The United Airlines CEO says he is “disappointed” in ongoing manufacturing problems at Boeing that have led to the grounding of dozens of United jetliners, and the airline will consider alternatives to buying a future, larger version of the Boeing 737 Max.
United Airlines CEO Scott Kirby said Tuesday that Boeing needs “real action” to restore its previous reputation for quality.
Kirby’s comments came one day after United disclosed that it expects to lose money in the first three months of this year because of the grounding of its Boeing 737 Max 9 jets.
United has 79 of those planes, which federal regulators grounded more than two weeks ago after a panel blew out of an Alaska Airlines Max 9 in midflight, leaving a gaping hole in the plane. Investigators are probing whether bolts that help hold the panel in place were missing or broke off.
Believe it or not, this consolidation is almost certainly because of (good) regulation not capitalism.
The costs of building a new air frame are gigantic - the regulatory aspect in all countries is also gigantic. The barriers to entry are gargantuan - and the scale you need to be profitable is extreme.
But those regulations save lives. But they also keep competitors out.
Believe it or not, but companies outside of Boeing and Airbus are capable of designing airplanes.
It’s not just “good” regulation holding them back either - in 2017 Boeing accused Bombardier of “dumping” some CSeries planes because they sold them to Delta at below the retail cost (about a 30% discount). The CSeries was/is a good plane, but took an incredibly long time to get through certification so Bombardier had been losing money and was desperate to sell them. Boeing complained about this discount to the US International Trade Commission who imposed a massive fine on Bombardier. Because of the delays, Bombardier couldn’t afford to fight the fine so they ended up having to give up a 50% stake in the design to Airbus for only $1. The year after, the fines were appealed and overturned, but the damage was already done. Bombardier has since completely sold their stake in the CSeries (one less competitor), and Airbus gets the renamed A220 series for a massive discount.
As an aside, I can’t argue that the FAA doesn’t do more good than harm in this space generally, but I’m the last ~5 years it’s becoming clear to me that they have a massive blindspot for Boeing in particular.
Your comparison of Bombardier is a good one - but not so much for you. Bombardier was losing money on the A220 nee C Series and was going to lose more even without the ITC decisions. They had no manufacturing scale and didn’t have the money to build it - those A220s are now being built in Mobile, Alabama, alongside the rest of the A320 family.
Their order book was relatively thin - Delta took a big gamble in exchange for the hefty discount that those planes would ever get built. It didn’t look like it. Canada and Quebec already had two massive bailouts for bombardier, owned a big chunk of the program, and said they weren’t going to put more in.
That program had massive cost overruns and practically bankrupted all of Bombardier. They only survived because of Airbus. Before Airbus, the Federal Government and the Quebec Government already owned 50% of the C Series project. Because of the C Series, Bombardier is a shell of itself - they sold off all of their commercial plane operations (the CRJ, to Mitsubishi, who subsequently cancelled the whole thing), they sold off all their rail operations to Alstom. They only build business jets now.
It was also a massive strategic failure for Boeing - who could have bought the program instead, and been selling a fantastic small plane instead of Airbus.
But who else has tried to build a plane? How is the Sukhoi Superjet doing? How about the Mitsubishi SpaceJet?
China will eventually be able to build planes with their own engines - but that’s only thanks to truly massive state resources, and a big dose of corporate espionage. And it still will probably be a commercial failure.
Because building commercial success in the airline industry is hard. The old adage of “how do you become a millionaire? Start with a billion dollars and buy an airline” applies to almost every part of the entire sector.
You can’t sell a few planes and make money to build a bigger plane anymore. You have to invest tens/hundreds of billions of dollars and bet on long term success - and there aren’t many people willing or able to make those bets, for the next pandemic, recession or 9/11 to kill your business even if you did everything else right.
Airbus was propped up for decades by the governments of Europe, Boeing too - and same with Embraer and Bombardier. But even the resources of small nation states aren’t enough to compete with Boeing and Airbus on their turf. Canada didn’t have pockets deep enough for it - and they’re a reasonably wealthy country.
Because Boeing is a massive military contractor. The US government needs Boeing, and will protect them.
Just like Airbus. They are the majority stakeholder in Eurofighter (makes the Typhoon), they hold an equal share of Panavia (makes the Tornado), and they have a hand in Dassault (Rafale, Mirage, etc.) as well. Airbus Helicopters also makes attack and military transport helicopters like the Tiger and the Puma.