More turbulence ahead for Big Aerospace

I have generally refrained from making observations on current events in the aerospace world. Today’s an exception.

The union of Boeing machinists has rejected Boeing latest contract offer, which Boeing was using to extract pension and benefit concessions from the workforce, else they will move the work for the proposed 777X elsewhere.

I’m not taking sides in the argument. But I do suggest this:

Boeing managers, this is what happens when you treat your skilled engineers and technicians like chess pieces to move around on the board. They sweated blood for you on the 777 and 787. This is how you thank such sacrifice?

Union employees, this is what happens when you entrust your career and future to a large lumbering giant, in a world of ageing workforces, ballooning debts and unrealistic expectations. Nice cushy pensions and benefits (for either managers or workers) are not realistic expectations. Quit trying to live in a world that’s long gone. Start preparing for an ex-Boeing life.

Both sides: Wake up, quit trying to fight old battles, and collaborate to reinvent Big Commercial Aerospace in the 21st Century.

And those of us spectating from the sidelines in this particular skirmish, don’t smirk. This problem is coming your way soon. Plan for it now.

Big Aerospace needs to be reinvented. It needs to re-learn how to think Light. Nimble. Agile. Collaborative.

Otherwise it might soon become Small Aerospace.

7 thoughts on “More turbulence ahead for Big Aerospace”

  1. David, the underlying assumption here is that the trend for lowering the rewards for employees (either by cutting benefits, security of tenure, or simply remuneration) is an irreversible trend in the 21st C. I don’t think that’s necessarily the case; looking at the 20th C, the story is of rising standards of living (most notably connected to employment rewards) overall, but there’s a period between 1950 and 1973 that the income of employees grows very quickly. That’s a quarter of the whole period and is only ended by the oil price shocks. At either end of the 20th C, living standards were falling. So that’s a historical view.

    While I don’t see a time when the current downward trend would naturally end I can speculate that it can be ended by addressing our use of energy – we either find much much less energy intensive technologies to keep us economically active or we find new ways to capture and store energy. So that’s a broad macroeconomic view.

    If big employers exhibit no will to improve the living standards of their employees, do we care if they fail and are replaced with smaller companies? If we are not improving the lot of mankind, what’s the point? Of course it’s a painful transition to make for anyone involved in an industry undergoing that change, but would we be better off with small aerospace, if that means improving standards of living for everyone? Surely, yes. Now it just takes the societal will to say we expect people to become better off in their lifetimes, not worse off.

    I expect that a few people will see this as flame bait, but I’m only reiterating what was social orthodoxy in the ’50’s and ’60’s.

    1. I used the term “small aerospace” a bit carelessly, meaning to suggest that the large companies will gradually go bust. However, I am inclined to agree with you: Small aerospace would be a good thing, if it consists of many smaller, nimble, visionary companies with a collaborative approach.

  2. Totally agree – companies need to be much more flexible in today’s environment. Don’t think the big players will be able to reinvent themselves – too much politics and administration going on there. It’s only a question of time until they lose out to the smaller smarter and more innovative enterprises.

  3. David,

    It is possible that Boeing needs to balance the activities amongst its different locations. The commercial airplane business is blooming and there is a hell lot of work to do like the 737 production rate increase (up to 42 units per month in the 2nd half of 2014). They also need to ramp the 787 production up.

    On the other side of the business, activities are dwindling down due to US defense spending cuts. It would be reasonable for Boeing to utilize the facilities it has in different places.

    In my very humble opinion, it would be a good move to put 777-9 and 777-8 production where jobs need to be maintained. Washington state will be busy producing the 787 on top of 737 and 737 MAX. People in WA need to think that people in other states might need some jobs too.

    As far as Europe is concerned, I have been waiting since a couple of year the next cost-cutting program in European aerospace industry. Finally, it has been formally announced in 2013. The move will extend into 2014 and beyond. Airbus Group (formerly EADS) will have to improve its productivity by a significant scale.
    Why? Because Boeing started to increase its productivity since several years now. It has succeeded to increase its output using roughly the same work force.

    It seems obvious to me that Airbus Group will spread its cost cutting effort to its commercial airplane business. It would be a heresy to believe that Airbus commercial airplanes will not be impacted by the restructuring effort. It also needs a huge productivity gain.

    I believe the effort in Europe this time will be much-much bigger than the one done during Power8 program. Most importantly, this time it needs to be done properly because they need to improve their competitiveness.

    The cuts will be deep and painful, but it is a necessary.

    1. i quite agree with you, particularly regarding the Airbus cuts. (I myself stand a fair chance of being affected.)

      The only thing that surprises me is that it took Airbus this long to get around to it.

      I’ve been expecting substantial cuts ever since the IT-related delays were announced on the A380 programme some 7 years ago. I couldn’t see how Airbus could continue without them, given the financial numbers that were being publicized at the time. Possibly the bean counters have been shuffling the cards ever since, so as to cover the problem up.

      However, I suspect there is another factor in play.

      Namely, a desire on the part of Airbus Corp management (we may as well stop using the EADS moniker) to free themselves from meddlesome politicians in Paris and Berlin.

      And possibly a desire on the part of said governments to get money. From somewhere. anywhere.

      This will require Airbus to raise some capital to pay off Paris and Berlin. Either privately or publicly, they will need to raise capital.

      And it’s hard to raise the capital you need if your books aren’t looking too rosy.

      And what’s one way to improve the short-term bottom line? Easy. Cutbacks.

      1. I am sure these cuts make sense financially speaking but I was quite disappointed to hear about them. Last year I visited the Astrium site in Munich and I got pretty excited about it. It seemed to be a perfect place to have a career in the space industry in Europe. The outlooks of the company seemed to me pretty good regarding that they had secured the assignment to build the service module for Orion. In my opinion that is quite an achievement to ‘steal’ that job from the American contractors.

        As far as I know, now the former Astrium group faces major cutbacks and layoffs. It doesn’t look so promising, but well, I have 1-2 years left before I enter the job market. Let’s hope for the best!

  4. David,

    You said “This will require Airbus to raise some capital to pay off Paris and Berlin. Either privately or publicly, they will need to raise capital.

    Nowadays, it is difficult to raise capital if you do not allow foreign investors buy a lot of the shares. We also know that there is a huge amount of sovereign fund out there that needs investment vehicle.

    Is it possible to give out too much control to foreign investors in a strategic asset like the defense business of Airbus Group (formerly EADS)? Knowing a little bit about the European state of mind, I believe it is out of question to put European defense industry in the hands of foreign influence.

    In a blog posted in February 2013, I discussed about the possible outcome of European aerospace industry evolution. It is here: http://wp.me/piMZI-302

    It is possible that the strategic assets will be spinned off before they can raise the capital. It is all discussed in the above mentioned blog entry.

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