Aviation Week editors Sean Broderick and Guy Norris discuss the latest ups, downs and relocations at Boeing. 

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Below is a rush transcript of Aviation Week’s October 9, 2020, Check 6 podcast.

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Joe Anselmo:              Welcome to the Check 6 podcast. I'm Joe Anselmo, Aviation Week's editorial director. And this week, our discussion will be about all things Boeing. First, more than 16 months after it was grounded, the Boeing 737 MAX is closing in on winning regulatory approval in the U.S. and Europe to re-enter service. Aviation Week editors Sean Broderick and Guy Norris join me today with the latest on the MAX saga. Next, we'll discuss what was behind Boeing's decision to centralize all of its 787 production in South Carolina, dealing a blow to the Seattle region. Finally, we'll discuss Boeing's new ten-year demand forecast, which, as you can imagine, isn't very pretty. Sean, let's start out with you. You've been writing about the MAX since it was grounded last March. It's really looks like it's coming back, doesn't it?

Sean Broderick:          It looks like it's close, and we've said this several times in the past now coming up on 19 months since the grounding, but this past week the FAA released the latest draft minimum training standards. It’s called the Flight Standardization Board Report. And those are going to set the baseline for MAX training around the world. It's a big deal, because in addition to the software and flight control computer, the flight control computer software in MCAS updates that Boeing has been required to do, there's been a huge emphasis over the last 12 months on improved training.

                                   And if you look at the current Flight Standardization Board Report and the draft report that was put out in April, 2019 -- after the second accident but well into Boeing's MCAS fix effort that started after the first accident in October, 2018, -- huge difference in emphasis on what MAX pilots are going to be required to do. They're going to be required to have simulator training, which now isn't a surprise, but was never been part of the MAX transition package before. They're also going to be required to practice a lot of non-normal procedures, both review them and run through them in the simulator. So two big emphasis areas that are both on the MAX, but also on broader 737 training as well. As of this moment, the extra training doesn't apply to anything but MAX pilots, but it's a safe bet that 737 NG training is going to get some of these non-normal procedures too, like runaway stabilizer.

Joe Anselmo:              Sean, I remember last year we were writing that Boeing thought this airplane would be back in service in a matter of a few months and it's just dragged on and on and on. I mean, did the 737 MAX get caught up in politics?

Sean Broderick:          I don't think it got caught up in politics. I mean, back when it was grounded, the FAA said that the MCAS software is being reworked and they expected that of an AD done in April, 2019. What happened was that the FAA, some industry pilots and other regulators began to take a deeper look at some of the issues beyond the MCAS software. The MCAS software in many ways was the easiest fix here. But it's some of the additional procedures and lack of understanding that 737 pilots had on things like the runaway stabilizer checklist that we talked about. They got deeper into some of the human factors and also deeper into the system safety analysis that Boeing did on the 737 MAX, really on the whole program.

                                   Those things uncovered issues that the regulators, FAA also wanted fixed, back to Boeing and asked for more validation and that caused the process to be dragged out. But the training and the human factors, to me, it's been a huge aspect of this that I don't think is getting proper attention. We're certainly trying to give it proper attention. But bridging the gap between what the pilots understand and what the manufacturers think they need to understand and what the regulators make sure they understand, this whole saga has demonstrated a huge gap there. And trying to close that gap has taken up on a lot of the last, at least, 12 months.

Joe Anselmo:              So what's your ballpark guess now? When do you estimate that it will be certified to fly again? And then how long is it going to take airlines to put the airplanes back in service?

Sean Broderick:          Two big things that have to happen before the re-certification approval starts to come. Number one, the FAA has to finalize the airworthiness directive that lists everything that has to be done to the MAX. That's the software updates. That's some wiring changes that had nothing to do with the accidents, but that required to bring them into compliance. That's number one.

                                   Number two is the finalization of this in the FSB report comments are due on that in early November. It's going to be at least a couple or three weeks after that. So you could see it reasonably in November from the FAA, barring anything odd. I would say December is a very good bet. EASA says it's going to come shortly after that. Other regulators as well. There will be some outliers. Everybody's looking at China and wondering if they're going to take at least a deeper look on their own at some of these issues. For airlines, it's going to take  at least a month or two after the approvals, at least. I would be surprised if you see a MAX in revenue service in 2020.

Joe Anselmo:              Okay. Guy Norris, there's an ironic twist to this. When the MAX was grounded last year, it was really bad for the airlines that had ordered them and were awaiting deliveries. But now with COVID-19, these delays actually have relieved some airlines, because they don't need new airplanes right now.

Guy Norris:                 Yeah. Hi, Sean. Hi, Joe. It is an interesting, strange timing, as you say there. I wouldn't exactly call it a silver lining to the cloud. But on the other hand, yes, you're right. In fact, we've even heard that Boeing is jumping, trying to work with some of the big airlines to essentially offload large fleets of these aircraft that are just sitting around, waiting for somebody to use them at extraordinarily advantageous prices. But even if they could take them, there's simply not the requirement for the capacity.

                                   The other strange silver lining, I think we maybe could mention here, Sean, you maybe know more about this, is the fact that obviously, the MAZX program is due to finish in terms of development with the MAX 10, which is the longest version of the 737 ever built. That first flight, of course, has yet to take place, because it was totally sidelined by the dealing with the whole recertification process. As part of that, the 10 will be flight tested with a synthetic angle of attack sensor system, which is essentially based the same system that's used on the 787. And this, basically, uses inertial data, inertial systems, to calculate a third standby angle of attack indicator. And I think that's really one way of being able to meet some of the requirements, the longer-term requirements, that some of the certification agencies have wanted to see in the revised MAX. That's right, isn't it, Sean?

Sean Broderick:          It is. That was one of the things that EASA revealed a couple of weeks ago as part of their evaluation of the MAX. They wanted to see a third angle of attack calculator. The MAX has two AOA veins, one on each side of the nose. And one of the problems that has been addressed with MCAS is that the old MCAS system would respond if only one of those angle of attack veins was giving erroneous information. That's what triggered both accidents. Boeing has fixed that with the MCAS, and now the two on the airplane will compare. But EASA wanted more. They wanted redundancy. Boeing has agreed to do that. Now, it will not be, because it's being rolled out on the MAX 10, it will not be part of the Return to Service conditions that FAA puts in its airworthiness directive.

                                   What the FAA is going to do is follow its regular Continued Operational Safety Process, which includes taking service bulletins and mandating them as airworthiness directives. It's going to do that. That's the most likely, and that's what the FAA has signaled that they will do sometime, once it's ready. And it will be retrofitted on the entire fleet. EASA put a two-year timeframe on the interim procedures that they want pilots to understand, to manage catastrophic AOA reading failure. So it's safe to bet that you won't see it for another two years. But yes, that is one thing that at least EASA and I think some other regulators wanted, and the FAA and Boeing have agreed.

Joe Anselmo:              Guy, let's move on to the 787. When Boeing launched the program in 2003 -- it was called 7E7 back then -- some people said this might be the last major Boeing commercial aircraft built in the Seattle area. Now even the 787 isn't going to be built in Seattle anymore. What's behind this move?

Guy Norris:                  Yes, this is a seismic event really for Seattle. That's not an understatement either. I mean, this is the very first widebody that's come out of the Boeing stable which will not be built on the West coast, even. In other words, not one that you've brought up from Long Beach side or from the McDonnell Douglas side of the stable. It's a Boeing-designed widebody that is not going to be built on the West coast. So that's a first.

                                   The background to it is that, strangely enough, when the 7E7 was created, it was based on a model which Boeing brought in really from McDonnell Douglas after the merger, which was to find ways of spreading the risk and bringing in partnerships to help get the program launched. So that is what happened with the 7E7.

                                   And of course, as part of that, you had new entrants who wanted to expand their industrial footprint as part of that partnership. Included in this case, it was Alenia of Italy, which was looking for a place in the U.S. to be an active structural partner on the program. They looked at buying some areas of Northrop, for example. They eventually teamed with Vought. The best place they could find was Charleston, which is where they established this. Vought had already decided they were going to place something in Charleston as well. So that really began the ball rolling on this. This is where we are now in 2020, because of decisions that were made in 2003. Obviously, it's probably not as definitively as Boeing might've planned back then, because the fact that they've had to reduce the production rate from 14 a month down to six, means that there's just no way of sustaining two lines. It's as simple as that.

                                   So if you've only got a choice, what do you do? You go to where the bulk of the program is already based and, in this case, it's in Charleston. And the reason for that is very simple. Their fuselage sections, the biggest part of which is 110 feet long, it can't be transported in the Dreamlifter to Everett by air. So it's the logical place to put it. And that's just a fact.

Joe Anselmo:              Sean, you've written that when you talk about logic, it's cheaper to do things in South Carolina than Washington State, isn't it?

Sean Broderick:          I think that's safe to say. The logistics were a major factor. But one ancillary benefit [is that] South Carolina has the lowest percentage of unionized workers of all the 50 states. The unions have attempted to unionize the Charleston shop in the past. They will probably try again. As of right now though, they are not unionized, which of course was not the case out in Puget Sound. So if you're looking at doing what makes the most sense for [the] bottom line, going to a place where you're making the biggest and hardest to transport piece of the airplane is beneficial. And also going to a place where you presumably have lower labor costs is also beneficial.

Guy Norris:                 And can I just point out here, Sean's raised an excellent point. You can't ignore the labor cost side of it. And that's going to be a huge factor when it comes to future Boeing decisions on where to put programs. But here's an irony. The union has tried to unionize twice, three times if you really count the last one, in Charleston. It hasn't worked out. But now you've got a situation where it is literally the only place on the planet where you're going to have 787s coming out of. So all of a sudden you may see the unions have a lot more leverage certainly in trying to force the issue there. So I don't know. It may not be a non-unionized facility forever.

Joe Anselmo:              Guy, for the last 104 years, Boeing Commercial has been synonymous with Seattle. Is this the beginning of the end of Boeing in Seattle? Or is it just the company's moving to a more distributed assembly footprint as Airbus has already done with plants in France, Germany, China and Alabama?

Guy Norris:                 That's a great question. I mean, the weird thing is that Boeing has already said all the way along, "Look, we don't think that this idea that Airbus has of putting final assembly lines [around the world]makes a lot of sense." I mean, you can see why they've done it for so many reasons, but in Boeing's case, it's just not a model that's ever worked for them. So the only way that you're going to see a distribution in future of Boeing's final assembly and commercial airplane developments is if you get new models in new locations. And essentially that's what's happened with the 787.

                                   Remember in 2003, they conducted a site survey which included 80 places around the planet, not in the U.S. in some cases. And they finally selected Everett because they got some pretty good incentives from the State of Washington and they had a lot of room to expand. So this takes us to 2020. Say, what are you going to do if you have a new product? Now they need space, and with the NMA, which of course isn't now going to happen, from what we know, they were looking at a campus-based approach to develop that program. And if you're going to do a campus, you're going to need a lot of space. So maybe Everett might be the location for a future program because you're going to have a lot of space that's going to be spare right now in that huge facility.

                                   However, that said, we've seen Boeing look to reduce its costs. We mentioned labor just now. There are a lot of options out there in the future. So I don't think I see them moving away from Seattle as the core and the heart of their company. I just don't see that. But I do see them seriously exploring new footprints, as you mentioned, Joe, going to their next program, because it's all about diversifying and making sure that you're doing the right thing for the right program at the time. I think that the Charleston decision proves that when push comes to shove, they will actually move lock, stock and barrel, a whole program, to suit the situation. So I don't see them being shy doing that in the future for the next program.

                                   The other thing that you have to remember, and the reason why the Seattle area has been so vital to Boeing, is the fact that you've got so many generations of engineers and skilled mechanics, people who know how to build airplanes really well. And it's a vast human resource, which you just can't get instantly in other parts of the world. So for example, Florida, the Space Coast, that's the reason you have new startups like Aerio that moved there, because there are pockets there of skilled aerospace people. But they are few and far between, if you think about it, sites which can really provide that sort of feedstock really, that human resource. So yes, bottom line, I think Seattle will be the core and continue to be the core of their business, but I do think they're going to continue to make moves out of the state where they see it makes sense.

Joe Anselmo:              Sean, we're running short on time, but [let’s] wrap up today with Boeing's new 20-year forecast which had a ten-year breakout in it. What does it tell us?

Sean Broderick:          Well, short-term, it tells us that the impact of the novel coronavirus pandemic is really going to depress airplane deliveries and the fleet size over the next few years. That's why Boeing took the 10 years out of its 20-year forecast to sort of emphasize the momentous impact here. A couple of numbers, I think, laid it out the best. The forecast says 43,000 deliveries over the next 20 years, but only 18,000 of those in the first 10 years. So a much bigger share on the back half.

                                   Looking at that first 10 years, 56% of those deliveries are going to be for replacement, as opposed to growth. Last year's forecast had that in the low 40s. The overall forecast has it in the high 40s, again because of the heavy emphasis on the front end. So overall fewer deliveries. Short-term, wide bodies are going to be hit extra hard. Boeing thinks that the fundamentals that drive traffic will come back. It willtake five or six years, but they see an average of 4% growth year over year for the 20 years, including the major dip that 2020 is bringing.

Joe Anselmo:              Guy Norris, have the final word. Boeing likes to roll out these forecasts at major air shows and such. Can you recall ever when Boeing rolled out a forecast that had a lower number of airplane sales and dollars generated then the last one?

Guy Norris:                 Oh, I can't, Joe, to be honest. And I've been covering the commercial market outlook announcements for a long time. So when Sean and I decided that we'd cover this one, it was actually together, it was sort of thing. I think we both were going to be needed on this, because there hasn't been one this interesting for a long time. And, yes, you're right, it's the first time that I remember seeing a decline, certainly in a long-term way, like that. Boeing's always had a kind of cheery outlook, optimistic. Obviously, it needs to, because it's part of their portfolio. They have to show a bright forecast. But they've also been realistic. And when you look at the results of their forecast against the reality versus prediction, they've pretty well been spot on. So you can imagine that they've done a lot of due diligence with this one. There have been a lot of hard decisions to make, but I think they genuinely believe this is going to be a longer term downturn and everybody's going to see lower numbers as a result, especially, as Sean says, on widebodies.

Joe Anselmo:              Okay. Guy Norris, Sean Broderick, thanks for sharing your time and your insights with our listeners. That's a wrap for this week's Check 6. Special thanks to our producer in Washington DC, Donna Thomas. Join us again next week for another edition of Check 6, which is available for download on iTunes, Stitcher, Google Play and Spotify. And if you like what you've heard, please give us a positive review. We appreciate your feedback. Thanks for your time and have a great day.