Stabilizing Production Key For Commercial Aircraft Manufacturers
Affected by the combination of multiple factors complicating business, commercial aircraft manufacturers are all focused on stabilizing and then growing production in 2023. Much, but not everything, will depend on factors beyond their control.
Boeing hoped its fortunes would finally turn a corner in 2022, but the expected rebound failed to materialize as quickly as hoped, and instead the corner turned out to be more of a long curve—the trajectory of which will continue well into 2023 and beyond.
- Supply chain problems still bedevil Airbus, Boeing and Embraer
- Widebody delivery recovery should gain traction in 2023
Battered by successive waves of losses related to fallout from the 737 MAX accidents, 777X delays, 787 quality issues and the COVID-19 pandemic, the company’s prime focus for 2023 is squarely on restoring production stability and rejuvenating cash-generating deliveries.
As the 747 sunsets with the final delivery early in 2023 and 777-9 production still on hold, the bulk of Boeing’s attention is fixed on steadying the ship on the 737 and 787 programs.
Production of the 767, meanwhile, continues to roll along at a regular rate of three per month. It is backed by continuing KC-46 tanker and 767-300F manufacturing and an order backlog of more than 100 aircraft. And that is providing an invaluable consistency throughout one of the company’s most topsy-turvy periods in modern times.
Supply chain restraints notwithstanding, Boeing is targeting as many as 450 737 deliveries in 2023. However, much depends on the company’s ability to shuffle and remarket undelivered 737s in storage as well as gradually step up new-build production at the Renton, Washington, plant. If all goes to plan, Boeing production will creep beyond its current rate of 30-31 per month to around 33-34 by the second quarter. Beyond this, based on production decisions by key suppliers like engine-maker CFM International, Boeing aims to reach the low 40-plus per-month rate by late 2023.
Before the MAX accidents, the subsequent grounding and the pandemic, Boeing 737 production had reached 57 per month, and the company was targeting up to 63 per month by 2021. The 737 line was last at its current rate of 30-31 17 years ago, before the gradual climb began toward 42 per month, which was achieved in 2014.
Although aerospace analysts indicate a more realistic scenario will see Boeing stabilizing at a more modest new-build average production rate in the low 30s by the second half of 2023, the company apparently is aiming to build some 38 737s per month by early in the third quarter. They would be mostly 737 MAX variants for airlines, with a few business jets and military aircraft. Many suppliers are producing at or close to that rate already, and Boeing has hired the personnel required to do the work—a key sign of the company’s intentions.
“We typically like to bring our resources in about six months in advance” of a production-rate increase, Boeing Commercial Airplanes President and CEO Stan Deal told analysts. That gives new hires training time before assignment to production lines, he said. In this case, Boeing may establish a third 737 production line to provide an incremental monthly bump-up to 38 aircraft, Deal notes.
Part of the production calculus also depends on whether the 737-7 and -10 versions enter the mix in a more meaningful way in 2023. Boeing was holding out hope that the 737-7 could earn FAA certification by year-end, but by late December that seemed less likely. Boeing also recently suggested for the first time that the 737-10, the largest and final stretch variant of the MAX family, may not be approved until 2024.
In November, Deal said the company now anticipates “closure of certification by late 2023 or early 2024.” The development, test and certification of both variants has taken longer than expected due to several factors, notably the more rigorous FAA scrutiny of various safety assessments that Boeing must provide in the wake of the 737-8 accidents in 2018 and 2019.
It remains unclear as of mid-December whether a related 2020 law targeting certification reform will be changed to allow the 737 variants to be certified as currently designed. The law prohibits the FAA from certifying new large transport aircraft unless they comply with specific flight-crew-alerting requirements. Neither the 737-7 nor the 737-10 meets those standards because of exemptions granted to the baseline 737 MAX design.
Boeing appears resigned to prolonged approval processes. The company has built 27 737-7s and three 737-10s, the third of which joined the -10 flight-test program in November. Based on the assumption that both variants will join the family over the next three years, Boeing’s 2025-26 guidance sees 737 production ramping up to about 50 aircraft per month.
Although as recently as four years ago China accounted for a third of all 737 deliveries, Boeing continues to remarket MAX aircraft formerly earmarked for operators in China and has factored in further orders and deliveries there for the foreseeable future.
The long-awaited recovery in widebody deliveries is also forecast to gain traction in 2023, with around 160 twin-aisle airliners and freighters due to be handed over in the coming year. The rebound will be led by the 787, up to 80 of which could be delivered through 2023 from the consolidated production line in South Carolina as well as from the refurbishment site in Everett, Washington. Around half of deliveries will be reworked airframes from the undelivered inventory, which in early December was more than 110 aircraft.
Boeing plans to bring in additional engineering resources from Everett to assist buildup efforts in South Carolina, where production quality issues have halted the 787 line twice since 2020. New-build aircraft assembly in South Carolina is expected to climb back toward a near-term target of five per month by 2024 and growing to around 10 per month in 2025-26.
Production of the 777/777X family, meanwhile, is set to grow back to around four per month in 2025-26 as assembly of the 777F freighter continues and manufacture of 777-9s eventually resumes. Building of the 777-9, the first member of the new stretched twinjet 777X family, was paused in 2022 amid continuing delays to the start of certification. Despite the emergence of a potential design issue with the aircraft’s General Electric GE9X engine in November, initial 777-9 deliveries remain on track for 2025 under the revised schedule announced in April.
The uptick in production plans from the current 3-4 per month over the next three years reflects Boeing’s increased confidence in securing the certification basis for the 777-9 as well as accelerating progress on the recently launched 777-8F freighter derivative. Boeing also confirmed in late 2022 that the 777-8 passenger model remains in the 777X development plan for later this decade.
As for Airbus, more than a year ago, the OEM placed what seemed to be a risky bet. The airline industry was still very much in the middle of the coronavirus pandemic, struggling with local, regional and national lockdowns limiting operations and the ability to generate revenues. It was not clear when airlines would need new aircraft or how many they would take. Airbus nonetheless told carriers and investors it was going to almost double single-aisle production over the next four years or so.
As the industry heads into 2023, those doubting whether there is actual demand for that many aircraft have become quieter. Air travel has returned more quickly than many planners had anticipated—overwhelming airports, airlines and manufacturers at times. The quick recovery has been paired with a wave of deliveries that were deferred during the pandemic.
As much as Airbus was willing to delay deliveries to accommodate airline financial woes, the OEM by and large insisted that customers honor contracts, as the company was going to deliver these aircraft later—and “later” is supposed to be now.
As many customers will confirm, “later” is often not now, but much later. Lessors and airlines are complaining that hardly any Airbus aircraft are being delivered on time, a situation familiar since 2018-19, when production already had spun out of control. Several months of delay for a narrowbody aircraft are now the norm. Some established carriers seeking to protect market shares and happy with the high yields resulting from strong demand and limited capacity are actually not displeased with how slowly things are moving, but expansion is being slowed as many airlines aim to benefit from the recovery with higher market shares and growth into new city-pairs.
Therefore, beyond any strategic considerations, it is the focus on day-to-day management of operations that will dominate work in 2023. Shortages of parts, components or workers at suppliers, logistics issues and in-house constraints are likely to continue through the year, with some hope for improvement over the summer. Airbus CEO Guillaume Faury says production challenges may have peaked in the fall of 2022. But just as the supply chain problems that emerged during the pandemic are coming under better control, small aerospace companies in Europe are facing the next uphill battle: how to sustain and even increase production as energy prices double.
As 2022 draws to a close, Airbus finally is admitting what many have expected to hear for several months: its near- and medium-term production targets are not achievable.
First, Airbus gave up on the goal to deliver “around 700” commercial aircraft in 2022. The actual number will be lower, though not by much.
Airbus delivered 565 aircraft from January to November. While deliveries traditionally peak toward year-end as aircraft manufacturers try to stick to their targets, the problems Airbus is facing this year make a catch-up exercise of this scale unrealistic.
“Taking into account the fact that this complex environment will persist longer than previously expected, Airbus will be adjusting the speed of the A320-family ramp-up to Rate 65 for 2023 and 2024,” the company said and added that it “maintains the objective to reach Rate 75 by the middle of the decade.” According to the aircraft-maker’s earlier guidance, Airbus wanted to reach Rate 65 for A320neo-family deliveries in the first quarter of 2024 and Rate 75 during 2025.
Airbus delivered 440 A320neo-family aircraft (six A319neos, 214 A320neos and 220 A321neos) between January and November, an average of just 40 aircraft per month. Its own timeline called for reaching a monthly average of 50 A320neo-family deliveries by year-end. In November, it handed over 53.
Airbus is implementing substantial internal structural changes to facilitate a smoother ramp-up. Aerostructures subsidiaries in France and Germany are being integrated more closely into the Airbus production system, moving them from a buyer-supplier relationship to a truly internal arrangement.
Opposition from the IG Metall union in Germany is slowing the process, leading to less transparency for the Airbus group in its internal supply chain for the next three years. After then, the plan is for Premium Aerotec Industries sites to be merged into Airbus Aerostructures.
Where possible, Airbus has implemented value-stream-management to identify and clear bottlenecks early. Chief Operating Officer Alberto Gutierrez says that without the organizational changes launched as a result of the 2018-19 meltdown, the situation would be much worse today.
The supply of engines, short through most of 2022, is no longer the main issue. Now a small part missing in the cabin or an incomplete seat can delay deliveries.
During a recent Aviation Club presentation in London, Faury said: “We see another thing coming, which is the consequence of energy prices skyrocketing, leading to some suppliers trying to adapt, sometimes stop producing, waiting for the situation to normalize. That’s very low in the supply chain, but it’s probably something new.”
In some cases, Airbus may be forced to assist suppliers that need more financing even to continue production, let alone growing output.
To support the growth internally, Airbus also is introducing a new final assembly line in Toulouse initially dedicated to the less complex versions of the A321neo. The facility will not make a material difference in raising output in 2023, as every production step in the new site will have to be certified, leading to a much slower process for the first units. But opening the line is a further step in Airbus’ efforts to modernize its production system incrementally. Flextrack drilling robots, already in use in component manufacturing and final assembly in Hamburg, are being introduced in Toulouse along with a more automated logistics system of delivering parts and components to the site.
While the third final assembly line in Toulouse is being introduced, one of the two older A320neo lines is being wound down. At the same time, all sites—Mobile, Alabama; Tianjin, China; plus Toulouse and Hamburg—are being made capable of building A321neos.
Airbus is facing similar growth challenges on the A220 program. The company delivered only 39 aircraft in the first 10 months of 2022 when it should have been producing six per month since the spring. Airbus Canada CEO Benoit Schultz says parts shortages are continuing to hamper operations. Airbus plans to increase A220 output to Rate 14 from the nominal Rate 6 by 2025.
Combined, Airbus would build 89 single-aisle aircraft per month, should it achieve its targets.
With production taking so much of management’s attention and Boeing having decided to not move ahead with a new narrowbody project until the early 2030s, far less activity can be expected in Airbus product development. Work is continuing in flight tests and certification of the A321XLR. Three prototypes are participating in the campaign, and Airbus expects the aircraft to enter commercial service in the second quarter of 2024, a delay of around six months compared to its original schedule. Agreement with the European Union Aviation Safety Agency (EASA) about acceptable special conditions for the rear center tank is still pending, however, and company officials are reluctant to talk about details. Concerns have been raised that additional EASA safety requirements may have an impact on performance of the A321XLR, mainly in terms of weight, payload and range.
A new-build A321neo freighter could be another upcoming derivative, given the continuing strength of the air cargo market, though Airbus has not committed to such a project yet. It is continuing work on the A350F, which is due to enter service in 2025. Breeze Airways founder David Neeleman is pushing Airbus to develop an extended-range version of the A220-300, while Airbus has said launch of a stretched A220-500 is only a question of time.
For its part, Brazilian airframer Embraer has decided to delay the go-ahead of its next-generation turboprop (NGTP) 70-90-seat airliner project, citing unfavorable technical, economic and market conditions.
The move marks an unexpected U-turn for Embraer, which until recently was showing signs of firming up the project schedule. The OEM said earlier this year it expected to select an engine supplier by year-end and recently issued requests for proposals to industry for major systems and components.
News of the delay emerged just days after Embraer said it will focus sustainable-aircraft studies on hybrid-electric and hydrogen fuel-cell 19- and 30-seat regional airliners as part of its ongoing Energia program. However, the various Energia concepts are targeted at potential entries-into-service in the 2030-35 timeframe, rather than the 2028-29 period targeted for the initial NGTP models.
Embraer previously aimed to launch the new turboprop in 2023—possibly at the Paris Air Show in June—pending engine selection, finalization of the business plan and securing funding. The company also appeared to be attracting traction in the market for the advanced turboprop and at this year’s Farnborough Airshow revealed it had letters of intent for 250 aircraft.
As for the Comac C919, China Eastern Airlines took delivery of its first in early December and is expected to launch commercial services in the coming weeks.
Following certification of the C919, slow introduction into revenue service and an increase in production are the main items on the 2023 agenda for China’s main commercial aircraft program. In late November, the Civil Aviation Administration of China issued a production certificate to Comac allowing the company to enter serial production as opposed to the mandatory sign-off on individual aircraft.
Industry experts project that Comac will not be able to deliver more than five C919s in 2023. The rate could go up to 25 aircraft in 2030, according to analysts at Jefferies.