Aircraft Manufacturer Problem: The Planes Never Run on Time

EADS, parent of Airbus, said it will delay the launch of its A350 aircraft. The news echos the many setbacks of the commercial release of the Boeing (NYSE: BA) 787 Dreamliner. These two events offer proof that airplane manufacturers cannot get their products to customers on time. And, these customers have no leverage.

EADS said it would take a $270 million charge as it pushed the first deliveries of the A350 wide body from 2013 to 2014. A problem with access to parts and lack of experience working with new modern composites were blamed. That will hardly be a satisfactory answer for many carriers wishing to replace old fleets. The multiyear delay of the 787 cost Boeing money, shareholder value and perhaps orders. But orders lost, as it turns out, were very minor.

There are several reasonable causes of these delays. The problem is that Boeing and Airbus refuse to build delays into their time tables. That means deadlines are impossible to meet, even before a new airplane makes it off the drawing board. Misleading carrier customers has become part of the delivery system. Ultimately, these carriers can do little more than complain and demand modest compensation. A large airline that has made specific plans for a new aircraft can hardly shift its orders from Airbus to Boeing and then back again.

It should be no shock that Airbus and Boeing are also large military suppliers. The list of delays and cost overruns for planes made for the Pentagon are legendary. The government, like major carriers, has no options. A new fighter plane cannot be cancelled because it is late.

Airbus and Boeing are part of a class of companies that can be badly run with little consequence. They have no competition beyond one another. The cost to start an aerospace manufacturer is too high to allow another firm into the industry. China says it will create a competitor to the Western companies. It will be a long time before it can prove any success.

Boeing and Airbus are unlikely to ever improve their records for on-time delivery. That will continue to cost the carrier industry billions of dollars it cannot afford. The two companies are more fortunate than most. They operate in an industry in which poor management has no consequences.

Douglas A. McIntyre