Tag Archives: Lockheed Martin

“Lessons from a Career of Trying to Defy the Law (of Gravity)”, lecture by Norman Augustine

Norman Augustine is an aeronautical engineer whom I have referred to often in this blog mainly due to his book “Augustine’s Laws” of which I wrote a review (find it here). He started working at Douglas Aircraft Company (1) in 1958, though through his long career he has occupied several positions in the administration and other major aerospace companies such Martin Marietta and then Lockheed Martin (2).

In my review about his book I wrote:

The book reviews A&D programs, especially their mismanagement and failures from the Wright brothers times till the early 80′s, when the book was written. The book is hilarious.

Lecture by Norman Augustine.

Lecture by Norman Augustine.

Some readers may believe I overstate it. Well, I invite you to watch the lecture he gave 2 days ago at the Smithsonian National Air and Space Museum (3) as part of the Charles A. Lindbergh Memorial Lecture Series. The lecture was titled “Lessons from a Career of Trying to Defy the Law (of Gravity)” [47’59”].

During the lecture Norman shares a great deal of the wisdom he has accumulated through his long career, part of it condensed in his Laws, compiled in his book. One of the laws I like the most is possibly the number IX:

In the year 2054, the entire defense budget will purchase just one tactical aircraft. This aircraft will have to be shared by the Air Force and Navy 3 1/2 days each per week except for leap year, when it will be made available to the Marines for the extra day. (LAW NUMBER IX)

I think it is priceless to have Norman explain it in person:

Augustine's Law IX.

Augustine’s Law IX.

During the lecture he used an update of his law (written in the 80’s) made by The Economist a few years ago which I covered also in this blog (4).

Other topics covered by Augustine during the lecture include: the importance of thinking with a systems point of view, the evolution of aerospace industry in the last decades, the importance of strategy and leadership, all covered by his fine humor and wit.

(1) You may read here a tribute I wrote about Douglas Aircraft Company.

(2) Some years ago I wrote this post about Lockheed’s Skunk Works.

(3) You may find here a post I wrote about my visit to the Smithsonian National Air and Space Museum at Dulles.

(4) I few months ago I wrote another post reviewing the application to bomber aircraft of Augustine’s Law IX with new US long range bomber program. In his book Norman includes an extrapolation as well of bomber aircraft increasing costs, even if the wording of the law takes tactical aircraft as the benchmark.

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Augustine’s Laws and the future long-range bomber

The US Air Force is moving ahead with its plan to develop a new long-range bomber aircraft to be operational by the mid of next decade. The program is not yet launched, but within this year it is expected that we will see the launch of a request for proposals (RFP).

I read about the latest moves about this program-to-be in an article from DefenseNews, “USAF To Shed Light on ‘Mystery’ Plane“. Apart from different declarations from officials and industry, the article provided some main general clues:

The Air Force intends to begin fielding the bomber in the mid 2020s, with penetrating capability in mind. The service will procure 80 to 100 planes, which will mostly be made with existing technologies. Those machines will also have both standoff and direct-attack munitions and room for a large payload.

The service also is exploring the idea of the aircraft being optionally manned.

Service officials have cited a cost of $550 million per plane as the ceiling for the program, but even that figure has some mystery to it. Observers have noted that the figure does not include research and development (R&D) costs, which could drive that amount up.

My first reaction on that figure of $550 million per aircraft was:

For those not acquainted with him, Norman Augustine served in many positions both in the Administration (Under Secretary of the Army) and in the Aerospace & Defense industry (CEO of Lockheed Martin). Lately he lead the Committee that was reviewing the US Human Space Flight Plans. He wrote a fantastic book, “Augustine’s Laws”, about the aerospace and defense industry, the problems that plague their programs, etc. I reviewed that book in this post.

However, after writing that tweet I decided to check it myself…

See below the original graphic from the book depicting the trend of increasing costs of bomber aircraft:

Trend of Increasing Cost of Bomber Aircraft (source: Augustine's Laws).

Trend of Increasing Cost of Bomber Aircraft (source: Augustine’s Laws).

I extrapolated the trend with the information provided in the article, that is, a $550 million unit cost with an entry into service by the mid 2020s, see below where that spot is in the enlarged graphic:

Updated Trend of Increasing Cost of Bomber Aircraft (source: Augustine's Laws + future long-range bomber information).

Updated Trend of Increasing Cost of Bomber Aircraft (source: Augustine’s Laws + future long-range bomber information).

You will see that I marked 2 different spots in red and blue. The blue one corresponds to the unit cost ceiling of 550M$ reported in the article. You will see that the spot is way off the 70-year old trend (from the end 1920s-1990s). Therefore, I decided to continue the trend line and see at what unit cost would a bomber aircraft with entry into service in the mid 2020s still follow the trend, and I marked that unit cost in red. The result is that the future bomber would have to cost about $500 billion apiece, or a cost roughly equal to the entire Department of Defense yearly budget.

That may seem impossible today, completely off reality. How could that happen? Start by imagining that the budget which will be earmarked for 80-100 airplanes along several years, in the end serves to procure many less units (40?, 10?… 1?). Then, add to that the information appearing in the article accompanying the 550M$ figure, “the figure does not include research and development (R&D) costs, which could drive that amount up”. Put all that together and we might end up seeing, 10 years from now, that Augustine’s was right on the spot.

In fact, the assertion that one single airplane would cost the US Air Force the entire DoD yearly budget was exactly predicted by Augustine in his Law number IX, though he applied it for tactical fighter aircraft, and the date in that case would be a bit later, 2054:

In the year 2054, the entire defense budget will purchase just one tactical aircraft. This aircraft will have to be shared by the Air Force and Navy 3 1/2 days each per week except for leap year, when it will be made available to the Marines for the extra day. (LAW NUMBER IX)

Update (2014-03-08): See in the article from Bloomberg, “Long-Range Bomber’s Development Would Get $12 Billion“, a declaration from Lt. General Charles Davis: “Is it going to be $550 million a copy? No, of course it’s not going to be $550 million a copy once you add in everything.“. The article includes further figures providing a new estimate of 810M$ apiece… The closing of the gap between 550M$ and ~ 500bn$ has started.

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La última cena de William Perry

La semana pasada, con motivo de la celebración del día de la Hispanidad, el diario ABC publicaba una entrevista al ministro de defensa, Pedro Morenés (“Morenés: “Me preocupa el adiestramiento de las Fuerzas Armadas”“).

El portal InfoDefensa hacía referencia a dicha entrevista en la siguiente entrada, “Morenés: “Vamos a reforzar la industria de Defensa desde Navantia a Indra”“, donde además incluía unas declaraciones que no aparecen en la edición digital de ABC. En ellas el ministro habla de la necesidad de consolidar la industria de la defensa española para competir con las grandes empresas del sector: Lockheed Martin, Boeing, BAE, etc.

En esta entrada me quería centrar en una anécdota que se relata:

La anécdota de Weinberger (sic).

Según el diario, el ministró finalizó este tema mencionando una anécdota del secretario de Defensa de EEUU Caspar Weinberger (1981-1987):

“Cuando el señor Weinberger dijo a las cincuenta y tantas empresas de Defensa que había en EEUU, o más, “el año que viene por estas fechas, cuando yo les invite a cenar en esta mesa en la que hoy hay ciento y pico personas, va a haber doce. Arréglenselas ustedes como puedan”. Les dio un mensaje muy claro. Al final hubo 12.

En esta entrada en el blog solo quería precisar:

  • La cena no fue con Weinberger como secretario de defensa (1981-87), sino con Les Aspin en 1993.
  • No fue el secretario de defensa (entonces Les Aspin) sino William Perry (subsecretario entonces, y que posteriormente fue secretario de defensa) quien dijo aquello.
  • No había ciento y pico personas que luego pasaron a 12; sino 12 en la cena que luego pasaron a 5 (representando a Boeing, Northrop Grumman, General Dynamics, Lockheed Martin, Raytheon); por eso de que a la mesa iban 12 lo llamaron “última cena”.

Esta anécdota se puede leer en numerosas fuentes especializadas en asuntos de defensa y genéricas, como por ejemplo, The New York Times:

The changes now occurring began in the early 1990’s. Industry executives recall the famous ”Last Supper,’‘ a 1993 Pentagon dinner whose host was Les Aspin, then Secretary of Defense, and his deputy, William J. Perry, who succeeded him. At the dinner were executives from a dozen contractors who were told by Mr. Perry that there were twice as many military suppliers as he wanted to see in five years and that the Government was prepared to watch some go out of business. From 1992 to 1997, a total of $55 billion in military-industry mergers took place, according to Securities Data Company, a research concern in Newark.

Quiero pensar que el ministro Pedro Morenés conoce bien la anécdota, y fue el periodista de ABC el que escuchó algo y no se enteró, y más tarde, en la redacción, la reconstruyó como quiso sin comprobar datos en ninguna fuente… raro es que no acabase atribuyendo la anécdota o cita a Wiston Churchill o Mark Twain.

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Twin-aisle aircraft deliveries 20-year forecast

I read in the following article “Airbus seeks to increase Washington State supply business; aims for 13 A350s/mo” (from Leeham News) how from a presentation of a A350 supplier (ElectroImpact) at an aerospace suppliers event in Washington State, it was concluded that the Airbus aimed at building 13 A350s per month, as the mentioned supplier had built its factory with capacity to extend production rates up to those 13 aircraft.

This would be news because in its presentations Airbus talks about a production ramp-up up to 10 a/c per month (as does Boeing for the 787, which 10 aircraft/month should be reached by the end of 2013).

Having analyzed several times Airbus’ Global Market Forecast (GMF) and Boeing’s Current Market Outlook (CMO), I believe that those production rates of above 10 aircraft per month should be expected by industry followers just by seeing the numbers included in those forecasts.

In 2012, the GMF forecasted about 6,500 twin-aisle to be delivered in the next 20 years. The CMO indicated 7,210 aircraft. In 2013, Boeing CMO slightly reduced the figure to 7,130 a/c.

Comparison of Airbus GMF and Boeing CMO 2012-2031.

Thus, both companies expect between 6,500 to 7,200 twin-aisle passenger aircraft to be delivered in the following 20 years (excluding freighters, 747 and A380 – these 2 considered as Very Large Aircraft in the studies).

1st approach. If we were to take the mid-point of both forecasts, about 6,850 a/c, and simply divided by 20 years, we would reach to an average figure of 343 twin-aisle aircraft to be delivered per year between the 2 manufacturers, or 28 a/c per month. If Airbus wanted to maintain the long-term 50% market share, it would have to aim at delivering 14 a/c per month between all its twin-aisle products, which soon will be A330 and A350.

2nd approach. However, current twin-aisle production levels are in no way close to those 343 a/c per year. In 2012 there were 258 deliveries thanks to the introduction of 787s, but in the previous decade the average was about ~165 a/c per year. Thus, manufacturers must have a deliveries’ ramp up to accommodate those 6,850 in the next 20 years. Not knowing what that ramp-up is, I just linearized from where we are today and what is to be delivered.

I plotted in the graphic below all the deliveries of twin-aisle (excluding Very Large Aircraft) from the 1970s to 2012, and then what a forecast could be departing from 2012 deliveries’ figure to accommodate ~6,850 a/c in the next 20 years.

Taking a look at the graphic, one can already understand that if we take the GMF and CMO forecasts as good ones, the manufacturing rhythm will have to accelerate in the following years, especially in the second decade. In the late 2020s, over 400 twin-aisle would have to be delivered per year (over 33 per month), thus manufacturers will have to churn above 16 a/c per month each, that is the double of what they produced during the last decade.

Twin-aisle deliveries: historic series (1970s-2012) and forecast (excludes VLA -A380  & 747).

Twin-aisle deliveries: historic series (1970s-2012) and forecast (excludes VLA -A380 & 747).

Market shares. One could wonder whether this growth will favour more one company or the other. I compared market shares (excluding VLA):

  • in 2012: Boeing delivered 155 twin-aisle (26 767s, 83 777s, 46 787s) vs. Airbus 103 a/c (101 A330s, 2 A340s)… 60% / 40%.
  • in 2003-2012: Boeing delivered 839 twin aisle (148 767s, 642 777s, 49 787s) vs. Airbus 880 a/c (44 A300s, 687 A330s, 149 A340s)… 48% / 51%.
  • in 1993-2012: Boeing delivered 1,687 twin aisle (572 767s, 1,066 777s, 49 787s) vs. Airbus 1,521 a/c (175 A300s, 31 A310s, 938 A330s, 377 A340s)… 50% / 45%.

[The shares in the past decades include marginal deliveries from Ilyushin models and McDonnell Douglas models, which share I kept out of Boeing even after the merger in august 1997, these are ~30 a/c to be added to the 1,687]

Seeing that market shares have been fluctuating but always around 40-60% for each company, they could expect to have to at least deliver 40% of those 6,850 a/c in 20 years, or of those above 400 a/c in the late 2020s.

Backlog. Finally, just to see how the twin-aisle mix for each company is going to be, let’s look at the aircraft on order (backlog) that each company has as of today (end June 2013):

  • Airbus (43%):
    • A330: 260 a/c to be delivered.
    • A350: 678 a/c to be delivered.
  • Boeing (57%):
    • 767: 56 a/c to be delivered.
    • 777: 339 a/c to be delivered.
    • 787: 864 a/c to be delivered.

Thus, of the 6,850 twin-aisle to be delivered in the next 20 years, about 2,200 are already contracted as of today (plus the above 130 a/c delivered within the first half of 2013), thus 33% of those 6,850 a/c is more or less secured and among those the split is 57 / 43 for Boeing.

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Skunk Works

It is known by nearly everyone in aviation industry the Lockheed Martin department: Skunk Works. It has its own website and it is were many planes have originated since World War II. We all have heard about the strict security rules and stories about how suddenly new aircraft were unveiled. Other companies have tried to establish similar departments; Boeing with its “Phantom Works” and EADS with its “Innovation Works”.

However, it was not until during my last holidays that I came to know the origin of the word, reading the book “Guide to Management Ideas and Gurus“, by Tim Hindle.

The name skunkworks originates from a cartoon series called “Li’l Abner” by Al Capp. The story is explained as well in the Wikipedia:

“[…] The “Skonk Works” was a dilapidated factory located on the remote outskirts of Dogpatch, in the backwoods of Kentucky. According to the strip, scores of locals were done in yearly by the toxic fumes of the concentrated “skonk oil”, which was brewed and barreled daily by “Big Barnsmell” (known as the lonely “inside man” at the Skonk Works), by grinding dead skunks and worn shoes into a smoldering still, for some mysterious, never specified purpose. […]”

Sometimes industry names come from the least expected place.

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