Building Boeing’s New Small Airplane
An aside before getting into the heart of this post: the following was sent by a Wall Street analyst upon hearing the news that Boeing will lose $300m on the first 18 KC-46A tankers.
KC-46A over-runs. In the movie Casablanca, the Police captain proclaims; “This café is closed; I’m shocked, shocked to find out there is gambling here.” A waiter then hands him his Roulette winnings. We are equally shocked to read reports that BA likely underbid the KC-46 contract. BA’s poor performance on the 767 tanker program and aggressive KC-46A bid drove us to include a nearly $1bn EMD contract over-run in our estimates, which are unchanged. We maintain our Buy rating and $92 target.
Now for the rest of the story, as they say.
While there remains much uncertainty within Boeing and the industry over what Boeing will do about a new airplane–a 737 re-engine or an entirely New Small Airplane (NSA), and if an NSA, what will this look like–states interested in building the NSA also anxiously await Boeing’s decision.
Washington State is the location for building the 737 and having lost the 787 Line 2, it doesn’t want to lose the NSA. The governor has already appointed a task force under the name Project Pegasus to plan the campaign and strategy to be sure the NSA is built here. Other states probably are already planning their strategies, though none has announced anything that we’ve seen.
Aviation Week has this story on the subject. In it, author Michael Mecham notes that Renton (the 737 site) has the ability to go to 63 airplanes a month. This is 42 on Lines 1 and 2 and another 21 on the 737-based P-8A line. This could launch the NSA in Renton.
We asked Pat Shanahan, the head of airplane programs, about this at the Paris Air Show.
How can you accommodate production rates of 60 per month? That means starting at a time when rates on the 737 are 42 per month. Is there physical room in Renton to start a third line for a new airplane or will you be forced into a “greenfield” site, wherever that is?
There are a lot of options in Renton. From a space standpoint, we are really not physically constrained. We can accommodate a third production line in Renton.
Is there any thought to going to Eastern Washington, or is that like going to another state altogether?
Most of the thinking right now is to the configuration of the airplane and the production system and less to where we would actually place the production system.
Although there is room at Renton to start the NSA, Boeing officials have made it clear there will be a competition for the assembly site of the NSA.