Podcast: Boeing Commercial Chief Outlines Priorities Ahead Of Farnborough

Stan Deal, president and CEO at Boeing Commercial Airplanes, talks with Karen Walker about customer expectations, how Boeing will deliver, and expectations for the Farnborough Airshow.

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Rush transcript

Karen Walker:

So hello everyone and thank you for joining us for Window Seat, our Aviation Week Air Transport podcast. I'm Air Transport World and Group Air Transport editor in chief, Karen Walker and so welcome on board. Today, I'm absolutely delighted to be joined in person by Boeing Commercial Airplanes president and CEO, Stan Deal. Stan. Welcome.

Stan Deal:

Thanks Karen. It's great to be here.

Karen Walker:

Thank you. I know these are such crazy busy times, and so we really appreciate you giving us some time today. I guess we're going to sort of get straight to some of the key points, obviously with the airlines, your customers and leasing companies. There's been a lot of talk about that relationship with everything that's been going on. And I was at a media round table recently where Tim Clark at Emirates Airlines was asked what's the one message he would give to Boeing. And he was very succinct. He said, it's certainty. I want certainty. Can you talk a little bit about, customer relationship and building that trust with obviously a lot of issues going on?

Stan Deal:

Yeah, I sure can, Karen, and certainty is the name game in the airline industry. And for Boeing, we have to re-earn some trust and we're going to do that one airplane at a time. Simply put, when we say we're going to have an airplane ready, it needs to be ready. That happens at the individual airplane level. The quality's got to be perfect. Obviously safety's hygiene in this industry, it's the stakes to come and play, and that's how we're approaching it. As we're running Boeing, we're trying to drive that stability of our operation, start with the engineering excellence and re-earn that trust with each of our customer, one delivery at a time.

Karen Walker:

And so yeah, you say that, but a lot of customers now have been waiting for a lot of decisions for some time. And you get the sense now of real frustration and some of them are making that very public.

Stan Deal:

Sure. And so for us, that's about development execution. It has taken more time for some of our developments. We feel good about where we've set the 777-9 out in 2025. It'll give us that necessary time to work the regulatory environment and deliver on all of our promises. The good news about the 777, for instance, which will be at the show and you'll get to see it fly in all its grace and glory, the fuel burn and the efficiency is right on spec. And it's going to deliver unprecedented environmental benefits to our airline customers.

Karen Walker:

And you just mentioned the show, of course, that's the Farnborough Air Show.

Stan Deal:

Yeah.

Karen Walker:

Which is just around the corner now and a big event. And now that we're seeing all these shows come back as in person events, that's a big one. So you'll be taking the 777X to that show.

Stan Deal:

We're going to have the 777-9 on flying display and the MAX 10, our largest member of the MAX family. So, this is going to be a two airplane airshow for us plus large static displays. So it's going to be great to see those two airplanes flying. We did have at Doha last year, the 777X. It went to Singapore. Now it's going to debut at Farnborough Air Show.

Karen Walker:

It was at the Dubai Air Show, correct?

Stan Deal:

Yes.

Karen Walker:

Yes, that's right. Yeah. And you just mentioned there, the 2025 delivery date, there's been again from the airlines, quite a lot of questions about that. And interestingly, several of them are also raising the importance of the freighter-

Stan Deal:

Absolutely.

Karen Walker:

Version of that. So they really want to know that that is a deliverable. Is that what you're saying? That your 2025 is-

Stan Deal:

20-

Karen Walker:

The deliverable as well.

Stan Deal:

2025 for the passenger and yes, this year we launched a freighter version. It's going to be called the 777-8F. That'll be available in the last half of 2027. We were proud to launch it with Qatar Airways since then, Luptons has signed on to the program and Ethiopian has signed on and I expect, we'll see more, very shortly.

Karen Walker:

So you are talking of certainty for your customers these days.

Stan Deal:

Absolutely.

Karen Walker:

You mentioned the MAX, you said you'll be taking the MAX 10 to Farnborough. So can you just talk a little on the deliveries, and clearing that stored backlog, you've talked about where your targets, where you need to be.

Stan Deal:

Sure.

Karen Walker:

When we look at the numbers, they don't seem to be where they need to be. What do you expect to happen, this year and next on that?

Stan Deal:

Yeah. Yeah. We're continuing to focus on that backlog of inventory airplanes, as we've said. Those airplanes have to be brought up to the same build standards of production airplanes. So it actually takes work to do that. In reality, we spend as much time on those airplanes now, as it takes to assemble an airplane and we're driving to increase the output of the inventory airplanes, our customers are demanding it, as you know, the domestic markets have recovered mostly around the globe with the exception of China and perhaps some, a little bit in the Northern Asia region. So, and then we're slowly bringing the production system back and what we're learning is there's more stress in our supply chain, like we've seen at the airports in other industries, staffing backup is going to be one of our key watch items as we build up our rates across the 737 MAX. And, but we'll take it one day at a time and we'll get these rates back up so that our customers can grow.

Karen Walker:

And do you have a sort of timeline on that now as to where you'll be on those numbers?

Stan Deal:

Yeah. I mean, we've already done a rate increase as we entered the year. We'll look at another one as we exit the year in that timeframe, and then we'll make gradual adjustments over 2023. We're going to do this as the supply chain's in control. It makes no sense to try to build ahead and then you need every part to have an airplane successfully delivered to our customer. So that's our approach and the airplanes as they're delivering are performing extremely well. The MAX family's offering about 16 to 18% better fuel burn than the current next generation airplane, that noise footprint's 50% less at the airport. It's a overall reduction of noise for the industry and that emission value that gets offered is incredible. It's one of the pathways to our sustainable future.

Karen Walker:

So sustainability obviously huge topic for this industry and-

Stan Deal:

Yes.

Karen Walker:

Well obviously it is still dealing with the impact of COVID, you talk to any airline CEO and they'll say the sustainability is the much bigger issue. So can you talk to me a little bit about, it seems to me that Boeing takes a very different tact when it comes to its approach to sustainability and what you're doing for the customer in that respect. What's the Boeing philosophy?

Stan Deal:

Yeah. Our philosophy is, first and foremost, continue to fill products that offer a step function in efficiency. That's what the current generation of products do. The MAX family, the 787, the new 777 family. And that offers somewhere between 15 and 20% lower fuel burn. Huge emissions reduction benefits, and then, have all of our product certified by 2030 for a 100% capable set.

            They're all certified for 50/50 blend. That's not enough. We have to get to the ability to operate with a 100% and then continue to work with the industry to usher staff in. This is a, been a 10 year journey already. Remember, 10 years ago, we started the demonstration of biofuels and then continuing to invest in technologies that could supplant that ecosystem over time. Electric investments, Boeing's invested in west to do urban mobility. See how far electric propulsion technology could go. We're working on hydrogen too. We're not saying hydrogen is not it, but it's got a lot of R and D work, but we just produced a 16,000 gallon cryogenic composite tank in conjunction with NASA for rocket use, but it could, a lot of that technology development could come right into the commercial aviation environment. So we're not stopping, but we see the next step renewal to staff to future technologies.

Karen Walker:

So a stepped program, if you like-

Stan Deal:

Correct. Yeah.

Karen Walker:

That you are laying out. You also mentioned there the supply chain.

Stan Deal:

Yes.

Karen Walker:

Again, we're seeing a lot of issues there, not just in this industry, across the whole industry. What's the main challenge for you in terms of your suppliers?

Stan Deal:

Yeah. I think it's bringing the human capital back into the system, so to speak, and it's not a capital expenditure issue. Whereas the first time we're ramping up the MAX, many were having to invest to capitalize for that, our rate increase. That's been done. Now it's bringing back the workforce, not everybody that was there came back. You have to bring new workers in, bring them through the training process. That's taken more time than most people expected. I suspect we'll get through that. It's not a question of, will rates go higher? It's, how fast will the rates go higher? And you only want to do it to the point where you can produce in a disciplined way with high quality. And that's what we reinforce with our supply chain as they're ramping up.

Karen Walker:

Let's talk about the market in general.

Stan Deal:

Yeah.

Karen Walker:

Okay. Narrow body versus wide body. We all know how much that has shifted in recent years. Will the wide body market rebound? Do you see that getting back to, the position that it was before the pandemic?

Stan Deal:

Yeah. Good question. So, first of all, as the show approaches, we're going to release our current market outlook. That's one of the things we try to do every pre Farnborough or Paris Air Show. And I think the simple answer is yes, we always predicted the narrow body market would recover first. That started happening, last year you saw terrific quarters by Boeing, and we're starting to see some wide body demand come home. We've said it was a 23, 24 recovery for a wide body. I think that's still intact. You see airlines in north America, Latin America, Europe, Middle East, India, all talking about international traffic recovery this year. That's great. Pacific Rim's lagging. So I think you'll see that recovery come home and get ready for the market outlook. That's a great opportunity to talk about what those trends are long term. And we'll have that for the show.

Karen Walker:

What you do have with the triple seven is a bigger aircraft versus the say Airbus A350 available to the customer, if that comes about. As you said, people are seeing quite a fast surge back of traffic where markets open up. Are you hearing people talk about big interest again in like, yeah, we're going to need a big aircraft that can go into the big hubs.

Stan Deal:

Yeah. It's starting to come. But I would say the first and foremost interest is first on the 787. That will be, if you will, we always say heart of the market, the heart of the market for the wide body, the world has changed since 1969 when the 747 came out, which really served hubs well. We bet on a strategy as Boeing through the eighties and nineties, that the world would fragment. People would want to get to the city pair that they wanted to travel versus going through a third point. That has happened in the world. So the 787 will be the heart. It will carry people where they want. The 777-9 will become the flagship airplane. It will replace those four engine airplanes that are out there today. That'll be the flagship operation. And I think that demand comes in the 24 timeframe. So we're well positioned with the entry into service of 2025.

Karen Walker:

And then of course, ultimately you're a business man first and foremost. And, there's been a lot of concerns being raised now about the economy in general, talks of, is there going to be a global recession? We've got the tragedy that's happening in Ukraine.

Stan Deal:

Yes.

Karen Walker:

We've got oil prices, skyrocketing. How do you see all of that in terms of, as you are looking out to the market?

Stan Deal:

Yeah. Well, I wish I was a master predictor of the future, unfortunately, I'm not, but yeah, those are headwinds we're watching. And the one thing we're seeing is demand is coming back, it's coming back very rapidly. So there is an element of pin up demand with the market being shut down. I think we all have to just watch and see as the market continues to unfold, governments are taking action. We hope those countermeasures smooth this out, the inflationary pressure we're seeing, we hope it doesn't end in a recessionary pressure, but it's too hard to predict. We just kind of have to take it one day at a time, stay close to our airline customers and be flexible. That's something that Boeing did through the downturn. It's something we'll do as we move forward with our customers.

Karen Walker:

What about China? What do you think is going to happen there?

Stan Deal:

Yeah. It's that big growing market that has had the significant impacts of COVID and, we continue to stay very close to our customers there. When there's no COVID in the country, the travel demand picks up. We saw that last year where it exceeded 2019 levels. I believe as the country and when the country opens up, you'll see a resilient demand rebound out of China.

Karen Walker:

Can we just maybe finish with sort of going back to, as you say, Farnborough just around the corner.

Stan Deal:

Yes.

Karen Walker:

Do you anticipate being able to announce any major airline orders there?

Stan Deal:

Well, it's an airshow and first and foremost, we're going to focus on one, promoting our products to our customers. That's with the MAX 10 and the 777-9. We've got a great sustainability story, we're going to unfold the market outlook. I hope to sprinkle few orders into that in between there.

Karen Walker:

And what would be your key objective about this Air Show?

Stan Deal:

Yeah. Number one is being out and about with the industry members, our customers, our suppliers. This is a show where everybody shows up. We have a portfolio that extends into the defense world. That's an objective to continue to promote the benefits of how our products protect the world. So, with us, it's continue to reconnect, advance our products, win some new business and call it a wrap.

Karen Walker:

So thank you very much for your time today, for a good conversation. I really appreciate it.

Stan Deal:

Yeah, thank you.

Karen Walker:

I know how busy you are. Thank you also to our listeners. I hope you'll join us again next week. Make sure you don't miss it by subscribing to the Window Seat Podcast on Apple Podcasts or wherever you listen, until then, this is Karen Walker disembarking from Window Seat. Thank you.

Stan Deal:

Thank you, Karen.