The United Airlines CEO says he is “disappointed” in ongoing manufacturing problems at Boeing that have led to the grounding of dozens of United jetliners, and the airline will consider alternatives to buying a future, larger version of the Boeing 737 Max.
United Airlines CEO Scott Kirby said Tuesday that Boeing needs “real action” to restore its previous reputation for quality.
Kirby’s comments came one day after United disclosed that it expects to lose money in the first three months of this year because of the grounding of its Boeing 737 Max 9 jets.
United has 79 of those planes, which federal regulators grounded more than two weeks ago after a panel blew out of an Alaska Airlines Max 9 in midflight, leaving a gaping hole in the plane. Investigators are probing whether bolts that help hold the panel in place were missing or broke off.
Alternative? Thanks to capitalism creating monopolies, there are 2 viable companies that manufacture commercial airplanes. Boeing and Airbus. That’s it. Pick your poison.
For medium sized airplanes there’s Embraer.
Embraer’s largest plane the 195-E2 fits 146 in an all economy configuration. Boeing’s smallest plane the 737 max 7 has an all economy configuration capacity of 172. Embraer just doesnt make a plane in the same class as Boeing or airbus.
Believe it or not, this consolidation is almost certainly because of (good) regulation not capitalism.
The costs of building a new air frame are gigantic - the regulatory aspect in all countries is also gigantic. The barriers to entry are gargantuan - and the scale you need to be profitable is extreme.
But those regulations save lives. But they also keep competitors out.
Believe it or not, but companies outside of Boeing and Airbus are capable of designing airplanes.
It’s not just “good” regulation holding them back either - in 2017 Boeing accused Bombardier of “dumping” some CSeries planes because they sold them to Delta at below the retail cost (about a 30% discount). The CSeries was/is a good plane, but took an incredibly long time to get through certification so Bombardier had been losing money and was desperate to sell them. Boeing complained about this discount to the US International Trade Commission who imposed a massive fine on Bombardier. Because of the delays, Bombardier couldn’t afford to fight the fine so they ended up having to give up a 50% stake in the design to Airbus for only $1. The year after, the fines were appealed and overturned, but the damage was already done. Bombardier has since completely sold their stake in the CSeries (one less competitor), and Airbus gets the renamed A220 series for a massive discount.
As an aside, I can’t argue that the FAA doesn’t do more good than harm in this space generally, but I’m the last ~5 years it’s becoming clear to me that they have a massive blindspot for Boeing in particular.
Your comparison of Bombardier is a good one - but not so much for you. Bombardier was losing money on the A220 nee C Series and was going to lose more even without the ITC decisions. They had no manufacturing scale and didn’t have the money to build it - those A220s are now being built in Mobile, Alabama, alongside the rest of the A320 family.
Their order book was relatively thin - Delta took a big gamble in exchange for the hefty discount that those planes would ever get built. It didn’t look like it. Canada and Quebec already had two massive bailouts for bombardier, owned a big chunk of the program, and said they weren’t going to put more in.
That program had massive cost overruns and practically bankrupted all of Bombardier. They only survived because of Airbus. Before Airbus, the Federal Government and the Quebec Government already owned 50% of the C Series project. Because of the C Series, Bombardier is a shell of itself - they sold off all of their commercial plane operations (the CRJ, to Mitsubishi, who subsequently cancelled the whole thing), they sold off all their rail operations to Alstom. They only build business jets now.
It was also a massive strategic failure for Boeing - who could have bought the program instead, and been selling a fantastic small plane instead of Airbus.
But who else has tried to build a plane? How is the Sukhoi Superjet doing? How about the Mitsubishi SpaceJet?
China will eventually be able to build planes with their own engines - but that’s only thanks to truly massive state resources, and a big dose of corporate espionage. And it still will probably be a commercial failure.
Because building commercial success in the airline industry is hard. The old adage of “how do you become a millionaire? Start with a billion dollars and buy an airline” applies to almost every part of the entire sector.
You can’t sell a few planes and make money to build a bigger plane anymore. You have to invest tens/hundreds of billions of dollars and bet on long term success - and there aren’t many people willing or able to make those bets, for the next pandemic, recession or 9/11 to kill your business even if you did everything else right.
Airbus was propped up for decades by the governments of Europe, Boeing too - and same with Embraer and Bombardier. But even the resources of small nation states aren’t enough to compete with Boeing and Airbus on their turf. Canada didn’t have pockets deep enough for it - and they’re a reasonably wealthy country.
Because Boeing is a massive military contractor. The US government needs Boeing, and will protect them.
Just like Airbus. They are the majority stakeholder in Eurofighter (makes the Typhoon), they hold an equal share of Panavia (makes the Tornado), and they have a hand in Dassault (Rafale, Mirage, etc.) as well. Airbus Helicopters also makes attack and military transport helicopters like the Tiger and the Puma.
There are also smaller ones like Embrauer and Bombardier.
The Embraer E195-E2, Comac C919, and Irkut MC-21 are three non Boeing/Airbus planes that directly compete with the 737, and are currently being produced.
There is a duopoly in the larger aircraft. But narrow body jets are a pretty competitive market at the moment, despite the huge costs of aircraft development.
The E195 is a bit too small for mainline use, though a good aircraft otherwise. The others however I’m not sure are ready for the prime time.
The Comac has potential, it’s a completely new aircraft developed for the Chinese domestic market, I don’t know if it will be sold in the west though. One issue is that the aircraft market doesn’t lend itself to new players. Planes typically last 30 years give or take, so taking on a new type from an unproven manufacturer is a big risk. It could, however, be successful in the long term.
Irkut is majority owned by the Russian government, and given the war, is likely going to have issues. It has flown, but now they have to move to entirely homegrown parts, which will likely make the aircraft completely shit.
Speaking of, the Tupolev Tu-204. It is still in production, and since the war started it has begun to ramp up again. Unfortunately it still has significant problems. For an aircraft built today, it still uses a three person cockpit crew, and is very underpowered. It also has had nearly no changes since its introduction in 1989, and is way behind pretty much any aircraft of its size.
It’s worth considering how much room there is in the airliner market for more competitors. Since aircraft require a huge amount of R&D, you have to sell a lot of them to break even. So if there’s too many manufacturers vying for a finite market, it gets hard to find any RoI. This has happened a lot historically, it’s like streaming services except you can’t actually get anyone to buy duplicates and very rarely will anyone split their orders.
Airlines live off of equipment depreciation. They are taxed less on their airframes age. Considering that, US taxpayers make up for that shortfall I would rather that US carriers buy US made airframes built by US workers. So, Boeing would be my pick.
Fire the MBAs. Fire McKinsey. Fire Wall Street. Hire back the engineers.
Wait… You don’t actually think the executives are actually going to switch from resource extraction mode to an invest in company strategy, right?
The world has become one big private equity firm. Barbarians in the throne room.
United CEO: It it’s a Boeing, nobody’s going.
? Over my head
Bring on the COMAC lolol
