Boeing 747 freighter program follows course of troubled 787
It was supposed to be a cheap and easy way to steal sales from Airbus’ hulking A380 double-decker jet.
Boeing Co. would update its decades-old 747 jumbo for the large freighter market with cutting-edge technology borrowed from the 787 Dreamliner: powerful, new fuel-efficient engines.
But five years later, Boeing is struggling to resolve design and technical issues with the 747-8 program that are partially a byproduct of the Dreamliner’s production woes. Like the 787, the jumbo jet is late, badly over budget and is almost certainly headed for another costly delay, analysts said.
The string of missed deadlines, supply-chain mishaps and design flaws that have plagued the two aircraft have tarnished Chicago-based Boeing’s reputation for top-flight engineering and called into question its decision to rely on suppliers to design and build portions of the jets.
As Boeing works to correct those problems, Wall Street increasingly worries about the drain the two jets are placing on Boeing’s cash and engineering resources. Analysts want assurance that Boeing won’t see another debacle when it updates two other popular models this decade: its 737 narrow-body jets and long-range 777 twin-aisle planes.
“If they don’t learn from their mistakes, they’re really in trouble,” said Paul Nisbet, aerospace analyst and president of JSA Research Inc.
The Dreamliner and jumbo jets have progressed significantly since the panicky days of 2008, when Boeing drew engineers from across the company to rescue the 787.
But as the planes undergo rigorous flight testing needed to gain certification from federal authorities, technical issues are still coming to light, especially on the 747-8. Boeing acknowledges it is unlikely that the process will be completed this fall, as it had predicted.
On Aug. 27, Boeing said the 787’s first delivery would be delayed to early 2011, as analysts expected, and it also shook up the 747’s management team. Program head Mohammad “Mo” Yahyavi was placed on “special assignment,” while Pat Shanahan added oversight of the 747 program to his portfolio of responsibilities as vice president and general manager of Boeing’s airplane programs.
There have been persistent rumblings of problems with the 747, analysts said, even though the freighter version of the plane has achieved milestones during flight testing, including last month’s successful takeoff with a million-pound payload, the heaviest ever for a Boeing jetliner.
Boeing spokesman Tim Bader said the company was trying to resolve two problems unearthed during test flights that involve vibration in the 747’s wings and the inboard aileron actuator, which moves the flaps that control rolling and banking.
But union leaders say Boeing’s engineers are still slogging through a host of technical issues ranging from small to potentially troubling, many of which originated with contractors. One recent cause for concern is whether air-bleed ducts that feed compressed air from the engines into the plane’s cabin pressure system will meet certification standards, sources said.
“There’s a lot of dreadful work coming out of the partners the company is working with and also some great work,” said Ray Goforth, executive director of the union representing 21,102 Boeing engineers. “But they’ve really saddled themselves with some partners who are just not capable of doing the job. Unraveling those relationships is going to take time and money.”
Bader noted that engineering work is outsourced for all of Boeing’s programs and said that the contract work hadn’t contributed disproportionately to the 747’s woes.
Boeing has manufactured 11 of the jumbos, which will have to be retrofitted as technical issues are resolved. Fixing the flutter and actuator issues, for example, could cost “several hundred millions” of dollars, said Howard Rubel, an analyst at Jefferies & Co., in an Aug. 31 research report.
Rubel estimated that the new issues could delay the first delivery to Luxembourg-based Cargolux by about six months, to mid-2011.
“We’ve said that due to the discoveries (through flight testing) and cumulative effect of discoveries that there’s a high probability of deliveries moving into 2011,” Bader responded. “Currently, we’re assessing the program’s schedule.”
Boeing has taken $2.04 billion in charges related to the 747-8 program and has declared the program to be in a forward-loss position, a sign that it expects to lose money on many of the 109 jumbos on order.
Executives badly underestimated the complexity of revamping the 40-year-old jet, which required nearly a complete redesign, sources said. They were further distracted by the daunting development problems that left the Dreamliner nearly three years behind schedule, tying up a small army of engineers and leaving the 747-8 freighter program short-handed.
“I’ve been warning for years the insidious effect the 787 program was having on the entire company,” aviation consultant Scott Hamilton said. “It was sucking up resources from all over [Boeing’s commercial airplane unit], including the 747 program.”
But some observers say that the problems started earlier, with former Boeing Chief Executive Harry Stonecipher’s decision to remake the manufacturing giant into a systems integrator modeled after McDonnell Douglas Corp., which Boeing acquired in 1997.
Outsourcing initially slashed development costs for the 787, which boasted all-new technology as well as a new style of manufacturing that left much of the design and manufacturing in the hands of suppliers. But Boeing didn’t have adequate oversight in place, executives later admitted. Engineers said the 787 and 747 problems were slow to be addressed by senior officials who often didn’t want to hear bad news.
“The management culture changed,” said Tom McCarty, a Boeing engineer and president of the Society of Professional Engineering Employees in Aerospace, a union that represents Boeing’s technical workers. “The feeling is senior management became less approachable. They had distanced themselves more and more. Of course, the corporate relocation to Chicago emphasized that.”
The pendulum is swinging back as Boeing has taken direct control of more of the 787 process. Boeing bought Vought Aircraft Industries’ 787 operation and Vought’s stake in Global Aeronautica, two early supply-chain bottlenecks for the Dreamliner. There’s talk that additional work on the 787 and future programs will be “in-sourced” to Boeing’s factories.
Jim Albaugh, who stepped in as president of Boeing’s commercial airplane business last fall, has hired a consulting firm to deal with cultural and communication problems. He also has formed an advisory panel of retired Boeing engineering luminaries to help steer the airplane unit back on course.
“Our efforts to incorporate lessons learned from our development program challenges will remain a priority for us,” Boeing CEO Jim McNerney told investors during an earnings conference call earlier this year.
jjohnsson@tribune.com
