HOW AIRCRAFT BUILDERS KEEP COSTS LOW

HOW AIRCRAFT BUILDERS KEEP COSTS LOW

The free world's largest commercial aircraft builders agree that improving the cost-effectiveness of new planes is the major challenge facing their industry, but they are employing different strategies to meet this challenge.

U.S. builders Boeing and McDonnell Douglas corporations are holding down development costs through the derivative approach - that is, improving upon current models that have already proved successful rather than coming up with completely new aircraft.Europe's Airbus Industrie, however, has developed a totally-new aircraft that the company feels will save millions of dollars in operating costs over the life of each plane.

Representatives of the aerospace firms addressed the second Speednews Aviation Industry Suppliers' conference in Los Angeles.

The significant investment needed to develop and build new aircraft is becoming a crucial issue in an industry that expects demand for its products to be less than half of its production capacity for the remainder of the century.

J.C. Longridge, vice president-sales at Boeing Commercial Airplane Co., said the projected demand for new aircraft over the next 12 years will be slightly more than 5,000 planes - compared with the industry's production capacity of about 12,000 aircraft.

That projected total reminds us that we are in an intensely competitive industry. It is a clear message to the major airframe builders and suppliers that there will continue to be pressure on profit margins, to reduce costs and improve quality and to justify every technological advancement in terms of its safety or economic benefit to our commercial airline customers and the passengers, Mr. Longridge said.

Boeing is responding to this challenge with a program that aims at cutting costs by 25 percent over the next five years, primarily through improved in- house productivity and a similar effort by the company's suppliers.

Roger D. Schaufele, vice president-general manager of commercial advanced products at Douglas Aircraft Co., noted that direct operating costs of an aircraft have declined while the cost of developing new aircraft has gone up. Over the past 10 years, the cost of owning an aircraft has risen from 28 percent of direct operating costs to 42 percent.

This means today's approach to new aircraft is different from what it was 10 years ago. We have to be very selective when choosing technology to integrate into the new design because new technology costs money, and we have to be careful to keep the cost of ownership as low as possible. Otherwise, the selling price of the airplane gets too high, Mr. Schaufele said.

Boeing and Douglas, by viewing the cost-of-ownership equation the way they do, feel the derivative approach to aircraft development is the best way to proceed.

The derivative approach, Mr. Schaufele said, results in an inherently lower price because the non-recurring cost, common to all aircraft in the group, represents a considerable saving that can run $2 billion or $3 billion an airplane.

Boeing, for example, has developed the original 747 concept into the 747-200, 300 and 400. Douglas has derived the MD-11 family from the DC-10 model, and is developing the ultra-high bypass (propfan) MD-91 and MD-92 models from the current MD-80 series.

The derivative approach is very attractive because the new aircraft can be brought to operational status with relatively low risk and certainly in far less time than an all-new aircraft, Mr. Schaufele said.

Other advantages of the derivative approach include a reduction in non- recurring costs and reduced operational and maintenance costs because of commonality in parts and support equipment.

Airbus Industrie, a consortium of European aerospace firms, last year began flying the new A320 aircraft that incorporates technologies designed to significantly reduce operational costs.

The A320 is in fact the only all-new commercial jetliner now in production in the western world, said Adam Brown, vice president-strategy at Airbus.

Mr. Brown listed several features of the A320, which contribute to reduced operational costs:

* A new below-deck configuration that reduces cargo-handling time, enabling carriers to generate additional revenue from previously undeveloped local cargo markets without compromising rapid turnaround times.

* A redesigned cockpit with cathode-ray tube displays that provide more information to pilots with only 12 front-panel instruments, a reduction of up to 70 percent compared to other aircraft in its class. The new computer control system, which uses only 25 percent as many computers as many models, also saves on aircraft weight and maintenance costs.

We calculate that the A320's integrated avionics and fly-through computer system will yield cost benefits amounting to a discounted present value of $600,000 per aircraft over a typical 15 years of operation, Mr. Brown said.

* The centralized fault display system collects data for trouble-shooting purposes, reducing unjustified component removals and saving maintenance costs. We calculate these savings will amount to a further discounted present value of $1.8 million per aircraft over 15 years, he said.

* The microprocessor-controlled cabin intercommunication data system controls lighting, signaling and communications and can be adapted to a variety of cabin configurations without hardware changes, saving an additional $600,000 per aircraft.

Mr. Brown said the advanced technical features of the A320, its new aerodynamic and structural design and its improved cargo-carrying features, will produce significant savings to airlines.

Over a typical 15 years of operation, the benefits are such that an A320 is worth up to $14 million more than its closest competitors, in discounted present value terms, he told the conference.

Mr. Longridge said Boeing is reducing operational costs on long-range routes with its twin-engine 767. The use of lower-cost twin-engine aircraft, spurred on by the cooperation of regulatory bodies, is resulting in significant reductions in trip costs on international flights, he said.

Because long-range twins represent the right solution for low-to-medium density long-haul operations, several customers are showing significant interest in an increased capacity model with range approaching that of the 747, Mr. Longridge added.

McDonnell Douglas is counting on its ultra-high bypass (UHB) aircraft to reduce operational costs through fuel savings of as much as 40 percent over aircraft now in use.

Douglas last May began a flight-test program with a new General Electric unducted fan engine, and to date the demonstrator aircraft has logged more than 130 hours of flight time. More than 100 airline executives have been on the plane during the test flights, and they gave the UHB aircraft high marks for its fuel efficiency and low noise level, Mr. Schaufele said.