Boeing’s expensive 787 Dreamliner problem
The Boeing 787 Dreamliner became a dream for many airline executives, as its operational flexibility and reduced operating costs offered unprecedented gains over other narrow-body aircraft that were around when it entered service in 2011. To this day, it still does – as the Dreamliner is still on top of its class in Boeing‘s lineup of aircraft.
It holds influence outside of it as well, as the 787 spawned its closest competitor, the Airbus A350. At first, Airbus pitched its new aircraft as a derivative of the A330. Instead, on the day of the launch, the European manufacturer called the A350 family “sisterships to the A330.” The competition of the two resulted in the ongoing conflict between the European Union and the United States regarding tariffs. The headache has been only aggravated further during the current pandemic, as airlines have limited resources to take up new aircraft.
But for Boeing, the 787 Dreamliner has been and seemingly will be an expensive and migraine-inducing problem to solve in the near-term future, as the company considers to consolidate the production of the wide-body into one production line.
Boeing cash cow
Boeing’s situation entering the current crisis was difficult. Its, and together with the 737’s, reputation was destroyed as two 737 MAX jets crashed, resulting in a worldwide grounding of the type. The subsequent discoveries about the intricate relationship of Boeing and the Federal Aviation Administration (FAA) hit headlines and made strides in the general public’s minds. While Boeing was focused on rebuilding its reputation and business, the manufacturer had a safety net that was full of dreams, as the 787 had a very healthy backlog.
It could rely on the aircraft to provide an influx of cash while the 737 MAX sat idle in airports, factories and parking lots all throughout the United States. So much so, that in Q1 2019, the manufacturer announced that more 787s would leave the factory than ever before, increasing its monthly output from 12 to 14 Dreamliners. The backlog stood at around 600 aircraft, stated the now-ousted chief executive Dennis Muilenburg at the time. Thus, the decision to increase the monthly rate was “well supported,” according to Muilenburg.
As of August 31, 2020, the 787’s backlog stood at 499 units.
Over the quarter, the program managed to decline its deferred production costs by more than $1 billion. Furthermore, Boeing Commercial Aviation (BCA) Q1 2019 margins dripped down to 9.9%, as 737 program deliveries numbers dropped. They were offset by the ever-increasing margins of the Boeing 787 Dreamliner.
“Key commercial milestones in the quarter included the 787 program's smooth transition to rate 14 per month while maintaining the highest quality standards,” commented Muilenburg, adding in that the “787 Dreamliner extended its status as the fastest-selling twin-aisle jet in history.”
A year and a ripped-apart industry later, the situation has shifted. And not in Boeing, or anyone’s favor for that matter.
For Boeing, the situation began to shift even before Muilenburg hailed the 787 as the fastest-selling wide-body during the company’s Q1 2019 earnings call on April 24, 2019. Four days earlier, however, the pride and joy, a role previously the 737 MAX held, was once again at the forefront of controversy.
While the 787 as a whole was at the forefront, the true center of attention was Boeing’s North Charleston, South Carolina facility, where some parts of the Dreamliner were manufactured, including a production line where the aircraft was also assembled.
The manufacturer announced that its second assembly line for the 787 would be placed in the easternmost part of the Deep South in 2009. Five years later, a very significant change was possibly set in motion, as on July 30, 2014, Boeing announced that the largest version of the aircraft in question, the 787-10, would be assembled only in its Charleston facility.
“We looked at all our options and found the most efficient and effective solution is to build the 787-10 at Boeing South Carolina,” stated the now-retired VP and general manager of the Dreamliner program Larry Loftis. The company also cited the fact that the -10 is 18 feet (5.5 meters) longer than the -9, which makes it too long to be transported efficiently from South Carolina, read a press release issued by the planemaker.
For the company’s headquarters in Chicago, moving to North Charleston was also about the fact that it wanted to reduce the presence that unions had in its factories.
Anti-union stance at South Carolina
No better proof of the fact is Boeing South Carolina’s webpage – the first menu heading is named “Our Union Position” whereupon the company depicts unions as “slow to adapt to new processes and often insist on narrow definitions of what each job code is allowed to do.” It also states that they add extra steps in communication and bureaucracy, resulting in “communication breakdowns, unresolved issues and inaction.”
“The IAM [The International Association of Machinists and Aerospace Workers – ed. note] wants to take us back to the old way of doing things. We’ve got a better thing going at Boeing South Carolina. Let’s keep moving forward.”
Any attempts to unionize in South Carolina instantly met harsh retaliation from Boeing. In August 2019, for example, six workers filed a case with the National Labor Relations Board (NLRB). The board determined that five out of the six might have been discriminated against by their employer after they had expressed support for the IAM union.The workers were fired from the company in 2018. According to a consolidated case file compiled by the NLRB, a Boeing manager told employees at North Charleston that he “did not like it when employees wore union insignia and that it was offensive” ‒ another example about the negative perception of unions at the site.
Plans to consolidate Dreamliner production
Now, rumors of Boeing completely moving and consolidating the assembly of the Dreamliner in South Carolina are in full swing. The company’s chief executive David Calhoun has indicated that the company was examining the feasibility of moving the 787 assembly under one roof.
The lower production rate, Following the coronavirus-induced crisis, the Dreamliner production rate has fallen from 14 to 10, with plans to lower it to seven per month by 2022. Boeing is plotting to reduce it to six in 2021 in order to “further de-risk our skyline, taking into account the financial condition of our customers and the geopolitical environment,” commented Calhoun.
The aforementioned IAM union and its Boeing branch, IAM 751, warned its members that the manufacturer could potentially consolidate the production of the 787 Dreamliner on the East Coast of the U.S.
“We have been made aware through conversations with elected officials, and notified by the media, that Boeing indicated they want to talk to the IAM about ‘further flexibilities and efficiencies’ they want from the IAM as the Company evaluates its study to consolidate 787 final assembly at one site,“ wrote IAM 751 president John Holden in an open letter on the union’s website.
Problematic South Carolina site
Unions were not the only ones having issues with the events unfolding in the Palmetto State. Airlines that received their 787s from Charleston were also vocal about it. The aforementioned controversy, which became public on April 20, 2020, involved reports that even Qatar Airways had “stopped accepting planes from the factory,” read an article published by the New York Times.
Boeing’s South Carolina unit, after being pinned down to the ground in Round 1, stood back up and went on an aggressively offensive tirade in Round 2. On May 9, 2019, the site’s website issued a public release titled “Setting the record straight”. To support its fight, it invited three sideline supporters, namely Qatar Airways, Norwegian Air Shuttle and Suparna Airlines. The New York Times report alleged that Qatar Airways stopped accepting 787s from the site, to which the Doha-based airline responded:
“Qatar Airways continues to be a long-term supporter of Boeing and has full confidence in all its aircraft and manufacturing facilities as a strong commitment to safety and quality is of the utmost importance to both our companies.”
However, data might point otherwise. Qatar Airways has 37 Boeing 787 Dreamliners in its fleet, with deliveries going from 2012 until 2016 and again in 2019, when the Qatari flag carrier accepted seven 787s. Its last Charleston-built Dreamliner was delivered on August 28, 2014, planespotters.net data showcases. The aircraft (registered A7-BCO) was the 15th Boeing 787 delivered to the airline – the remaining 22 all have Everett, Washington marked as their production site.
Meanwhile, Norwegian reiterated being “very satisfied with the quality and reliability of all our 33 Dreamliners, regardless of where they have been assembled.”
But Norwegian might not be the best name to point out, either. The low-cost carrier has seemingly switched sides, has canceled their remaining orders for 97 Boeing planes, including five Dreamliners, and has sued the manufacturer. The company has accused Boeing of “gross negligence, fraud and breach of contract” on both the 737 and the 787. It aims to recoup its pre-delivery payments (PDP) and losses related to “the aircraft and compensation for the company’s losses related to the grounding of the 737 MAX and engine issues on the 787,” commented Norwegian in its H1 2020 results presentation.
The New York Times report hinted at the fact that faulty parts have been installed in planes, as were tools and metal shavings that have been left inside aircraft. Metal shavings, according to John Barnett, a former quality manager at Boeing, were left close by wires that were responsible for flight controls. If the shavings were to penetrate the wires, subsequent events would be catastrophic, stated Barnett in the article.
Dreamliner flying in headlines
In early-August 2020, FAA proposed to fine Boeing for interfering with its work at the site. The administration alleged that the manufacturer had not properly structured its Organization Designation Authorization (ODA) program, as employees of ODA units reported to managers who were not approved to work under the ODA. A second allegation stated that Boeing’s management subjected ODA designees to increased pressure and interfered with the airworthiness inspection of a Boeing 787 Dreamliner.
On August 27, 2020, the Air Current reported that Boeing was forced to pull out eight 787s over the fear of structural failure. The issue, related to the aft fuselage, could result in the structural failure at the rear of the aircraft, as it would not be able to handle the maximum stress that a pressurized jet experiences during flight. While the issue affected aircraft assembled in South Carolina and in Washington, the pieces are manufactured in Charleston.
Let me guess again... Charleston?— Huell Babineaux (@hueIIbabineaux) August 28, 2020
And that’s the price of the reputation, a very expensive at that, Boeing will have to pay if the company does decide to consolidate its assembly facilities in South Carolina. For the Chicago-based executives, the proposition of removing any union presence from one of its assembly lines completely is possibly very attractive, as it makes life much easier in the offices in Chicago. For airlines and passengers, however, the questionable reputation might make life and future choices much harder.
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