Good news is Boeing is ramping up 737-800 production another 10% and 777 orders are holding firm. Airbus have been experiencing cancellation in orders and options. For years the European Union and especially France has been propping up Airbus. With the financial crisis enveloping Europe, Airbus might have to start selling their aircraft based upon the real costs of production. This bodes well for Boeing as over the past month the Euiro has devalued nearly 25% against the greenback. The only way Airbus was able to outsell Boeing over the last ten years has been government subsidies have allowed them to have better pricing.

Boeing is a story of outsourcing gone crazy. Much of the blame for production delays is suppliers have either not been able to deliver on time or their parts did not meet up to specification or quality. So much of the stuff should have been manufactured by Boeing-owned factories where quality and production could be controlled from within. This would have avoided Boeing having to fork out $billions in penalties to airlines for delays in delivery. Ever since Boeing moved “mahogany row” from the Everett manufacturing complex to Chicago, their once smooth manufacturing process has gone to hell in a hand-basket.

The response from Boeing to rival Airbus when they announced they were moving forward with the A 380 was to upgrade the 747 to an 800 series. As of this month there were options on only thirty-two of the passenger version but seventy-six for the freighter configuration, almost making it a loss making venture for Boeing. It is interesting to note that some freighter operators, led by Cargolux, are looking at ensuring any replacement aircraft are new rather than conversions. With possible cancelations on the passenger 747-800, it looks like the 747 will go the way of the MD 11. In the last five years of MD 11 production all aircraft delivered were freighters.

I started in the business about the same time as Pan Am started flying the 747 to New Zealand. I have always been in awe that such a huge machine could actually fly. It is sad that starting with the “new” JAL, a mega international carrier, that the 747 will slowly fade from the skies because most carriers will undoubtedly follow Air New Zealand’s choice of scrapping the redundant aircraft rather than find buyers. To think it was 747 which transformed the airline business to move passengers in “bulk” which in turn led to pricing that allowed working class families to enjoy overseas travel at Greyhound bus prices.

Manufacturing which used to take place in their own plants, was out-sourced to a mish-mash of “wanna-be” aircraft suppliers. Sure by tendering the supplies, Boeing initially was able to save money by choosing the cheapest bidder and also more accurately determine its overall costs, because cost over-runs would not be their responsibility. Three years ago they were laughing all the way to the bank. Like the good American corporation it is, it dumped a huge part of its Seattle workforce and went on to sign more contracts with foreign companies than local suppliers. What a mess has ensued. When they started final assembly on both aircraft at their Everett plant, nothing fitted! For instance, with the 787’s, the front of the fuselage made in Sweden could fit to the mid section that was made by Kawasaki in Japan! The measurements of the flaps made in Australia meant they could not be attached to the wings made by Mitsubishi in Japan.

If it weren’t for a low dollar versus the high Euro (stopping airlines substituting for Airbus equivalents) coupled with the fact most airlines were thrilled to bits in this current environment not to be writing out checks and taking delivery of their orders, this total Boeing debacle could have easily sent the company under. I hope GM learns a lesson from this by taking Delphi lock, stock and barrel back under its wings and sources everything it can from within. Outsourcing is nothing but a recipe for disaster. Already Boeing has seen the error of its ways and is struggling to get everything back on track by taking back control of much of the manufacturing activity as it is able to do at this late stage. Being the manufacturer and not the assembler provides for greater accountability of the processes, but moreover leads to greater customer satisfaction. It is a case of being able to maintain full responsibility for the quality of the product.