Post on 03-Apr-2018
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
1/57
BOEING 787 USS DREAMLINEROR NIGHTMARE-LINER?
Who will Ultimately Win the Aerospace Race:US, Europe, China, or Russia?
Copyright 2013 Exolus. All rights reserved..
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
2/57
1
Contents
Dreamliner 787 Overly Globalized? Outsourced?
Boeings Evolution of Globalization/Outsourcing Aircraft
Dreamliner 787: Over-Globalization of Frame Production? Boeings Aggressive Global Sourcing Strategy Illustrative China Case
Highly Complex Global Supply Chain Leads to Major Challenges
2
3
45
11
Airbus Globalization
Airbus 350XWB Globalization Strategy
Airbus A350XWB - Frame Production Concentrated in Europe
Airbus 350XWB: Globalization of Supply Chain
17
18
19
22
China and Russias Unique Models: Glocal-ization Strategies
China Market: Foreign Investors: hunger for China Opportunity
Road Forward: China Focusing Initially on Single-Aisle & Regional Jets
Chinas GlocalizationStrategy
29
30
41
42
China / Russia Partnership for Aircraft Development/Production? The Ilyushin Il-96
4546
Considerations for the Future of Aircraft Production
Competition in the Global Supply Chain Immense USD100 billion
48
49
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
3/57
2Copyright 2013 Exolus. All rights reserved..
Dreamliner 787 Overly Globalized? Outsourced?
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
4/57
3Copyright 2013 Exolus. All rights reserved..
1. Boeings Evolution of Globalization/Outsourcing Aircraft Production/Development
Parts built by the IAM union of Boeing workers
1967 (737 Class ic)
1969 (747 Series)
2009 (787 Dream liner )
Source: A Wing and a Prayer Outsourcing at Boeing, Reuters
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
5/574Copyright 2013 Exolus. All rights reserved..
1.1 Frame Production: Overly-Globalized? Overextended?
Numbers of engineers are projections for the end of 2005 made by Boeings first-tier partners, and may not include all engineering specialties. Production workers are not included.
CHINA SOUTH KOREA JAPAN
CANADA
AUSTRALIA
ENGLAND
FRANCE
COMPANY ENGINEERS
Chengdu Aircraft
Industrial Group: NA
ITALY
Rudder
Shenyang
Aircraft Group: NA
Vertical fin
Leading edge
Hafei Aviation
Industries: NA
Wing to body
Fairing panels
COMPANY ENGINEERS
Korean Air NA
Wing tips
Movabletrailing edges
Tail Cone
COMPANY ENGINEERS
Boeings Hawker
De Haviland unit 80
COMPANY ENGINEERS
Kawasaki Heavy
Industries: 190
Inboard flaps
COMPANY ENGINEERS
Messier Dowty 30
Main landing gear
Nose landing gear
Midfuselagesection
Fixed trailing edge
Centerwing boxfuselage section
wing box
Fuji Heavy Industries: 130
Mitsubishi Heavy
Industries: 250
Total Engineers: 250
COMPANY ENGINEERS
Boeing Canada (Wing-peg): 60
Wing to body fairingassembly
Aft pylon fairings
Wing to bodyfairings
Main landing gear
doors (body)
Main landing geardoors (wing)
COMPANY ENGINEERS
Latecoere NA
Aft passenger doors
Forward
passenger doors
UNITED STATESCOMPANY ENGINEERS
Spirit Aerosystems (Wichita, Tulsa): 670
Nose section
(Wichita, Kan)
Engine pylons
(Wichlta)
Fixed leading edges (Tulsa, Okla.)
Movable leading edges (Tulsa)
Vought (Charleston): 100(Dallas): 300
Rear fuselage sections(Chovlestan, S.C)
Goodrich Aerostructures: 160
Nacelles (Chuta Wista, Caly)
Boeing: 95
Vertical fin
SWEDEN
COMPANY ENGINEERS
Saab 30
Aft cargo door
Forward cargo door
(Boeing Everett plant):
TOTAL ENGINEERS: 4,925Plus 200 support staff (Everett)
COMPANY ENGINEERSAlenia 770
Midfuselage
sections
Horizontal
stabilizer
Source: Boeing
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
6/575Copyright 2013 Exolus. All rights reserved..
1.1 Systems Development/Production: Overextended Risk Sharing Partnerships?
Highly Diverse Group of Partners Integrated in 787 Collaborative Development
Source: Boeing website
SYSTEMS
Air Conditioning /Pressurization
Autoflight
Communications
Electrical Power
Equipment/Furnishings
Fire Protection
Flight Controls
Fuel
Hydraulic Power
Ice and Rain Protection
Indicating/Recording Systems
Landing Gear
Lights
Navigation
Oxygen
Pneumatic
Vacuum
Water/Waste Diagnostic and Maintenance
Information Systems
Nitrogen
Auxiliary Power
Cargo and Accessory
Compartments
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
7/576Copyright 2013 Exolus. All rights reserved..
Beijing
Shanghai
Shenyang
Xian
Chengdu
Shanghai
AviationIndustry Co.
Hanzhong
Hongdu
Aviation
Industry
Nanchang
Illustrative Boeing China Sourcing Activity*
1.1 Global Sourcing: Overextended? Overly-Globalized?
JingdezhenChanghe
Aircraft
Company
Harbin
AircraftIndustriesBaoji Group Ltd.
Titanium ingot, plate & sheet
Hong Yuan Aviation Forging &Casting Industry Company747 titanium forgings since 1984
Xian Aircraft Company
737 Next Generation vertical fin747 trailing edge ribs, floor beams,detailed parts, and subassemblies747-8 trailing edge flaps
Chengdu Aircraft Industries737 forward entry and over-wing exitdoors (a subcontract from VoughtAerospace, USA)747-8 ailerons and spoilers, singlesource; horizontal stabilizer parts andsubassemblies (a subcontract fromVought Aerospace, USA)787 rudder, single source (soleprovider of this assembly)
Southwest Aluminum747 aluminum forgings
Taikoo Ai rc ra f t Engineer ing Company
Ltd. (TAECO)
747 parts, subassemblies747 boeing converted Freightermodification program
BHA Aero Comp os i tes Company , Ltd.
737 composite panels and parts(flight deck, close out panels, dorsalfin, wing to body fairing, coverpanels, wing fixed trailing edge, wing
fixed leading edge, tail cone, interiorparts, secondary compositestructures)747 miscellaneous composite partsand structures767 and 777 wing fixed tailing edgesand dry bay barriers; empennagepanels, interior parts, secondarycomposite structures777 flight deck interior panels787 trailing edge panels for thevertical fin, interior parts, secondarycomposite structures
Hafei Aircraft Industries
787 upper and lower body panels for
wing-to-body fairings, single source;vertical fin parts
Shanghai Av ia t ion Indus t ry Company
737 horizontal stabilizers
Shenyang Ai rc ra f t Company
737 aft fuselage subassemblies787 vertical fin leading edge, singlesource
Quick ElectronicsPrint hardware, servers in support ofBoeing IT hardware
Tianjin
Chongqing
Xiamen
* June 2007
Source: Boeing, About us: Boeing in China.
Shenyang
AircraftIndustries
ShaanxiAircraft
Company
ChengduAircraft
Company
XianAircraft
Company
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
8/577Copyright 2013 Exolus. All rights reserved..
1.1 Dreamliner 787: Overly-Globalized and Overly-Outsourced?
Problems with 787 Launch
Boeing tried to outsource 90% of frame, but failed to achieve such a high a level of global deployment
In retrospect, our 787 game plan may have been overly ambitious, incorporating too manyfirst all at once in the application of new technologies, in revolutionary design-and-buildprocesses, and in increased global sourcing of engineering and manufacturing contentBoeing CEO Jim McNerney
Break in Communication Ling between Chicago HQ and Seattle Operations and, Within Operations, Outsourced Jobs Results in Loss of Critical Tribal Knowledge
Loss of Tribal Knowledge. Aggressive global outsourcing results in significant reduction ofkey staff in Final Assembly and enormous loss of Tribal Knowledge. Tribal knowledge is keyto producing airplanes. Acquired on job over long time, it is the key ingredient in thedevelopment of a new plane. It is the shared method of performing countless daily tasksefficiently and in coordinating with colleagues. In short, it is the grease that cuts frictions
through the assembly process. Broken Communication/Management Link Chicago Headquarter and Seattle Operations.
Headquarter moved to Chicago after 85 years in Seattle. Labor unions complain the movedrove a wedge between executives in Seattle-are rank and file. But the benefit is being ininternational city, for sales, hiring and so forth.
Source: Reuters
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
9/578Copyright 2013 Exolus. All rights reserved..
1.2 USD14 billion Launch Costs: Drives GlobalSubsidies, GlobalPartnerships
Not Possible for Boeing to Finance alone the USD13.6 bn Project Launch Costs
Source: Canada-US Trade Center Occasional Paper No. 28
Given that 2 models are being built, the launch costs are covered by domestic and foreign subsidies,
as well as Boeing's risk-sharing partners.
Funding Source Amount Form Item Aid Type
Washington State $3.2 billion B&O Tax Reduction Final Assembly Production Subsidy
Kansas State $200 millionInterest Free Bond, 20-
yearNose & Cockpit Interest Free Bond
States Bidding on
FAL$500 million
Subsidy for retrofitting
747 to carry planes
Production
TransportProduction Subsidy
State of Washington $16 million 787 Rail Barge 787 Rail Barge Production Subsidy
JapaneseGovernment
$1.6billionSubsidies and loans to
MHI, KHI, Fuji
Wing &Fuselage
(35% state in
frames)Production Subsidy
Italian Government $590 millionSubsidy to Alenia from
Italian Government
Rear Fuselage (13%
state in frames)
Production Subsidy
InternationalSystem Suppliers
$3.1 billion Risk-sharing contributionNon-airframe
suppliers
Non-Recurring
Costs
Boeing Contribution $4.2 billion 787 Launch Funding Self-Financed
Total $13.4 bill i on
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
10/57
9Copyright 2013 Exolus. All rights reserved..
1.2 Challenges and Delays: Increase Costs from USD10 bn to USD13.5 bn
Challenges and Delays add an Additional USD4 USD5 billion in Costs
Delay in 2007 shortage of bolts, flight control software.
Delay in 2008 58 day strike
Later major problems with suppliers in South Carolina
2010 - No availability of Rolls-Royce engines
October of 2010 another two week delay with horizontal stabilizers from Alenia
November 9, 2010 emergency landing on test flight due to a fire due to foreign
debris in electrical cabinets. Electrical systems and power panel are built by
Hamilton Sundstrand.
3 Year of Delays Resulted in an Estimated
Additional Development Costs of
USD 4 - 5 billion
Source: The Seattle Times
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
11/57
10Copyright 2013 Exolus. All rights reserved.. Source: Bauhaus Luftfahrt
55
50
45
40
35
30
25
20
15
10
5
01965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
737 747767
757737-300
747-400
777
787
A300
A340-600A340A330
A300-600
A321
A310-200
A320-200
A380
A400M
A350XWB
Boeing
Airbus
Other
DC9DC10L1011
MD-80
MD-11 MD-90 ARJ21-700
MRJ
A320B737
SUCCESSOR
Advanced Composites in Aircraft1.3 Aggressive Weight Reduction Strategy: Overly Ambitious?
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
12/57
11Copyright 2011 Exolus. All rights reserved..
Benefits: Lighter More Durable Reduced Corrosion/Fatigue & Maintenance
1.3 Aggressive Weight Reduction Strategy: Overly Ambitious?
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
13/57
12Copyright 2013 Exolus. All rights reserved..
1.3 Carbon Composite Weight Reduction: Nice in Theory, Very Difficult in Practice
Carbon Composite Challenges
According to Spirit, composite material lay-down rates are far below projections
The initial goal was 100 lbs/hr with a single-head machine
Production started at 8-9 lbs/hour
Efficiency gradually increased to 19 lbs/hour
The rate is expected to increase to 30 lbs per hour once a new dual-headmachine on order arrives.
The rate of 100 lbs/hour now is a mid-term goal.
Source: Boeing 787 Lessons Learnt, October 2008, Airbus
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
14/57
13Copyright 2013 Exolus. All rights reserved..
1.4 Hyper-GlobalOutsourcing /Partnerships: Nice in Theory, Possible in Practice?
Poor: Documentation, Oversight, Integration, Supplier Capabilities
Very Poor or Lacking Documentation Production records on deferred work were found to be incomplete or lost in transfer resulting in a
loss of configuration control
Assembly work was found to be completed incorrectly only after assemblies reached the Final Assembly
Lines. Root causes
Oversight not adequate for the high level of outsourcing in assembly and integration
Qualification of low-wage, trained-on-the-job workers that had no previous aerospace experience
Significant amount of change engineering work
Inadequate supplier capabilities in design, e.g. Vought had no engineering department when
selected
Oversight not adequate for the high level of outsourcing in detailed design
Weight growth and subsequent weight saving changes
Late Definition
Boeing admitted responsibility for a shortfall in wiring shipments
Late specification indicated by supplier as root cause
Source: Boeing 787 Lessons Learnt, October 2008, Airbus
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
15/57
14Copyright 2013 Exolus. All rights reserved..
1.5 Hyper-GlobalSupply Chain: Possible to Manage a Fully Global Supply Chain?
CHINA
Chengdu
Shenyang
Harbin
JAPAN
AUSTRALIA
UNITED
STATES
SWEDEN
FRANCEToulouse
ITALY
ENGLAND
GloucesterDerby
Nagoya
Wichita
Tulsa
Chula VistaCharleston
CANADA
Linkping
Loggia
Grottaglie
Frederickson
Melbourne
FROM ASIAVertical fin leading edge and rubber
Shipped from China to Frederickson
Wing to body fairing panels shipped from China to Winnipeg
Tail cone shipped from
South Korea to Everett
Wings flown from
Japan to Everett
Fixed leading
edges shipped
from Tulsa to
Japan
Vertical fin
assembled in
Frederickson and
trucked to Everett
Nacelles sent from
Chula Vista* to
Everett
Fuselage sections flown
fromJapan to
Charleston
Wing-tip
pieces
shipped
from
South
Korea to
Japan
Movable trailing
edges and inboard
flaps from
Melbourne shipped
to Everett
Nose section assembled in
Wichita and flown to Everett
Engine pylons moved by rail from
Wichita to Everett
Movable leading edges moved by
rail from Tulsa to Everett
Pylon fairing
and main
landing gear
doors moved by
rail to Everett
Wing-to-body
fairing
assembly
moved by railto Charleston
Forward cargo door from Linkping
to Wichita
Nose landing gearfrom Gloucesterto
Wichita
Passenger entry doors
shipped from Toulouse to
Charleston
Mid-and rear-fuselage sections
assembled in Charleston and flown to
Everett
Rear
fuselage
assembled
Mid-fuselage
assembled
Fuselage sections from
Italyflown to
Charleston
Horizontal stabilizer flown
from Italy to Everett
After cargo
door from
Linkping to
Italy
FROM THE MIDWESTFROM THE SOUTHEAST
FROM AUSTRALIA
Main landing gear flown from Derbyto Everett
FROM EUROPE
Wing box
assembled
EverettWinnipeg
Major parts traveling to Everett
Pieces traveling to be assemblies into larger parts
City of
origin
Everet
t
AVIC(Shenyang)
Source: Boeing
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
16/57
15Copyright 2013 Exolus. All rights reserved..
Problems with 787 Launch
Corroborating source believed to be Vought internal (Design News, 1st March 2008)
Ship 2 went to Seattle 2 months late from last schedule change
Several 1000 parts short and no insulation, wrong hardware, no system components, full of FOD
and unworked discrepancies generated by Vought
Stringer wrinkles and delaminating going undetected by Vought quality
No inventory control oversight and accountability
Inability to attract competent technicians to the facility
Novice student inspectors, no competent management organization in-house
Ships 3, 4, 5, and 6 all have more defects than the fatigue model
Delivery delayed 5 weeks due to damage sustained in production at Global Aeronautica
Incorrectly installed fasteners, non-compliance by temp worker
Ad-hoc FAA inspection highlighted FOD issues and workers bringing in their own tools
Spirit S41 structure 100% complete
Center fuselage systems installation targeted to be 50% complete on delivery
Vought aft body section S47/S48 structure 98% complete, systems 87% complete, including THSA as
well as potable and waste water tanks
Source: Boeing 787 Lessons Learnt, October 2008, Airbus
1.5 Global Supply Chain: Process Riddled with Challenges and Gross Mistakes
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
17/57
16Copyright 2013 Exolus. All rights reserved..
1.6 Summary of Challenges with Hyper-Globalization of Boeing 787
3 Years of Delays USD4 billion overrun FAA stops flying in Jan 2013
Challenges and problems in the 787 model resulted in 3 years of delays, approximately $4
billion additional costs FAA orders Boeing to stop flying the 787 in January, 2013
4 major strikes in the past 2 decades caused loss of 200 days of production. Machinists in South
Carolina, a right-to-work state, voted against IAM representation.
FAA had concerns about the heat dissipation through the composite skins.
Parts shortages: insufficient supply of frames, clips, brackets, and floor beams. Root causes are:
NDI (non-destructive inspection) / QA not supporting production rate demand.
Lack of NDI / QA personnel and equipment at T-2 and T-3 suppliers.
Deferral of NDI testing from T-2 and T-3 to Tier-1 partners to expedite pre-assembly
Repeated NDFastener shortages, primarily affecting but not limited to Mitsubishi. Root causes:
Late changes to sleeved fastener design for lightening strike protection
Alcoa unable to meet demand in time
To tackle the parts shortages Boeing has now taken a consolidated approach to inventory
management across the supply chain.
Rumored that GE GenX and Rolls-Royce Trend 1000 both missed SFC by a 2 4%
I testing at FAL due to all of above
Source: A Wing and a Prayer Outsourcing at Boeing, Reuters
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
18/57
17Copyright 2013 Exolus. All rights reserved..
Airbus Globalization
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
19/57
18Copyright 2013 Exolus. All rights reserved..
2.1 Airbus 350XWB Regionally-Focused Globalization Strategy
Cost Reduction + Risk Sharing Partners
Reducing costs by divesting from non-core to future requirements:
1) Those that make lower level composite component, or
2) Employ older metalbending fuselage assembly technologies
The risk-sharing partners expected to absorb $2.5 billion of the A350 developmentcosts
Critical aspect for risk-sharing partners to be successful: Ensure they have the financialand technical capabilities, along with the engineering workforce available to design andbuild composite structures.
Conditions for risk-sharing partners are that they need to pay for componentdevelopment costs, as well as be completive in terms of recurring costs (production) inUS$ terms.
Looking at 10 potential risk-sharing partners from Europe, Asia, the US and LatinAmerica.
MOUs are already in place for China, South Korea, and Russia.
Source: Strategic Destruction of the North American and European Commercial Aircraft Industry: Implications of the System Integration
Business Model by David Pritchard and Alan MacPherson
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
20/57
19Copyright 2013 Exolus. All rights reserved..
Pylon
Airbus France
Toulouse | France
2.2 Airbus A350XWB - Frame Production Largely Concentrated in Europe
CHINA
ENGLAND
FRANCE
UNITED STATES
GERMANY
SPAIN
AUSTRIA
Center Fuselage
Spirit Aerosystems
Kinston | US
Rudder
Harbin Hafei Airbus
Harbin | China
Horizontal Tail plane
Aernnova
Getafe | Spain
Horizontal StabilizerRockwell Collins
Cedar Rapids | US
Landing Gear
Messier-Dowty
Kinston | US
Nacelle
Goodrich
Chula Vista, US
winglets
FACC
Ried | Austria
Aft Fuselage
Airbus Deutschland
Stade | Germany
Forward Fuselage
Premium Aerotech
Nordenham | Germany
Movable Leading edge
GKN Aerospace De
Munich | Germany
Vertical Tailplane
Airbus Deutschland
Stade | Germany
Rear Fuselage
Airbus Spain
GetafeSpain
Tailcone
Airbus Spain
Getafe | Spain
Nose Section
Aerolia
Meauite | France
Keel Beam
Air France
Nantes | France
Wing Box
Air France
Nantes | France
Fixed Trailing Edge
GKN UK
Filton | UK
Fixed Leading Edge
Spirit Aerosystems Europe
St Nazaire | France
Source: Airbus
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
21/57
20Copyright 2013 Exolus. All rights reserved..
Harbin
CHINA
Meauite
Toulouse
Nantes
St Nazaire
Hamburg
Nordenham
Stade
Broughton
Filton
Getafe
Illescas
FRANCE
GERMANY
SPAIN
UK
AUSTRIA
Nose: Meauite
Nazaire
Front fuselage assembly and equipping: forward fuselage and
nose
After fuselage assembly and
equipping: U/L shells and Tailcone
Tailcone: Getafe
Hamburg
Bremen
2
3
Wing cover: State
Broughton
Wing cover:Getafe Broughton
4 5
Gloucester
Wing leading edge: St Nazaire Broughton
Ried
Winglets/wing spoiler: Ried Broughton
Forward fuselage1(equipping in
Hamburg)
Wing box assembly in
Broughton, equipping in
Bremen
1. Forward fuselage: Nordenham Hamburg
2. Upper/lower shells: Stade Hamburg
3. Center wing box and keel beam: Nantes St Nazaire
4. Fixed trailing edge: Filton Broughton
5. Landing gear: Gloucester Filton
US
Kinston
Corona
Center fuselage: Kinston St Nazaire
Doors (MLG/Nose): Corona St Nazaire
Belly fairing: Harbin St Nazaire
Rudder: Harbin St Nazaire
VerticalTail planeassemblyandequipping
Toulouse, France
Final assembly line
produce Pylon.
Chula Vista
Nacelle: Chula Vista Toulouse
Cedar Rapids
Horizontal Stabilizer: Cedar Rapids Getafe
St Nazaire, France
Sub assembly line for
front fuselage and
centre fuselage
Hamburg, Germany
Sub assembly line for
aft fuselage
Bremen, Germany
Sub assembly line for
wing
MunichInboard & Outboard landing flaps: Munich
Broughton
2.2 Airbus 350XWB: Supply Chain Largely Focused on Europe
Source: Airbus
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
22/57
21Copyright 2013 Exolus. All rights reserved..
Airbus Key Systems Suppliers
2.2 Systems Development/Production: US/European Risk Sharing Partnerships
Source: Airbus
SYSTEMS
Air Conditioning /Pressurization
Autoflight
Communications
Electrical Power
Equipment/Furnishings
Fire Protection
Flight Controls
Fuel
Hydraulic Power Ice and Rain Protection
Indicating/Recording Systems
Landing Gear
Lights
Navigation
Oxygen
Pneumatic
Vacuum
Water/Waste Diagnostic and Maintenance
Information Systems
Nitrogen
Auxiliary Power
Cargo and Accessory
Compartments
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
23/57
22Copyright 2013 Exolus. All rights reserved.. Source: Airbus S.A.S., Airbus in China; Airbus S.A.S., Airbus in China: Milestones
Shanghai
Shenyang
Xian
Chengdu
ShenyangAircraft
Industries
XianAircraft
CompanyChengdu
AircraftCompany
Shanghai
AviationIndustry Co.
Hanzhong
Shaanxi
Aircraft
Company
Hongdu
Aviation
Industry
Nanchang
Airbus Strategic Sourcing in China*
Changhe
AircraftCompany
Harbin
AircraftIndustriesHong Yuan Av ia t ion Forg ing & Cast ing
Titanium forging parts
Xian Aircraft Industry Company
Access doors for wide-bodied aircraftWing fixed trailing edgesMedium air ducts
Chengdu Ai rc ra f t Indus t r ia l Company
A320 rear passenger doors
Hafei Aviat ion Industry Co., Ltd.
HTP leading edge ribs andtorsion box
Shenyang Ai rc ra f t Company
Produces and assembles emergency
exit doorsManufactures:-Fixed leading wing edges and ribs-A320 cargo doors-Skin plates
* July 2007
2.2 Global Sourcing: Globalized, but Less than Boeing
Harbin
Guizhou
Guizhou Aviation Industrial Group
Maintenance jigs and tools
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
24/57
23Copyright 2013 Exolus. All rights reserved..
2.2 Yet A Great Leap Forward: Airbus Moves Final Assembly of A320s to China
Migration of Assembly Functions to China
Company: Airbus
Total Investment:
USD1.2 - 1.5 billion
Labor Force
1,000 employees
Functions:
Final Assembly for A320
Investment Site and Joint Venture Partners:
Tianjin. Three-party joint venture with Tianjin Free
Trade Zone and Aviation Industry Corporation of
China (AVIC).
Operational Commencement
September 2008
2010 Production Output/Sales
37 A320 planes for eight Chinese airlines
2011 Assembly (Planned)
36 A320 planes
Source: All Publically Available Information; Tianjin Economic Development Area (TEDA), Company Website
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
25/57
24Copyright 2011 Exolus. All rights reserved..
75 7368 67
61
19
4 7 15 1822
53
5 5 6
6
514
13 129 7
5 6
33 3 2 2 4
8
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
A300 A310-100 A320-200 A340 A380 A350 XWB
Aluminium Composites Titanium Steel GLARE Miscellaneous
Source: Airbus: Metal Materials in Airbus A380
2.3 Aggressive Weight Reduction Strategy: Equal to Boeing - Overly Ambitious?
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
26/57
25Copyright 2013 Exolus. All rights reserved..
1980 1990 2000 2010
A310-300Fin, Rudder, Elevator
A320+HTP, Flaps, Ailerons,
Spoilers
A330/340+ HTP as Fuel Tank
A340-600
+ Rear Pressure Bulkhead,Keel Beam
A380+ Rear Fuselage, Center Wing
Box, Wing Ribs
A350 XWB+ Outer Wing, Fuselage
Within primary structuresComposites Introduction
Source: Airbus: Composite in Airbus:A Long Story of Innovations and Experiences
2.3 Aggressive Weight Reduction Strategy: Airbus Composite Evolution
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
27/57
26Copyright 2011 Exolus. All rights reserved.. Source: Airbus: Composite in Airbus:A Long Story of Innovations and Experiences
2.3 Aggressive Weight Reduction Strategy: A350 XWB Structures
2 l S l Ch O d d d d l
http://www.exolus.com/7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
28/57
27Copyright 2011 Exolus. All rights reserved..
2.4 Regional Supply Chain: Outsourced and Integrated Logistics Model
Airbus Outsourced Integrated Logistics
Transformation Plan during implementation (i.e Toulouse)KUEHNE+NAGEL
September 2008BLAGNAC
JLL
ST ELOI
SEOR
TIT
CLEMENT ADER
L. BREGUET ATHOS
HARDWARD & FASTENERS
7P2 BOOKING
EUROCENTRE
Take over of over 360 employees (providers & AIRBUS) in one year with 4 different collectives agreement and 5
different HR policies
Smooth transition with 0 day of work stoppage
September 2008BLAGNAC
JLL
ST ELOI
SEOR
TIT
CLEMENT ADER
L. BREGUET ATHOS
HARDWARD & FASTENERS
7P2 BOOKING
EUROCENTRE
Source: Kuehne+Nagel AIRBUS Case Study, Paris 2010
2 4 R i l S l Ch i O t d d I t t d L i ti M d l
http://www.exolus.com/http://www.exolus.com/7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
29/57
28Copyright 2011 Exolus. All rights reserved..
2.4 Regional Supply Chain: Outsourced and Integrated Logistics Model
Airbus Flight Hour Services & Total Support Package
Maintenance & Eng ineer ing domains
Airframemaintenance
Engineering
Componentrepair
Componentspare partsand logistics
Engine
maintenance
FHS Airbus vendor:
Component stock, pool access, logisticsAnd repair for Airbus LRUs only
FHS Component:
Component stock,Pool access, logistics andRepair for all components
Including Airbus LRUS
FHS TSP:
Line & light maintenanceFleet engineering
IT and engineering servicesAirbus FHS full component
Airlines outsourcing policyIn-House Outsourced
Source: Airbus: Airbus Material, Logistics and Suppliers,, MOR Conference in Dallas, 2009
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
30/57
29Copyright 2013 Exolus. All rights reserved..
China and Russias Unique Models: Glocal-ization Strategies
3 1 China Market: Foreign Investors Hunger for the China Market
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
31/57
30Copyright 2013 Exolus. All rights reserved..
3.1 China Market: Foreign Investors Hunger for the China Market
230% Increase in Aircraft Needed in China by 2028
6,567
1,383826 702 423 447 387 507 544 479
5,000
3,165
1,150 1,100 1,050 1,000600 550 500 480
0
2,000
4,000
6,000
8,000
10,000
12,000
US China UK Germany India Russia Ireland Australia Japan Brazil
Existing Fleet 2010
New Deliveries 2028
Existing Fleet and New Deliveries (2010 - 2028)
Aircraft(un
its)
Source: Airfleets, COMAC, Boeing, EIU
3 1 Driven by: Growth Spike in Chinas Travel Volume
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
32/57
31Copyright 2013 Exolus. All rights reserved..
China Worlds 3rd Highest Traffic Volume by 2020
0
25
50
75
100
125
150
175
200
225
250
Outbound, Chinese Inbound, Foreign
Foreign Inbound & Chinese Outbound Travel Volume
3.1 Driven by: Growth Spike in China s Travel Volume
237
1321
51
CAGR 11.8%69
167 millionTravelerIncrease
USD
millions
Source: China National Tourism Association (CTNA); World Tourism Organization (UNWTO)
3 2 China: also hungers for Opportunity However
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
33/57
32Copyright 2013 Exolus. All rights reserved..
Boeing53%
Airbus36%
ChinaDomestic
Planes1%
Other ForeignAircraft, 10%
China Civil Aircraft Fleet
(2010)
3.2 China: also hungers for Opportunity, However
China Fleet 99% Foreign Airplanes
Source: All Publically Available Information , Company Website
China Aircraft Fleet
Boeing 736
Airbus 500
Other 133
Domestic 14
Total Aircraft 1,383
3 3 Therefore: China developing own Suite of Domestic Aircraft
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
34/57
33Copyright 2013 Exolus. All rights reserved..
3.3 Therefore: China developing own Suite of Domestic Aircraft
Source: Chinese Aerospace Market Research
Stage 2 Single Aisle (2016): C919 Aircraft Type: Single-Aisle Narrow Body (156 Seat, 168 Seat and 180 Seat)
Development: COMAC and joint ventures with foreign suppliers to jointly research and
develop the platform systems
Schedule: First Flight in 2014 and In- Service in 2016
2016
Stage 2 Single Aisle (2013): C-series
Aircraft Type110/130 , Single-aisle - Twin-Turbofan Development: : Fuselage Build by AVICs, Shenyang Aircraft Industries Group ,
Bombardier
Schedule: First Flight in 2011 and In- Service in 2013
2013
Stage 2 Single Aisle (201X): CS2010 Aircraft Type: 150-200 Seat- Single-aisle - Twin Turbofan
Development: Guangdong Prosperous Airline
Schedule: First Flight in 20xx and In- Service in 20xx
20XX
Stage 1 Regional Jet (2010): ARJ21 Aircraft Type: 70 to 90 Seat Twin Turbo-Fan
Development: CIVIC drawing on foreign suppliers for nearly all research and
development, production for sub-systems, local partner providing facility, sub-contracting
Schedule: First Flight - November 2008 and in-service 2010/11
2010
Stage 1 Regional Jet (2010): MA 700 Aircraft Type: 60- 70 seats
Development: Xian Aircraft Corporation
Schedule: Launch 2009 and in-service 2015
2015
3 4 Road Forward: China Focusing Initially on Single-Aisle & Regional Jets
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
35/57
34Copyright 2013 Exolus. All rights reserved..
3.4 Road Forward: China Focusing Initially on Single Aisle & Regional Jets
Future Global Aircraft Deliveries
(2009 2028)
Source: Airbus, Airbus Global Market Forecast, von Tronchin, March 2010, other Public Sources
Chinas 3,165 New Aircraft = 12% of Future Global Demand
Single-Aisle ,16,977
Regional Jet,1,500
Large Aircraft,1,729
Twin-Aisle ,6,250
26,500New Aircraft
by 2028
China % of FutureAircraft Demand
(2009 2028)
Global Demand 26,500
China Portion 3,165
China = 12% of Global Demand
3.5 Chinas Glocalization Strategy: Frame Production / Assembly in China
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
36/57
35Copyright 2013 Exolus. All rights reserved..
Shanghai
Shenyang
Xian
Chengdu
Hongdu
AVIC: Harbin
Aerostructure:
Wing/body fairing
HarbinAVIC: Shenyang
Aerostructure:
AFT fuselage
Engine nacelles
Tail fin
AVIC: Xian
Aerostructure:
Wing box
Aileron
Trailing edge flap
Leading edge slat
Center fuselage
AVIC: Chengdu
Aerostructure:
Nose
AVIC: Shanghai
Aerostructure;
Sub-assembly line
final assembly line
AVIC: Hongdu
Aerostructure:
Forward fuselage
AVIC: Nanchang
Aerostructure:
Trailing edge flap
Leading edge slat
Nanchang
3.5 China s Glocalization Strategy: Frame Production / Assembly in China
China Aircraft: C919
Source: COMAC
3. 5 Chinas GlocalizationStrategy: Foreign Joint Ventures Set Up in China
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
37/57
36Copyright 2013 Exolus. All rights reserved..
Suppliers for Chinas C919
gy g p
C919 Largely Based on Joint Sino-Foreign Research & Development
Source: Airframers, January 2011; Various Public Sources
Liebherr Oxygen Equipment
Parker Flight Deck Panel Assemblies
Rockwell Collins Interior Components
CFM International Engines
Eaton Corporation Lighting Equipment
Hamilton Sundstrand Electric Power System
Eaton Corporation Primary Flight Control
Kidde Aerospace Fire Protection
Liebherr AMS, Landing Gear
Honeywell Auxiliary Power Unit Door System
Parker Aerospace Fuel, Hydraulic, Flight Controls
Rockwell Collins Avionics
Eaton Corporation Flight Deck Control Suite
Albany Engineered
CompositeEngine Interface Control System
C919
3.5 Chinas GlocalizationStrategy: Frame Production / Assembly in China
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
38/57
37Copyright 2013 Exolus. All rights reserved..
Shanghai
Shenyang
Xian
Chengdu
AVIC: Shenyang
Rudder
Vertical leading edge
Rear fuselage
Tail cone
pylon
AVIC: Xian
Forward fuselage
Center fuselage
Aft fuselage
Wings
Nacelles
AVIC: Chengdu
Nose
AVIC: Shanghai
Sub-assembly line
final assembly line
Vertical stabilizer
Horizontal leading edge
gy / y
China Aircraft: ARJ21
Source: COMAC
3.5 Chinas GlocalizationStrategy: Focus on Technology Transfer to China
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
39/57
38Copyright 2013 Exolus. All rights reserved..
Suppliers for Chinas ARJ21
g g
2010: ARJ21 Largely Based on Foreign Research & Development
ROSEMOUNTAEROSPACE
ARJ21
BE Aerospace Oxygen Equipment
Eaton Aerospace Flight Deck Panel Assemblies
Fisher Advanced Composites Interior Components
General Electric Engines
Goodrich Hella Aerospace Lighting Equipment
Hamilton Sundstrand Electric Power System
Honeywell Primary Flight Control
Kidde Aerospace Fire Protection
Liebherr AMS, Landing Gear
MPC Products Corporation Auxiliary Power Unit Door System
Parker Aerospace Fuel, Hydraulic, Flight Controls
Rockwell Collins Avionics
Rosemount Aerospace Wiper System, Windshield Heater System
Sagem Flight Deck Control SuiteSaint Gobain Windshields and Window Openers
Vibro-Meter Engine Interface Control System
Zodiac-Air Cruisers Crew Seats
Source: Baidu Encyclopedia, Various Public Sources
3.6 Foreign Systems Vendors: Driving Development Aerospace Industry in China
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
40/57
39Copyright 2013 Exolus. All rights reserved..
Investment Footprint largely aligned with China Aviation Structure/Clusters
Beijing
Tianjin
Shanghai
Harbin
Shenyang
XiAn
Chengdu
Turbine NGVs, turbinerings, compressor seals
Landing gear & enginenacelle components
Precision sheet metal
A350 composite parts
Heat shields
A320 Final Assembly Line
Composites manufacturing
COMAC C919 Production
Design & Production of ECS
Autoclaved composite parts
Engine parts
Landing gear components
Nanjing
Suzhou
Xiamen
Source: AeroStrategy, 2010
Sensors, valves, nozzles
EC175 design & production
ERJ145 Assembly
3.6 Foreign Aircraft OEMs: Driving Development Aerospace Industry in China
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
41/57
40Copyright 2013 Exolus. All rights reserved..
Embraer Diamond
Training O O O
Engineering OManufacturing /
Assembly O O O
Sourcing O O O O O O
Service O O O
Sales O O O O O O
Source: Company Information pages, EIU
Aerospace OEMs Functional Deployments in China
Wide Variance in Strategies employed by Major Aerospace OEMs
3.7 Paving the Road for the Future: Chinas Twin-Aisle and Jumbo Jets
http://upload.wikimedia.org/wikipedia/en/6/62/EmbraerLogo2.gifhttp://upload.wikimedia.org/wikipedia/en/8/89/DiamondAirLogo.pnghttp://upload.wikimedia.org/wikipedia/en/b/b9/Cessna_Logo.svghttp://upload.wikimedia.org/wikipedia/en/8/80/Airbus_logo.pnghttp://upload.wikimedia.org/wikipedia/en/b/b5/Boeing-Logo.svghttp://upload.wikimedia.org/wikipedia/en/6/62/EmbraerLogo2.gifhttp://upload.wikimedia.org/wikipedia/en/8/89/DiamondAirLogo.pnghttp://upload.wikimedia.org/wikipedia/commons/6/69/Bombardier.svg7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
42/57
41Copyright 2013 Exolus. All rights reserved..
Chinas Future Aircraft
(2020 2030)
Develop Homegrown China Aircraft > Compete with Boeing, Airbus, Embraer
Stage 3 Twin-Aisle (2020 2025)?: C919 Extensions? Aircraft Type: Extensions of C919, possible Twin-Aisle version
Development: : COMAC and joint ventures withforeign suppliers to jointly research and
develop the platform systems
In- Service: 2020 - 2025
?
Stage 4 Jumbo Jets (2020 2025)?: ? Aircraft Type: Jumbo Jet
Development: COMAC and joint ventures with local domestic suppliers to jointly research and
develop the platform systems
In- Service: 2020 2030
?
2020?
2020?
Source: Chinese Aerospace Market Research
Stage 1Regional Jet (2010): ARJ21 Aircraft Type: 70 to 90 Seat Twin Turbo-Fan
Development: CIVIC drawing onforeign suppliers for nearly all research and development,
production for sub-systems, local partner providing facility, sub-contracting
Schedule: First Flight - November 2008 and in-service 2010/11
2010
Stage 2Single Aisle (2016): C919 Aircraft Type: Single-Aisle Narrow Body (156 Seat, 168 Seat and 180 Seat)
Development: COMAC and joint ventures withforeign suppliers to jointly research and developthe platform systems
Schedule: First Flight in 2014 and In- Service in 2016
2016
3.8 Chinas Unique Path in Building its Glocalized Aerospace Sector
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
43/57
42Copyright 2013 Exolus. All rights reserved..
China Strategy Cost Competitive FAA/JAA Compliant A/C
Airframe Production in China: Technology Acquisition through Offsets and Acquisitions (FACC)
Chinas labor costs are at least 4 times lower than those that prevail in Europe and North America
important in light of the labor-intensive nature of certain aspects of the airframe production process
Western components are readily available to install on Chinese airframes engines, avionics, hydraulics,
fly-by-wire systems. Result is that Chinese aircraft that are endowed with proven Western and/or
Russian systems, cheap Chinese airframes, and performance characteristics that match US FAA and EU
JAA technical and safety standards.
China starting production effort with state-of-the-art machine tools and fixtures, new materials handling
processes, Western design software, and advanced engineering procedures. As such, they will
technologically leapfrog the west.
Chinese government has the investment capital and political determination required for massive and
sustained industry support.
China will be able to pump-prime its domestic aerospace industry by mandating the purchasing
behavior of Chinese airlines. This is non-tariff trade barrier of immense significance at the global level.
Source: The emergence of a new international competitor in the commercial aircraft sector: The China syndrome by Alan MacPherson
4.1 Russias GlocalStrategy: Local Frame Production/Assembly in Russia
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
44/57
43Copyright 2013 Exolus. All rights reserved..
Nose section
Forward Fuselage
Aft Fuselage
Empennages: vertical and
horizontal tail surfaces
Novosibirsk
(NAPO)
VoronezhVASO
Komsomolsk-
on-Amur
(KnAAPO)
Center fuselage
Centre wing fuselage
Aircraft parts made of
composite materials
About 40% of SSJ 100 are
manufactured in NAPO.
Source: Komsomolsk-on-Amur Aircraft Production Association
SSJ100
4.2 Russia GlocalStrategy: International Partnerships with System Suppliers
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
45/57
44Copyright 2013 Exolus. All rights reserved..
SSJ100 Key Systems Suppliers
Source: Komsomolsk-on-Amur Aircraft Production Association
SYSTEMS
Air Conditioning /Pressurization
Autoflight
Communications
Electrical Power
Equipment/Furnishings
Fire Protection
Flight Controls
Fuel
Hydraulic Power
Ice and Rain Protection
Indicating/Recording Systems
Landing Gear
Lights
Navigation
Oxygen
Pneumatic
Vacuum
Water/Waste
Diagnostic and Maintenance Information Systems
Nitrogen
Auxiliary Power
Cargo and Accessory
Compartments
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
46/57
45Copyright 2013 Exolus. All rights reserved..
China / Russia Partnership for Aircraft Development/Production?
5. Russia and China: Joint-Venture for new Long-Range Aircraft?
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
47/57
46Copyright 2013 Exolus. All rights reserved..
Beijing is putting the money upfront, while Russia is supplying the know-how
Cost Competitive FAA/JAA Compliant A/C
Source: (Avionews 2013)
Beijing, China - (WAPA) - "Vedomosti" published today some declarations by Russia's
United Aviation Corp and China's Commerical Aircraft Corp about a joint-venture whichaims to develop and produce a new long-haul aircraft based on the airframe of the Ilyushin
Il-96 aircraft.
The agreement is going to be sealed during Vladimir Putin's visit to China next month. The
joint-venture headquarters will be in China, that will fund the programme. Russia is
expected to provide technology.
"Vedomosti" also reported that separately, Russia's Rosoboronexport agreed with China to
supply aircraft engines in a contract valued more than 700 million dollars. No more details
are available since the agency quoted a person it did not identify.
The Ilyushin Il-96 is a modern long-range civil aircraft and the first Russian-made wide-
body. It is equipped with fly-by-wire controls and modern technologies. Only 29 exemplars
were built, most of them purchased by Aeroflot.
The airplane boosts the title of one of the most secure aircraft worldwide, as since its first
deployment during the 1990s, it has never suffered any kind of accident.
5. Russia and China: Joint-Venture for new Long-Range Aircraft?
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
48/57
47Copyright 2013 Exolus. All rights reserved..
Beijing is putting the money upfront, while Russia is supplying the know-how
Cost Competitive FAA/JAA Compliant A/C
Source: (Avionews 2013)
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
49/57
48Copyright 2013 Exolus. All rights reserved..
Considerations for the Future of
Aircraft Production
6.1 Competition in the Global Supply Chain Immense USD100 billion
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
50/57
49Copyright 2013 Exolus. All rights reserved..
Up-Front Investments Required for New Projects Globally: $100 billion
Heavy Competition in Global Supply Chain for Resources and Financing
Source: Exolus
Company New or Proposed Programs Country / Region
Bombardier C Series Single Aisle Canada
COMAC C919 Single Aisle China
UAC MS21 Single Aisle Russia
Embraer KC 390 Cargo Aircraft Brazil
Boeing 737 Replacement Single Aisle US
Boeing Next Gen Tanker US
Airbus A320 Replacement Single Aisle Europe
Airbus NSR Europe
Mitsubishi MRJ Japan
Kawasaki YPX Japan
6.2 Considerations for Future of Aircraft Production
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
51/57
50Copyright 2013 Exolus. All rights reserved..
New Airplane Considerations to be Competitive
Financing and technology. Next generation of LCAs will rely heavily on compositematerials, advanced avionics, radically improved engines, and new airframe designs.
New entrants face established, fiscally strong brands with global support infrastructure inplace. The provision of Boeing and Airbus of training, spare parts and managerial support toairlines and to other aircraft manufacturers contributes to their strong market reputation.New entrants must consider providing these functions in addition to building andsupporting a competitive product.
It is unclear to what extent, the private sector will control aircraft design and production inChina and Russia. Both governments have allocated funds for the creation of integratedaircraft manufacturing centers; China allocated nearly $3 billion for its program, while it isour preliminary understanding that Russia has spent $1 billion to create a design andmanufacturing center near Moscow. Their LCA plans likely will provide an opportunity toconsolidate fragmented manufacturing capabilities and develop R&D and sales and supportcapabilities.
In China, the FAA has opened a new office to support the FAA certification of the ARJ21,even though no US airline has purchased the aircraft.
Source: New entrants face established, fiscally strong brands with global support infrastructure in place by Peder Andersen, April 2009
6.2 Considerations for Future of Aircraft Production
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
52/57
51Copyright 2013 Exolus. All rights reserved..
Offset Agreements and Risk-Sharing Agreements
Industrial offset agreements are typically designed to provide importers with a negotiated production
share for the final product, usually in return for guaranteed sales. For example, most of the Boeing 747s
operated by Chinas state-owned airlines fly with wing leading edges and various other sub-assembliesthat were manufactured in China.
Major industrial offsets are possible only under regulatory conditions where the importing nation has
public control over the end customer (e.g, and airline or other state-owned industry). If Airbus
negotiated offset agreements with Chinese manufacturers, then the Chinese government ensures that
domestic airlines will buy Airbus products. This type of arrangement becomes more complex when the
end-user is not closely regulated or controlled by the state. A further factor that complicates matters is
that industrial offsets involving technology transfer are usually regulated by the government of the
exporting nation to ensure that sensitive or critical expertise is not internationally diffused.
For systems integrators such as Boeing and Airbus, major industrial offsets at the international level have
increasingly been accompanied by risk-sharing agreements. China has yet to become a significant risk-
sharing partner in any of the aircraft programs of these two companies, but things may soon change in
this regard. Systems integration is a cost-driven strategy that involves extensive subcontracting for parts
production. The SI has minimal involved in manufacturing, but instead acts as a kit builder (e.g, final
assembly). Under risk sharing in the commercial aircraft sector, the systems integrator no longer
subcontracts on a build-to-print arrangement. Rather, the risk-sharing partner is expected to design,develop and manufacture the sub-assembly in question using its own funds. This is clear strategy
because it dramatically reduces launch cost for the new aircraft programs among system integrators. The
downside is that risk-sharing partners must receive infusions of tacit knowledge form the prime
contractors, expertise often referred to as tribalknowledge.
Source: New entrants face established, fiscally strong brands with global support infrastructure in place by Peder Andersen, April 2009
Off d i k Sh i
6.2 Considerations for Future of Aircraft Production
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
53/57
52Copyright 2013 Exolus. All rights reserved..
Offset Agreements and Risk-Sharing Agreements
Airbus is copying many of Boeings tactics to secure international sales. IN last 6 years, Airbus has
shifted its compensatory state emphasis from an indirect offset mode to a direct offset position, and is
now employing a business development model that closely mirrors the approach initially pioneered by
Embraer (but recently perfected by Boeing). Under the indirect offset mode, Airbus secured foreign
sales by granting market concessions such as landing rights to busy EU airports. These types of
concessions are still part of the Airbus marketing package, but direct offset are becoming important too.
Source: New entrants face established, fiscally strong brands with global support infrastructure in place by Peder Andersen, April 2009
http://www.exolus.com/7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
54/57
53Copyright 2013 Exolus. All rights reserved..
For a Comparative Perspective with the other BRIC CountriesPlease Refer to the Following Research Reports
Found on Slideshare @
http://www.slideshare.net/Exolus/china-2010-2020-v58slideshare
http://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-future
http://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-future
http://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-future
Download Reports @
www.exolus.com/en/knowledge/research.html
India 2020 Brazil 2020 Russia 2020China 2020
http://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.exolus.com/en/knowledge/research.htmlhttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/contest/worlds-best-presentation-contest-2010/entrieshttp://www.slideshare.net/contest/worlds-best-presentation-contest-2010/entrieshttp://www.slideshare.net/contest/worlds-best-presentation-contest-2010/entrieshttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.exolus.com/http://www.exolus.com/en/knowledge/research.htmlhttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-futurehttp://www.exolus.com/7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
55/57
54Copyright 2013 Exolus. All rights reserved..
Global Expansion Strategy &
Cross-Border Investment Execution(Greenfield, M&A, Joint Ventures, Outsourcing)
About Exolus: Exolus is a hybrid management consulting and transaction advisory firm. We work withmanagement teams in the development of their global expansion strategies, across the range of investment
formats: Greenfield, M&A, Joint Ventures and Outsourcing. As well, we deploy against global strategies by
providing program management across all phases of cross-border investment projects, from candidate
searches and evaluation, through investment structuring and negotiations.
The founders of Exolushave spent the past two decades in the global service space and have directexperience operating in nearly all of the major investment destinations in the world (40+ countries). The team
has served clients of all sizes, both public and private, on projects that ranged in investment size from USD10
million to greater than USD1 billion. We have served clients across all of the following industry segments: Life
Sciences, Manufacturing, Automotive, Technology, Retail, Consumer Business, Real Estate, Public Sector.
Follow Exolus at: www.exolus.com
Need Further Information: info@exolus.com
Want Copies of our Reports: www.exolus.com/en/knowledge/research.html
Disclaimer
http://www.exolus.com/mailto:info@exolus.comhttp://www.exolus.com/en/knowledge/research.htmlhttp://www.exolus.com/http://www.exolus.com/en/knowledge/research.htmlmailto:info@exolus.comhttp://www.exolus.com/7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
56/57
55Copyright 2013 Exolus. All rights reserved..
In writing we benefit from standing on the shoulders of others and, in the process, we strive to make our own
contributions to the market of ideas. As well, we are always tremendously grateful for the many, often selfless,
contributions that are availed in the process.
The opinions represented herein were prepared for information purposes only, at the time of publication. Theinformation represented herein is believed to be reliable, at the time of publication, and was obtained by
various public sources also believed to be reliable. The opinions were considered to be accurate at the point of
creation, and further, any views, forecasts, or estimates contained herein may be subject to change at anytime
without notice. The opinions expressed or implied herein may not be the opinions of the author, also Exolus, or
any associated affiliates.
This report and the information contained herein collectively, is not offered as, and should not be regarded as,
used or relied upon as advice on any matter. It shall not constitute or be construed as a recommendation or
solicitation on behalf of the author, and no legal commitment or obligation shall arise by reason of thisdocument. Thus, the reader shall make an independent assessment of opinions stated herein that shall not be
considered a substitute for obtaining advise from the readers advisors.
The author shall not accept responsibility, express or implied, with regards to the accuracy and completeness
of the information herein, and the author shall not be liable whatsoever and howsoever arising in connection to
this publication. The author shall not accept, and hereby disclaim, all responsibility and liability to all persons,
entities, or organizations for all consequences arising out of any use or reliance on the whole or any part of this
publication.
This publication should not be reproduced or distributed without the authors consent and is not intended for
distribution in any jurisdiction in which this would be prohibited.
7/28/2019 Boeing 787: US's Dreamliner or Nightmare-Liner? Who will Ultimately win the Aerospace Race: US, Europe, China, or Russia?
57/57
56Copyright 2013 Exolus. All rights reserved..
France Houdard
Managing Directorfrance.houdard@exolus.com
January 2013
http://www.exolus.com/