You’re looking at a picture of a Boeing 787 Dreamliner. Why is this significant? Well, it’s the 787th Dreamliner and it will be in service with China Southern Airlines, the first Chinese airline to operate Boeing’s latest jet.
But this isn’t about the 787 cracking the Chinese market, or about how the 787 is changing many airlines route structure with very long, low-cost nonstop flights. I’m talking about the manufacturing; the way Boeing builds commercial airplanes.
Perhaps “assembled” is the better word for what the company is doing. Unlike Boeing airliners of the past, the 787 is built up from very large and complex subassemblies outsourced from a global network of Tier 1 aerospace suppliers. And it’s been a big project. The Japanese government, for example, supported 787 development with a $2 billion loan, and Japanese companies codesigned and build a full third of the aircraft. We’re not talking about avionics, internal systems or software. Outside suppliers built entire fuselage sections, and wings. To haul these large parts, Boeing modified four old 747s into “Dreamlifters”, allowing Boeing to essentially fit airplanes inside airplanes, like Russian dolls.
Traditionally, Boeing built airplanes the same way they had since the 1940s: lots of aluminum sheet, forgings, stampings and castings held together with approximately 50,000 fasteners. The idea of the 787 was not only to outsource production of major assemblies, but to make the airplane out of composite materials, making it stronger, lighter and for Boeings airline customers, some 20% more fuel-efficient. The design worked, and when combined with advanced GE and Rolls-Royce turbo fan engines, sales in a word, took off. What didn’t take off, was Boeings profitability on the project. During the initial production run, Boeing lost as much as $35 million per airplane, which is considerable, even by aerospace standards…but the “program accounting” method that Boeing uses smears costs over a long production run, so it is possible to be profitable on a per unit basis over the long run. But as costs increase, that run gets longer. One result of all this confusion are business press headlines like this. And this. And this. And this.
So, is the 787 a winner or not? Well, the Dreamliner is really a giant two-part ongoing experiment for Boeing. Part one was to determine the feasibility of a large airliner made almost entirely from composite materials. The answer to that question is clearly “yes”. The other part is the experiment around massive outsourcing of the production of a large and complex engineering product, so much so that the airframe maker does little more than final assembly and testing.
The results of that experiment are a little less clear.
Low oil prices don’t help when you’re selling on economy, and Boeing’s own evergreen 737 program as well as advanced Airbus aircraft are a factor. In the end, I have no doubt that the program will be profitable well before the end of the production run of the -8 and -9 models, especially as the hot selling -10 variant ramps up. But was it worth it? Could Boeing have made more money by keeping more of the production in-house? Could the development delays have been reduced? Quality issues avoided? Costs lowered?
I think the answer may come when Boeing finally announces the company’s next major airliner project, the “new midsize airliner” that fits between the venerable 737 and the Dreamliner. The press are calling it the 797, although you won’t find a mention of it on Boeing’s website, and it’s widely assumed to use the same composite construction as the 787.
Will Boeing take on more of the airframe production in house?
Or have they worked the bugs out of the Dreamliner’s global supply chain?
Can they compress the time to first flight enough to hold back Airbus challengers?
The new jet will tell us a lot about the outcome of the 787 production experiment. Don’t worry about Boeing: over the last five years, they’ve built just under 5000 aircraft and satellites, increased production 10 times and repurchased 28 billion dollars in shares. But if you’re down in the weeds, a tier two or three supplier, you’ve just got to be curious: will Boeing ever make an airplane again, or just assemble them?