Turning corner: Boeing 787 begins crucial period
On December 15, 2009, the Boeing 787 Dreamliner flew for the first time, finally defeating the delays and other issues that had plagued the program since its inception. Entering service two years later with All Nippon Airways (ANA), the journey was not smooth. The aircraft had its type certificate temporarily rescinded in 2013 following issues with its lithium-ion batteries. The quality of manufacturing at one of the assembly sites was also questioned throughout the years.
Now, the program is being battered by the COVID-19 induced crisis. As it approaches its 1,000th delivery, the 787 Dreamliner program will enter possibly the most crucial period yet. All at a time when Boeing looks to recover its positions after having found itself on the brink of a knockout following a left-right-left punch combo.
Tails of the A350 and the 787: different reality?
The main competitor of the Dreamliner is the Airbus A350. The two have entered the crisis in a different set of circumstances. For now, the 787 is commercially more successful than the A350, yet the former is breathing down the latter’s neck.
At first, Airbus planned to re-engine the A330 in order to compete against the Boeing 787. However, pressured by its own customers, the European plane maker had to open a clean sheet of paper and draw up the competitor to the Dreamliner – the A350. Yet the former has remained a market leader.
Airbus’ product was always behind in the race for the throne of the mid-size wide-body aircraft. The A350 departed on the first flight two years later than the 787. It also entered service with Qatar Airways two years later than the Dreamliner did. The total production numbers paint a contrast-full picture: while the Boeing 787 is approaching its first four-digit delivery number, the A350 is almost halfway there with 398 deliveries as of November 30, 2020.
There is no denying that as of now, the Boeing 787 has had more commercial success. Including the aforementioned delivery numbers, Boeing’s product has logged a total of 1,507 net orders (excluding cancellations), while the A350 managed to amass 926 orders.
Operationally, though, hiccups of the Boeing 787 were rather frequent. First came the brief grounding of the jet starting in January 2013 and lasting through April of the same year. Then the issues, associated with Boeing’s North Charleston site, which delivered its first Dreamliner in 2012, began to surface a year later.
Throughout the 2000s, Boeing had started to move away from its Seattle conglomerate, where it has always been based and built aircraft. In addition to moving its offices to Chicago, the manufacturer opened a final assembly facility outside of Seattle, namely in North Charleston, South Carolina.
The two moves had amassed their fair share of criticism, but the assembly line in Palmetto State has had to defend itself from the sharp arrows of criticism.
Issues with the quality of production at the North Charleston site first arose after fuselage sections of the 787 had arrived at Everett from the East Coast with incomplete wiring and missing hydraulic lines, reported the Seattle Times in February 2014. The issue, according to one Charleston engineer that the publication interviewed, was the fact that Boeing had got rid of contractors, a move which “left a big hole”. “You cannot lose that level of expertise plus increase rate at the same time and expect things to be normal,” he was quoted as saying.
Customers were also not satisfied with the quality of work at the facility. For example, Qatar Airways stopped taking deliveries of the aircraft from North Charleston due to lapses in quality control. While the Doha-based airline reiterated its support for the 787 program later on with a statement that it “continues to be a long-term supporter of Boeing and has full confidence in all its aircraft and manufacturing facilities,” the reality was different. Qatar Airways’ last delivery from the site was completed in August 2014, when the Qatari flag carrier took delivery of A7-BCO, a Boeing 787-8. Since then, the airline has received 22 Dreamliners and none were built on the East Coast of the US.
Roof on fire
While the aviation industry has watched its roof slowly burn throughout 2020, for Boeing, the fire only spread.
The 737 MAX crisis, which had begun in October 2018 when Lion Air flight JT610 crashed shortly after take-off in Indonesia, is finally turning a corner. Regulators, starting with the Federal Aviation Administration (FAA), had started to lay the path forward for the aircraft to start flying once again. Brazil’s GOL Linhas Aereas was the first airline to fly the 737 MAX commercially since March 2019. Boeing also began to deliver the type to customers, slowly beginning to extinguish one fire.
However, another fire was slowly building momentum over the course of 2020. Various manufacturing deficiencies in the 787 program have come to light in 2020. First off, there were issues related to the aft section of the fuselage. Shims, which are used to fill small gaps during assembly, were improperly manufactured and left gaps in the fuselage. Furthermore, the inner skin of the aft fuselage of some Dreamliners was found to have sharper surfaces than it was supposed to – the combination of the two issues would weaken the structural strength of the fuselage – forcing Boeing to ground eight 787s in late-August 2020. In September 2020, the manufacturer faced another issue, as the components of the aircraft horizontal stabilizer were reportedly clamped together with a force stronger than specified in the requirements. The same month, the vertical tail fin came into question, as incorrect gaps left by shims could lead to connecting joints in the tail fin exceeding its capabilities.
The fuselage skin issues were found in other sections of the fuselage in other manufacturing and supplier sites, thus Boeing was forced to review its whole supply chain, including Spirit AeroSystems and suppliers in Italy and Japan, as reported by the Wall Street Journal on December 14, 2020.
All in all, the production anomalies forced Boeing to slow down the production of the 787. The manufacturer has had a “large number of undelivered 787 aircraft in inventory,” according to Chief Financial Officer (CFO) of the company Greg Smith. This was the reason why Boeing did not deliver any Dreamliners during the month of November and will deliver fewer 787s than originally planned in December, Smith clarified on December 4, 2020. The undelivered inventory should be cleared in 2021.
Turning the corner
With the aviation industry seemingly slowly turning the corner on the current crisis, fixing the problems affecting the 787 will be crucial for Boeing.
After all, the program has managed to amass an impressive number of orders and deliveries, but its backlog is shrinking. While the A350 has a backlog of 532 aircraft, the backlog for the 787 dwindled to 471 aircraft following customers canceling 44 orders in 2020, Boeing’s data showcases. The manufacturer, citing a lackluster demand for long-haul travel, cut the production rate of the Boeing 787 to five monthly starting mid-2021. Meanwhile, Airbus has produced the A350 at the rate of five per month, since reducing the rate from six per month in July 2020.
However, the main difference will be the fact that starting mid-2021, the Dreamliner will only be produced in the troubled North Charleston facility. While the Airbus A350 has had its fair share of blunders, Toulouse has been relatively silent compared to the South Carolina assembly site of the Boeing 787. Operational reliability and quality can become a very decisive factor when an airline is looking to buy new aircraft.
“When they don’t give me airplanes and engines that work, it’s over,” stated Emirates President Tim Clark in September 2019. “We are not in a business to deal with aircraft that don’t function properly,” Clark added.
A lot of airlines have phased out older wide-body aircraft throughout the pandemic. International air travel is bound to recover and the upcoming demand will have to be addressed, including reinstating the capacity capabilities that was lost due to the vast number of retirements. On the one hand, this could offer airlines a rich-in-offers second-hand market. On another hand, new aircraft could be a straight-forward option that entails no complexities regarding their state of maintenance and remaining active service life. Additionally, manufacturers have also suffered – and providing airlines with discounts to lure them to order fresh off the shelf jets to cover costs or to raise some cash could be a scenario that will be on the table in the short-term future.
Rejigging orders if a customer is not satisfied with the offered product is also a scenario that could develop. Emirates perhaps could serve as a great example.
Firstly, the Dubai-based airline ordered 70 Airbus A350 family aircraft in 2009. Before the due delivery date of 2019, Emirates axed the order citing the fact that the airline was “reviewing our fleet requirements” in July 2014. Three years later, the Dubai carrier announced an order for 40 Boeing 787-10 aircraft, which once again was nowhere to be seen come 2019, when Emirates announced a firm order for 30 Boeing 787-9s. The order, signed in November 2019, was part of an agreement with Boeing, whereupon Emirates had the “right to substitute the B777X with B787s,” read the announcement.
The airline also returned back to the Airbus A350. In February 2019, a switch-up of its order book was successfully negotiated with Airbus, which forced the manufacturer to prematurely cancel the production of the Airbus A380. Instead of 39 Super Jumbos, the airline signed up for 40 A330neo and 30 A350 aircraft, which eventually turned out to be just 50 Airbus A350 aircraft, under a new agreement signed in November 2019.
A more extreme case was Norwegian Air. Prior to its own bankruptcy, the long-haul low-cost carrier went guns blazing and sued Boeing in court, as the manufacturer was blamed for alleged negligence on its products, namely the 737 MAX and the 787.
“Instead of delivering what they promised, Boeing has deliberately misled and omitted information, shown gross negligence and clumsy production, and made aircraft with significantly impaired value and utility, which in the case of the MAX aircraft had tragic and fatal consequences," stated the lawsuit, filed with the District Court for the Northern District of Illinois in the United States in July 2019.
A few weeks prior, the Norway-based airline canceled 97 orders, composed of 92 MAX and five Dreamliner aircraft.
Once again, as the aviation industry begins to recover from the crisis, restoring capacity will be crucial. If airlines sway away from the Boeing 787 due to quality lapses, the backlog of customers is not infinite – and competition is on the horizon.
Geopolitics always plays a part in aviation, as the two are interconnected: while one provides the connections, the other makes sure that they stay together. For Boeing and the 787, geopolitics could become either a stepping stone or a force setting sail to fail.
For both Airbus and Boeing, China will become the most important market. Airbus is one step ahead of its US rival, as it has a Final Assembly Line (FAL) of the A320 family in Tianjin, China. While Boeing also established a 737 MAX assembly line in Zhoushan, China, it has been slow to get off the ground. So far, only one aircraft was delivered at the opening ceremony in December 2018, as the delivery center is yet to be fully completed.
However, the main advantage that Airbus has is in the wide-body market: a Completion and Delivery Center (C&DC) of the A330 was opened in September 2017, when the manufacturer delivered an A330 to Tianjin Airlines. Crucially, the C&DC will also deliver the Airbus A350, starting with the first delivery in 2021. Airbus made its access to a market, which the company’s Chief Commercial Officer (CCO) described as “one of the most powerful growth engines of global air transport,” much easier with its Tianjin facility.
The relationship between the US and China has been rocky, to say the least. China was the first authority to ground the 737 MAX following its second fatal crash in Ethiopia in March 2019. The country, which is slated to become the largest aviation market, has not ordered an aircraft from Boeing since November 2017. The US planemaker has unfilled deliveries to Chinese carriers standing at 122 aircraft, therefore a handshake sealing a deal will only grow in importance. Following a trade war ongoing for the past four years, the newly-elected US administration could provide some breathing room for Boeing and let the company once again set foot in a conference room to pitch its products.
And if the aviation industry is turning a corner, it would be the perfect time for Boeing to turn the corner on its fortunes in general and in North Charleston, where the company has faced problems since the first delivery from the site in 2012. At the end of the day, the Boeing 787 was a cash-cow for the manufacturer and still could very well be going forward. The aircraft program is well-suited to cater to airlines’ needs even during a downturn – its size, ranging from the 787-8 to the 787-10, operating economics and range capabilities could become a very important gear in the gearbox that will drive the industry forward past the current COVID-19 crisis.
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