In a prior Supply Chain Matters blog commentary, we highlighted that commercial aircraft manufacturer Airbus has made plans to once again rapidly ramp-up monthly production levels for the company’s popular Airbus A320 single aisle aircraft family. One of the stated reasons for this move is to both maintain current market dominance over industry rival Boeing in the single aisle product segment, along with cutting into a large backlog of outstanding customer orders.
Customer perceptions mean a lot in multiple industry settings and especially in today’s bruised commercial aircraft industry.
There can be little question that Boeing remains a manufacturer with a host of significant financial, operational and corporate culture challenges. Unforeseen but just as critical has been the COVID-19 impact on international air passenger travel, providing a perfect storm of compounding events.
Behind the scenes, in spite of the pandemic, some airline executives and government regulators have been frustrated with Boeing, along with influential industry media such as Aviation Week.
Background
In a published Supply Chain Matters bog published in February of 2021, we highlighted the essence of Boeing’s challenges, perceptions that the company had lost its engineering roots, manufacturing quality and supply network chops, and that the company’s board and senior management focus remains too focused on short-term shareholder returns. Frustrations obviously concern the tragic history of the Boeing 737 MAX aircraft including flawed engineering design decisions related to the aircraft’s flight control system. The subsequent multi-year grounding of this aircraft forced the company to have to painfully undergo a financial lesson as to the consequences of having to restore its reputation in savvy and uncompromising engineering design. Since that time, engineering design and manufacturing quality issues related to the Boeing 787 Dreamliner program have also frustrated customers. Over 100 of this aircraft remain grounded at factory lots pending U.S. FAA sign-off on added engineering, manufacturing and quality process fixes.
Senior management’s ability to change what are perceived to be corporate cultural challenges that have also yet to be resolved.
New Developments
Reuters reported this this week that: “The head of the world’s second-largest aircraft leasing company indicated that Boeing had “lost its way” and might need new leadership to fix a flawed culture that overshadowed its rival.”
These candid comments came from Avolon CEO Domhnal Slattery and reportedly represented a rare public rebuke of Boeing from a significant customer. Slattery reportedly also stated: “Boeing has to fundamentally re-imagine its strategic relevance in the marketplace and that would require “fresh vision, maybe fresh leadership.”
The remarks came during an Aifinance Journal sponsored conference held in Dublin which included some of world’s aircraft lessors. Reuters further reported that Slattery indicated that challenges could be resolved and that he had faith that Boeing would eventually figure it out. He further voiced concerns that the commercial aircraft marketplace could tilt too heavily in favor of Airbus with its new aggressive production plans.
Supply Chain Matters would also add that the fiery CEO of Ryanair Airways several weeks ago also expressed open frustration relative to Boeing getting its proverbial act together, especially in single-aisle and mid-range aircraft offerings.
Also, this week, Boeing announced plans to move its corporate headquarters from Chicago to Arlington, Virginia, reportedly to be better able to repair relationships with customers, U.S. federal regulators and legislators. Plans further call for a research and technology hub to be established at this new headquarters. Reportedly, the manufacturer already has a presence in Arlington, Virginia with significant unused space.
Boeing President and CEO David Calhoun indicated to reporters that this move makes sense given the proximity to customers and stakeholders. Others speculate the move represents another cost-cutting effort, similar to when the company sold-off its Seattle commercial aircraft headquarters and move to Chicago in 2001. Boeing reportedly received upwards of $60 million in tax and other incentives in relation to the Chicago move.
In separate reporting Reuters indicated that U.S. House of Representatives Transportation Committee Chairperson Peter DeFazio blasted Boeing’s latest decision and represented a further step in the wrong direction: “Boeing’s problem isn’t a lack of access to government, but rather its ongoing production problems and the failures of management and the board that led to the fatal crashes of the 737 MAX.”
Added Thoughts
One could surmise that the pressures focusing on Boeing are growing with each week, and with every additional announcement. When customers become more openly vocal expressing candid comments and when regulators continue to lack confidence in current direction, something has to give. This is moving beyond subtleties and toward genuine industry and supply network concerns.
© Copyright 2022, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
