Kevin Michaels, published in 2019. The latter goes into even more detail on the various suppliers and lower-level OEM for engines, avionics, airframe components, etc.
The story on engines is as interesting and risky as the story on airframes: the three remaining OEMs (Pratt & Whitney, Rolls-Royce, and General Electric) have all teetered on the edge of exiting the business over the last 60 years, and have also had roles in shaping (or forcing) the airframers' choices on development of new models. I won't try to match your level of analysis, but anyone interested in further information can learn a lot from the two books mentioned above.
Amazing post!
Boeing, likely because of the bean counter cost cutting at all cost mentality, erred badly on the 787: management insisted that the suppliers for the major assemblies (e.g., the aft fuselage supplier) take on the task of doing all of the subsystem integration for that assembly. This was uncharted territory; the suppliers didn’t have the expertise to do this but Boeing told them they had to take this on or be dropped from the project. So when Boeing started getting major subassemblies, and integrating them on the shop floor, there were discrepancies galore, stuff that flat-out didn’t work, etc. Boeing tried sending skilled engineers to the suppliers to straighten out the situation, but it didn’t work - the effort was equivalent to turning the suppliers into full-fledged mini-prime contractors. So Boeing had no choice but to tackle the rework themselves, and for new assemblies relieve the suppliers of the work they simply couldn’t do.
This is what led to the shocking overrun on the 787, and the fallout from that terrible business decision - outsourcing large elements of the vehicle integration to suppliers who had no expertise in it and had never done it before - still reverberates throughout Boeing today. It may end up killing the company in the next decade.
I'm surprised to learn that development costs for car models are similar to that for commercial jets. Why is that? Isn't the jet a vastly more complicated piece of machinery?
All this goes back to Boeing's decision to have the undercarriage retract into the fuselage.New engines with the 737-300 onwards created problems with ground clearance but were able to be solved.
The 737 Max was, however, a step to far. Boeing should have resisted the pressure and designed a new wing with the undercarriage retracting into it.
It's not as if the problem had not occurred before. The 707 could not be stretched beyond the 707-320 because ground clearance was inadequate, unlike the DC8.But engineers were in charge of Boeing then.
The boundary rules
The airliner industry might become a case where too strict regulation inhibits innovation which then actually reduces safety long-term.
And I wonder if airliner development isn't similar to nuclear power plant construction: You have to start a new project after the last one is finished just to keep the experience. Boeing hasn't begun a new clean-sheet design since the 787, and the last deep upgrade, the 777x, was also started 10 years ago by now.
How did Boeing go from an engineering-driven company to one focused on financials and stock price? Simple. Boeing has spent $43 billion on stock buybacks since Reagan deregulation made them legal. You can build a lot of airplane for $43B. But Boeing opted for buybacks to inflate its stock price and enrich its honchos.
Aren’t Bombardier completely out of commercial jets now?
The difference in complexity isn't as great as you imagine - in terms of the number of parts and assemblies involved, a new car is probably at least as complex as a new airliner. A car is an assembly of on the order of 100k parts that has to work perfectly, every time, under a very wide range of operating and environmental conditions, with relatively minimal maintenance (certainly compared to an airliner) for ca. 15 years. Also, fixed costs are very high - things like body stamping presses are extremely expensive. Even personnel costs are high, given the number of people required.
Amazing article but I don’t feel I understand what exactly makes a clean sheet design take so long or cost so much? Are all such engineering projects like that? Is it something specific to airplanes? (Though you mentioned cars being similar so maybe not)
Is it the actual man-hours of engineering design work? Is it the tooling? Is it government regulations? Some combination of the above? Something else entirely?
I’d love if you did a follow up to hone in on that.
I note that the 707, 727, 737 and 747 were all new planes developed and rolled out over a 20 year period, with fewer planes developed in the 50 years since. Could airline deregulation have been a factor in this?
Dear Brian, great summary and numbers. With respect to the A320 / 737 global competition you lack a few crucial insights. They are hard to find but canned easily deduced once you consider Boeing and Airbus/ EADS from a more holistic scale. Including military and global production along with geopolitical issues with respect to design and production along with WTO wars between the two and changing administrations in the US and respectively France, Germany, Spain and UK. Be happy to discuss. hajo.drees@berlininstitute-scm.com
There’s a book about the fall of Boeing but I think there are several volumes yet to be written. They’re simultaneously flubbing their space division and the Air Force One replacements. If it wasn’t real it would be considered too on the nose in a story about the fall of America.
Notably, Sukhoi has a somewhat successful clean sheet airliner to its credit this century and Irkut’s MS-21 is taking in some orders. Aeroflot has flown hundreds of Boeing and Airbus planes that are aging out or hard to service. Comac is about to compete with the 737 and A320 in earnest. China’s carriers have similarly been flying western designs since the end of Tupelov and Ilyushin. Pickings are getting slimmer for Boeing.