ABX Air Buying 767-223 from American Airlines

[inplaneview]

ABX reported yesterday that it is buying 1 767-223 from American. Does anybody know if this is stand-alone deal, or part of a bigger buy of AA 767's by ABX?

 

[mlifly]

ABX reported yesterday that it is buying 1 767-223 from American. Does anybody know if this is stand-alone deal, or part of a bigger buy of AA 767's by ABX?

I don't know, but I am hearing that about 50 American 757s are leaving for Fedex.

 

[REK]

Time to make room for the 787's?

 

[SuperKooter]

Time to make room for the 787's?

Or the airbuses that they are planning on getting

 

[roughneck]

I hear JetBo is for sale.

 

[inplaneview]

ABX needs all the 767s' they can get their hands on to support the ANA frieght contract. Also, Joe isn't interested in buying lone airplanes, so I look for a much bigger block of airplanes coming from American. I've heard figures from 12 up to 30 767s'.

 

[AAflyer]

Something is going on....

AMR Corp.'s American Airlines has similar expectations. It could soon ask Boeing to begin turning out as many as 36 airplanes a year, with deliveries starting in late 2008 or early 2009, say people familiar with the situation




March 26, 2007; Page A1

SEATTLE -- After two years of record orders, the jet business has never looked better for Boeing Co.

That's precisely what worries Scott Carson, head of its Commercial Airplanes unit. He remembers how Boeing handled the last jet-building boom and vows: "We've been there and we've done that, and we're not going back."
[Scott Carson]

In 1997, Boeing tried to ramp up production so quickly that suppliers were unable to make parts fast enough. Unfinished planes stacked up at its factories here, forcing managers to shut down production for a month to allow the strained supply chain to catch up. The colossal stumble led to a rare year-end loss and $2.6 billion in charges against earnings over two years.

This time around, the storied jet maker is trying to be more prudent and increase production gradually. In the process, it knowingly risks alienating some of its longtime, best customers.

It's a challenge all industries face: determining how much to gear up in good times that might be fleeting. The stakes are particularly high for manufacturers of huge and expensive products, such as Boeing, the U.S.'s largest exporter by dollar volume.

"We really do want to produce as many airplanes as we can, but we want to be responsible about it," Jim McNerney, Boeing's chairman and chief executive, says in an interview.
[Jim McNerney]

To build even its simplest jetliner, the single-aisle 737, Boeing has to assemble 367,000 parts from more than 900 suppliers, engage thousands of workers across the country, and front much of the cost before the customer pays off the $65 million average tab. During an ordering and production process that can span years, the economy and the health of its boom-and-bust airline clients may undergo radical shifts.

Now a recovery in the airline industry is intensifying a need for quick jet deliveries. Boeing, headquartered in Chicago, won more than 2,000 jet orders over the past two years from airlines in fast-growing markets such as China, India and the Middle East. Without a major jump in production rates, it is largely sold out until 2011.

Emerging From a Slump

Yet longtime U.S. and European customers are finally emerging from a slump that followed the Sept. 11, 2001, terror attacks. They're starting to shop seriously for new planes to replace hundreds of aging jetliners. Though they previously canceled or delayed hundreds of orders, these airlines still feel entitled to priority treatment.

"If Boeing or Airbus want our business, they can ramp up production," says Mel Fauscett, Delta Air Lines' managing director of fleet planning and aircraft acquisition.

AMR Corp.'s American Airlines has similar expectations. It could soon ask Boeing to begin turning out as many as 36 airplanes a year, with deliveries starting in late 2008 or early 2009, say people familiar with the situation.
[Wait List]

At Europe's Airbus, Boeing's archrival, top executives question Mr. Carson's tough talk. "Even though it is probably the smart thing to do, Scott is going to have a tough time proving that Boeing is serious about this," says John Leahy, Airbus's chief operating officer for customers.

By the end of 2008, Airbus, a unit of European Aeronautic Defence & Space Co., expects to build as many as five more single-aisle planes every month than Boeing. It has a similar backlog but is under pressure to generate cash, as production on its super-jumbo jetliner, the A380, has gotten delayed by two years due to manufacturing snafus.

Mr. Carson says Boeing isn't going to play a game of one-upmanship just to match its competitor. "We won't follow Airbus down that bunny hole. We're going to make decisions about our production that make sense for Boeing," he says.

Instead, Boeing will agree to a jump in production rates only if it can sustain the pace for at least a couple of years. The cost of hiring and training new people on the front end, only to lay them off a few months later, is "too painful to the entire supply chain" to be worthwhile, Mr. Carson says.

So far, Boeing's greater discipline has resulted in a leaner machine that turns out airplanes more quickly, using fewer people, than ever before. Operating profit margins at the Commercial Airplanes unit reached nearly 10% last year, whereas margins had hovered around 6%.

Boeing is also in a better position to take a hard line. It diversified its customer base internationally in the years that U.S. and European carriers stayed on the sidelines.

Things weren't always that way. In the 1990s, U.S. airlines were king, and airplane makers had to ride their ups and downs alongside them.

In 1996, Boeing won 712 aircraft orders by promising airlines they could have their planes in just a few months. Over the next 18 months, the company hired 32,000 workers and set about doubling production to 43 airplanes a month by early 1998.

'Train Wreck'

Top managers describe what happened next as a "train wreck." Badly needed components were at such a premium that they were rushed to the factories by private jet, helicopter and even taxicab -- "and that was on a good day when there were parts to deliver," recalls Jim Jamieson, a senior Boeing engineer who was brought in to help clean up the mess.

Boeing ended up shutting down its 737 and 747 lines for almost a month. Mr. Jamieson, who now runs all of the company's airplane factories, keeps a 1997 photograph of a row of unfinished planes sitting forlornly outside, as a reminder of the perils of promising too much. "I never, ever want to go through that again," he says.

The company also realized during the crisis that its sales force had struck deals to sell hundreds of airplanes at fire-sale prices because financial executives hadn't shared information about how much it actually cost to build one. This compounded Boeing's problems when manufacturing costs ballooned.

The experience left an indelible mark on a generation of middle managers. Today, many of them are running the place, including Mr. Carson. Then chief financial officer of the Commercial Airplanes unit, he helped lead an effort to revamp Boeing's approach to sales and production.

The new No. 1 rule, he says: "We don't sell airplanes on the assumption that the factories have infinite ability to produce them."

One of Boeing's first steps in the years that followed was to require approval of major aircraft orders by a committee of high-level managers. This team, which includes engineers and accountants, makes sure the factories can handle the work on the promised timetable. Boeing also keeps in touch with suppliers, monitoring their ability to deliver parts.

Close Watch

Just as crucial is to keep a close watch on the customers and their shifting needs. So another team at Boeing has refined a process to award delivery slots to important or impatient clients in the event that certain customers get in trouble and don't want the planes they had sought.

Jet purchasing is an unusually complex and fluid process. Customers can put in firm orders but they also can acquire options for jets, entitling them to a set delivery date but giving them the ability to cancel or postpone within a year or so of delivery. A still-more-flexible arrangement is called a purchase right, which guarantees a price but no fixed delivery date.

At Boeing, a so-called skyline team manages a detailed bar chart stretching out for years showing the delivery dates of airplanes in the backlog. Every Monday, the Commitments Board that manages the skyline meets to compare notes on the relative health of customers.

In certain cases, Boeing has been able to free up delivery slots for new customers by persuading existing ones to convert options into less-definite purchase rights. For single-aisle 737s, for example, it has found that existing clients end up postponing or canceling 10% to 20% of their jet-delivery slots. The team has used this "melt-off" as an opportunity to take care of impatient customers without raising the number of planes the factory turns out.

It's not always possible to find new customers for planes in an economic downturn. That's what happened after the 2001 terror attacks. Airlines canceled or postponed orders by the dozens. Over a few months, Boeing cut its production in half and laid off 35,000 people.

With today's unrelenting demand, Boeing's steadier pace is appreciated by suppliers.

"I think everybody has learned from the last go-round" in the 1990s, says Mark Donegan, chairman and chief executive of Precision Castparts Inc. in Portland, Ore. His industry, metal forgings and castings, was among the first to warn Boeing in the 1990s that it had asked for more parts than suppliers could produce. These products, used for wings, landing gear and engines, are ordered the earliest.

Adds Marshall Larsen, chairman and chief executive of Goodrich Corp., which makes landing gear, engine cowlings and other items: "The last thing suppliers want is to ramp up for all-time record production and then find out it's not going to last very long."

Since 2003, Boeing has boosted its jet output by 41%, delivering 398 airplanes in 2006. This year Boeing says deliveries should increase 12%, to about 445, and then to around 520 in 2008.

At the same time, it is enforcing strict training standards for new assembly-line workers. The company requires new mechanics to attend an unpaid 30-day training course and pass a stringent technical test before being allowed to touch a wrench. This means mechanics show up for their first day better prepared for the rigors of Boeing's factories.

 

[AAflyer]

Something is going on....

AMR Corp.'s American Airlines has similar expectations. It could soon ask Boeing to begin turning out as many as 36 airplanes a year, with deliveries starting in late 2008 or early 2009, say people familiar with the situation




March 26, 2007; Page A1

SEATTLE -- After two years of record orders, the jet business has never looked better for Boeing Co.

That's precisely what worries Scott Carson, head of its Commercial Airplanes unit. He remembers how Boeing handled the last jet-building boom and vows: "We've been there and we've done that, and we're not going back."
[Scott Carson]

In 1997, Boeing tried to ramp up production so quickly that suppliers were unable to make parts fast enough. Unfinished planes stacked up at its factories here, forcing managers to shut down production for a month to allow the strained supply chain to catch up. The colossal stumble led to a rare year-end loss and $2.6 billion in charges against earnings over two years.

This time around, the storied jet maker is trying to be more prudent and increase production gradually. In the process, it knowingly risks alienating some of its longtime, best customers.

It's a challenge all industries face: determining how much to gear up in good times that might be fleeting. The stakes are particularly high for manufacturers of huge and expensive products, such as Boeing, the U.S.'s largest exporter by dollar volume.

"We really do want to produce as many airplanes as we can, but we want to be responsible about it," Jim McNerney, Boeing's chairman and chief executive, says in an interview.
[Jim McNerney]

To build even its simplest jetliner, the single-aisle 737, Boeing has to assemble 367,000 parts from more than 900 suppliers, engage thousands of workers across the country, and front much of the cost before the customer pays off the $65 million average tab. During an ordering and production process that can span years, the economy and the health of its boom-and-bust airline clients may undergo radical shifts.

Now a recovery in the airline industry is intensifying a need for quick jet deliveries. Boeing, headquartered in Chicago, won more than 2,000 jet orders over the past two years from airlines in fast-growing markets such as China, India and the Middle East. Without a major jump in production rates, it is largely sold out until 2011.

Emerging From a Slump

Yet longtime U.S. and European customers are finally emerging from a slump that followed the Sept. 11, 2001, terror attacks. They're starting to shop seriously for new planes to replace hundreds of aging jetliners. Though they previously canceled or delayed hundreds of orders, these airlines still feel entitled to priority treatment.

"If Boeing or Airbus want our business, they can ramp up production," says Mel Fauscett, Delta Air Lines' managing director of fleet planning and aircraft acquisition.

AMR Corp.'s American Airlines has similar expectations. It could soon ask Boeing to begin turning out as many as 36 airplanes a year, with deliveries starting in late 2008 or early 2009, say people familiar with the situation.
[Wait List]

At Europe's Airbus, Boeing's archrival, top executives question Mr. Carson's tough talk. "Even though it is probably the smart thing to do, Scott is going to have a tough time proving that Boeing is serious about this," says John Leahy, Airbus's chief operating officer for customers.

By the end of 2008, Airbus, a unit of European Aeronautic Defence & Space Co., expects to build as many as five more single-aisle planes every month than Boeing. It has a similar backlog but is under pressure to generate cash, as production on its super-jumbo jetliner, the A380, has gotten delayed by two years due to manufacturing snafus.

Mr. Carson says Boeing isn't going to play a game of one-upmanship just to match its competitor. "We won't follow Airbus down that bunny hole. We're going to make decisions about our production that make sense for Boeing," he says.

Instead, Boeing will agree to a jump in production rates only if it can sustain the pace for at least a couple of years. The cost of hiring and training new people on the front end, only to lay them off a few months later, is "too painful to the entire supply chain" to be worthwhile, Mr. Carson says.

So far, Boeing's greater discipline has resulted in a leaner machine that turns out airplanes more quickly, using fewer people, than ever before. Operating profit margins at the Commercial Airplanes unit reached nearly 10% last year, whereas margins had hovered around 6%.

Boeing is also in a better position to take a hard line. It diversified its customer base internationally in the years that U.S. and European carriers stayed on the sidelines.

Things weren't always that way. In the 1990s, U.S. airlines were king, and airplane makers had to ride their ups and downs alongside them.

In 1996, Boeing won 712 aircraft orders by promising airlines they could have their planes in just a few months. Over the next 18 months, the company hired 32,000 workers and set about doubling production to 43 airplanes a month by early 1998.

'Train Wreck'

Top managers describe what happened next as a "train wreck." Badly needed components were at such a premium that they were rushed to the factories by private jet, helicopter and even taxicab -- "and that was on a good day when there were parts to deliver," recalls Jim Jamieson, a senior Boeing engineer who was brought in to help clean up the mess.

Boeing ended up shutting down its 737 and 747 lines for almost a month. Mr. Jamieson, who now runs all of the company's airplane factories, keeps a 1997 photograph of a row of unfinished planes sitting forlornly outside, as a reminder of the perils of promising too much. "I never, ever want to go through that again," he says.

The company also realized during the crisis that its sales force had struck deals to sell hundreds of airplanes at fire-sale prices because financial executives hadn't shared information about how much it actually cost to build one. This compounded Boeing's problems when manufacturing costs ballooned.

The experience left an indelible mark on a generation of middle managers. Today, many of them are running the place, including Mr. Carson. Then chief financial officer of the Commercial Airplanes unit, he helped lead an effort to revamp Boeing's approach to sales and production.

The new No. 1 rule, he says: "We don't sell airplanes on the assumption that the factories have infinite ability to produce them."

One of Boeing's first steps in the years that followed was to require approval of major aircraft orders by a committee of high-level managers. This team, which includes engineers and accountants, makes sure the factories can handle the work on the promised timetable. Boeing also keeps in touch with suppliers, monitoring their ability to deliver parts.

Close Watch

Just as crucial is to keep a close watch on the customers and their shifting needs. So another team at Boeing has refined a process to award delivery slots to important or impatient clients in the event that certain customers get in trouble and don't want the planes they had sought.

Jet purchasing is an unusually complex and fluid process. Customers can put in firm orders but they also can acquire options for jets, entitling them to a set delivery date but giving them the ability to cancel or postpone within a year or so of delivery. A still-more-flexible arrangement is called a purchase right, which guarantees a price but no fixed delivery date.

At Boeing, a so-called skyline team manages a detailed bar chart stretching out for years showing the delivery dates of airplanes in the backlog. Every Monday, the Commitments Board that manages the skyline meets to compare notes on the relative health of customers.

In certain cases, Boeing has been able to free up delivery slots for new customers by persuading existing ones to convert options into less-definite purchase rights. For single-aisle 737s, for example, it has found that existing clients end up postponing or canceling 10% to 20% of their jet-delivery slots. The team has used this "melt-off" as an opportunity to take care of impatient customers without raising the number of planes the factory turns out.

It's not always possible to find new customers for planes in an economic downturn. That's what happened after the 2001 terror attacks. Airlines canceled or postponed orders by the dozens. Over a few months, Boeing cut its production in half and laid off 35,000 people.

With today's unrelenting demand, Boeing's steadier pace is appreciated by suppliers.

 

[AAflyer]

Part II

"I think everybody has learned from the last go-round" in the 1990s, says Mark Donegan, chairman and chief executive of Precision Castparts Inc. in Portland, Ore. His industry, metal forgings and castings, was among the first to warn Boeing in the 1990s that it had asked for more parts than suppliers could produce. These products, used for wings, landing gear and engines, are ordered the earliest.

Adds Marshall Larsen, chairman and chief executive of Goodrich Corp., which makes landing gear, engine cowlings and other items: "The last thing suppliers want is to ramp up for all-time record production and then find out it's not going to last very long."

Since 2003, Boeing has boosted its jet output by 41%, delivering 398 airplanes in 2006. This year Boeing says deliveries should increase 12%, to about 445, and then to around 520 in 2008.

At the same time, it is enforcing strict training standards for new assembly-line workers. The company requires new mechanics to attend an unpaid 30-day training course and pass a stringent technical test before being allowed to touch a wrench. This means mechanics show up for their first day better prepared for the rigors of Boeing's factories.

"Boeing has finally realized that the absolute wrong place to be training a new guy is in the middle of a busy shop floor," says Mark Blondin, head of the local chapter of the International Association of Machinists and Aerospace Workers, which represents most of the blue-collar workers in Boeing's Seattle-area factories.

The company demonstrated its restraint in 2005 when it refused to pile on overtime for workers after it fell behind. A monthlong strike by the machinists forced it to miss more than 30 deliveries. Boeing chose to work the planes into the schedule over a period of a couple of years, even though it meant making customers wait. Mr. Carson points to this decision as "a good manifestation of the discipline we've been talking about."

But this all could get harder in coming months, as the market for new jets is expected to put far more pressure on its production lines.

Some analysts estimate, for example, that Boeing delivered 363 fewer airplanes between 2002 and 2005 than the market could have handled, meaning that the manufacturer will have to scramble to catch up.

And Boeing could lose sales opportunities on some of its most promising new products if customers get frustrated at its full pipelines. It already has almost 500 orders for its newest airplane, the planned 787 Dreamliner. First deliveries are scheduled for mid-2008, and Boeing is telling new customers they won't get Dreamliners until 2013.

Under Pressure

Some skeptics say Boeing will ultimately cave to pressure from impatient airlines. Even before completing assembly of the first Dreamliner, it is contemplating how soon it can open a second assembly line. Some customers and suppliers caution that an overly aggressive ramp-up could lead to a production breakdown that would hurt both Boeing and its customers.

"Boeing has to be very careful not to mess up on the 787, particularly in light of the problems that Airbus has had in bringing the A380 to market," says Steven Udvar-Hazy, chairman and chief executive of aircraft leasing giant International Lease Finance Corp., which has both 787s and A380s on order.

Mr. Carson knows how tempting it can be to promise quick results for important customers. Before being promoted to run the Commercial Airplanes unit last September, he did a stint as Boeing's chief airplane salesman. He recalls arguing to his bosses: "If you can build more of 'em, we can sell more of 'em." Today, he says that if Boeing had rushed to boost production as he had wanted, "we would have broken something."

Mr. Carson makes a point of wandering each month through the factories looking for signs that the production system is under stress. He keeps an eye on overtime and quality, and a key test is simply to count heads: A busy factory looks relatively empty, even though there may be 5,000 people in it. When people are standing around -- as they often were during the 1997 meltdown -- it might mean that they aren't getting the parts they need, and delays could snowball.

But Mr. Carson knows that at some point, the only answer to meeting the unrelenting demand is to find a way to turn out more airplanes. "Will we be more successful this time around?" he asks. "I say yes, but we've got to prove it."