Atlas Air announced that Boeing has selected Atlas Air to provide key supply-chain support for the production of Boeing’s all-new commercial jetliner, the 787 Dreamliner.

Beginning toward the latter part of 2010, Atlas Air will operate Boeing’s Dreamlifter fleet of four 747-400 aircraft that have been modified to transport major assemblies for the 787 Dreamliner from suppliers around the world to Boeing production facilities in the United States.

The parties have structured the nine-year agreement in a manner consistent with the outsourcing business model under which Atlas Air typically operates. Under that model, Atlas Air will receive contractually determined revenues for the operation of the Dreamlifter aircraft, with Boeing assuming responsibility for certain direct costs, including fuel. Under the CMI arrangement, Boeing will provide and maintain ownership of the aircraft assets.

“Atlas Air is very excited to partner with Boeing as it ushers in a new era in air travel with the first all-new jet airplane of the 21st century,” said William J. Flynn, President and Chief Executive Officer of Atlas Air Worldwide Holdings, Inc. “We look forward to working closely with Boeing and to providing world-class Dreamlifter service.

“Our dynamic customer solutions and our ability to integrate with our customers’ operations set us apart from other participants in the aircraft operating solutions market. We believe that our global scope and scale, high-quality service and reliability, cost-effective operations, and premium customer service create a compelling value proposition for our customers.”

Mr. Flynn added: “We are well positioned to execute on our growth initiatives and to drive future revenues and earnings. In addition to the expected start-ups of our new CMI service for Boeing in the second half of this year and for SonAir in the second quarter, we are focused on introducing our new Boeing 747-8 freighters into service in 2011 and on adjacent dry leasing opportunities in our Titan subsidiary.

“When fully implemented, we expect that the annual contribution per aircraft from our Dreamlifter service will meet or exceed the current average contribution that we achieve in our 747-400 ACMI service.”

This past week marked the end of an era, when 38 year Aerospace industry veteran, Scott Carson, retired from Boeing’s commercial division. Carson had a remarkable career, however the past few years have been highly stressful at the company, mainly due to the many delays for the 787 jetliner. Surprisingly, Boeing has decided to give Carson’s position to Jim Albaugh, formerly the head of Boeing’s defense business.

Investors have been calling for a change to the commercial division’s structure since the 787 aircraft has been forced to go through several costly delays, however by moving Albaugh from the Defense Contract position, one wonders if Boeing’s market share will decrease in the highly competitive defense landscape.

Several investor analysts were perplexed at the timing of Albaugh’s job change. Considering that it was under Albaugh’s leadership that Boeing became of the leaders in the defense contract industry, it would stand to reason that Boeing’s competitors may take advantage of the situation.

Considering that Boeing’s defense business now makes up for roughly 50% of the company’s annual revenues, investors became wary of the management shuffle, causing the stock to drop 2.7% after the announcement.

Dennis Muilenburg, currently the president of military support and services business will take over for Albaugh’s defense position at Integrated Defense Systems.

Image Courtesy of Volvo Aero Services

Volvo Aero Services and Boeing have extended a marketing and distribution partnership agreement, originally established in 1999, for an additional 10 years. Within the agreement, Volvo Aero Services will continue to provide multiple asset management services to support the distribution of quality aircraft parts for a wide range of Boeing aircraft models. In addition, Volvo Aero Services has been awarded the rights to manufacture and distribute Boeing proprietary parts.

The program, managed from the jointly established facility in Kent, Washington, covers the distribution of excess parts for in production and out of production Boeing and legacy McDonald Douglas aircraft.

“The extension of our contractual relationship with Volvo Aero further ensures that our customers will continue to receive the best, long-term parts support for their Boeing fleet,” said Dale Wikinson, vice president of Material Management. “They have proven to be an effective business partner that provides quality support.”

“The extension of our contract with Boeing is a testament to the success of our existing relationship”, says Claes Malmros, President and CEO of Volvo Aero Services. “We are extremely proud of our relationship and what has been created with Boeing over the last 10 years. We are looking forward to the continued success of our partnership.”

Volvo Aero Services Corporation, a subsidiary of Volvo Aero Corporation, is a leading provider of aftermarket services in the aviation industry. As the wholly-owned subsidiary of AB Volvo, Volvo Aero Corporation had 2007 revenues of $1.2 billion and employs over 3,200 people worldwide. Volvo Aero Services Corporation has a wide range of services based on its competence in asset management, logistics and leasing of aircraft engines as well as engine and aircraft components. The company is also the exclusive distributor of select material for Hamilton Sundstrand, Honeywell and The Boeing Company.

Courtesy of Bloomberg

Airbus SAS has been met with several delays this past year in regard to delivering their heavily requested A380 aircraft.  However this past week Airbus has said that they are confident that they are going to be able to produce the projected 12 jumbo jets by the end of 2008.  Due to the delays, along with the current economic conditions, the company’s stock has declined 34% this year, however after the announcement this past week, the stock rose 79 cents, the equivalent of 5.8%.

This could be a potentially very beneficial time for Airbus to gain significant market share against their main rival Boeing, due to Boeing’s current labor dispute and US political conflicts.  Presently there are already 21 orders of the A380 aircraft scheduled for 2009, Airbus confirmed their confidence that they would also be able to produce 100% of those orders as well.  So who is waiting for these planes?  Two large scale clients of Airbus are Qantas and Singapore Airlines, Bloomberg‘s Andrea Rothman had this to say about the situation and these two clients:

“The first Qantas A380 will be used on the Melbourne to Los Angeles route starting Oct. 20, and on the Sydney to Los Angeles route from Oct. 24. The carrier will later add A380 flights from Australia to Singapore and London.  Singapore Airlines Ltd., the first to fly the A380, took delivery of its sixth 470-seat plane this week. It will use the aircraft to operate a second daily round-trip flight to London.”

Qantas’ CEO, Geoff Dixon said: “When we ordered our A380 in 2000, we said that in addition to giving us the opportunity to reinvent our product, this revolutionary new aircraft offered capacity and operating savings, as well as environmental improvements. Everything we have seen since our initial order has reinforced this view.”

Why the Demand?

“The A380 sets the standards for the 21st century, “ said Tom Enders, Airbus’ CEO. “More than 380 patents on board underline the aircraft’s leadership in eco-efficiency and innovation and will allow Qantas to continue to grow whilst reducing its impact on the environment. We appreciate Australia’s iconic airline sharing the A380 vision with us from the very beginning.”

In the highly competitive landscape of large-scale defense contracts, one of the keys to continued innovation and technology growth are healthy bidding wars.  However, once a bidding battle has been completed, it should not have to be performed once again due to one company’s dissatisfaction with their loss.  Although it appears to be the what is occurring in the current Pentagon Tanker Competition.

Photo Courtesy of WSJ

The Wall Street Journal reported that the bidding war, for the pentagon’s highly sought after $40 billion dollar tanker contract, has been temporarily called off due to the political entanglements involved in the situation.  This is despite the fact that Northrop Grumman Corp. had already been declared the winner over Boeing this past February.  Boeing’s domestic domination has caused a slowdown in the competitive marketplace and it is clear that the next US Presidential regime will not be forced to make the decision between the two companies.

So does this decision give Boeing a legitimate chance at winning back this contract?  Most likely not.  And there are two main reasons:

1. Boeing currently does not have a plane large enough to fulfill the Air Force’s request.  And with the current Boeing labor dispute (coverage), the company will certainly be meeting with delays for all new projects, especially its new 787.  Conversely, Northrop Grumman has already satisfied the Pentagon’s demand due to the fact that they won the original contract at the end of this past Winter.
2. If the new President is Sen. John McCain, Boeing will find itself on an uphill slope considering that McCain has previously blocked contracts from the aerospace firm that he believed were won ‘too easily’.

Austin Cole from the WSJ says this about the situation,

“Although the decision gives Boeing a chance at a fresh start, the company will face the prospect that one of its key critics, Sen. John McCain, could potentially be the next president when the matter is decided. Five years ago, the Republican senator helped scuttle an original plan to lease a fleet of tankers from Boeing because the contract was not competitively bid. His office played a key role in opening up the competition to Northrop Grumman and its partner, European Aeronautic Defence & Space Co.”

So despite the fact that Boeing has been given a second chance to win this contract, Northrop Grumman still appears to be the most likely company to win this bidding war, and rightfully so.

Photo Courtesy of AOL

If you have followed the aerospace industry for the past few decades, you are well aware the the current Boeing strike is nothing new, and it is also important to note that the Boeing strikes are typically not short, with the last three ranging time spans of 28-68 days.  If you’re unfamiliar with the situation, the union’s 27,000 members are taking advantage of the record breaking orders for the new Boeing 787 aircraft in order to leverage a more profitable payday.  And if this strike is similar to the other labor disputes in Boeing’s history, it will not be easy for both sides to come to a mutually beneficial agreement.

A key factor to note in this situation is that Boeing and their customers are not the only enterprises affected by a prolonged strike.  Each of Boeing’s suppliers are now having to put safe guards in place and cut their own production.  Prime domestic examples of this are suppliers such as:

• GE
• Spirit Aerosystems
• Honeywell
• Rockwell Collins
• Hamilton Sundstrand
• Vought Aircraft
• Goodrich
• Moog
• Hexcel

Tim Hepher, from the International Herald Tribune, said this about the situation:

“Boeing itself is cushioned by a $4.1 billion profit last year and a record $275 billion worth of commercial plane orders, but analysts say each day of the strike will shave a cent per share off its annual profits.  The machinists, Boeing’s largest union, struck for 48 days in 1989, 69 days in 1995 and 28 days in 2005.  The machinists are protesting not only Boeing’s contract offer but also what they see as plans to shift more jobs to non-union and foreign companies.  Some were angered by a union decision to allow two days of extra talks after an overwhelming strike vote.”

Considering that the past year has seen Boeing’s stock price steadily decreasing due to several production delays of its new 787 model, I think we can all be certain that the company shareholders and senior level management are motivated to end this labor dispute as quickly and efficiently as possible so as to not incur further delays.

See below for Reuter‘s coverage of the strike: