Leonardo Aerostructures can no longer wait on Boeing solution, explores carve-out, alliances
After continued reductions (-36-41%) in 787 production, this key supply chain link for fuselage sections and other composite parts looks at restructuring options for the Grottaglie facility and Aerostructures Division.
CFRP fuselage sections for Boeing 787 Dreamliner produced by Leonardo being loaded onto the DreamLifter for transport. Source | Leonardo Aerostructures Division
Leonardo (Rome, Italy) is a global aerospace, defense and now security company with divisions that include Helicopters, Aircraft, Aerostructures, Electronics and the recently added Cyber and New Space (see its new Industrial Plan). Its Aerostructures division participates in the Boeing 787 Dreamliner, the Airbus A220 and A321, and the best-selling regional turboprops produced by ATR.
Source | Leonardo Aerostructures Division
Specifically for the 787, Leonardo Aerostructures produces the Section 44 and 46 fuselage barrels located between and just aft of the wings and horizontal stabilizer in the empennage, all made from carbon fiber-reinforced polymers (CFRP). It is also responsible for certification, production and assembly of all the moving surfaces of the wing and stabilizers of the Boeing 767.
Even though the machinists’ strike at Boeing is now over, its multiyear downward spiral continues to severely threaten the global composites and aircraft supply chain. Tier 1 supplier Spirit Aerosystems (Wichita, Kan., U.S.) has expressed concerns over continuing its operations, and now Leonardo has announced that it can no longer wait on Boeing to fix its problems. Although Leonardo CEO Roberto Cingolani acknowledges Boeing’s goodwill in the company’s Q3 2024 results presentations, and that the two companies had tried to find a solution, Cingolani says the current situation involving lost Boeing work and revenue is unsustainable.
Boeing events in 2024
In his video “Executing the Industrial Plan” (starting at 30:44), Cingolani outlines Boeing events in 2024 that give an example of the issues its severe lack of performance continues to create:
- June – Announced a 25% reduction in the 787 production rate.
- September – Strike began, halting 737, 767 and 777 production.
- November – Announced additional delays to beginning 777x production and the halt of 767 freighter production in 2027.
- November – Strike ended after 7 weeks but Boeing announced another 11% drop in 787 production for 2024 and 16% drop for 2025.
The result is that shipments for four Leonardo plants have dropped from 80 to 55 to 49 in 2024 and from a planned rate of 115 to 97 to 81 in 2025. Cingolani noted that three of these plants are doing relatively well, but the one in Grottaglie, Italy, is struggling due to Boeing’s continued decrease in production.
Source | Leonardo Aerostructures Division
As reported by Reuters in July, Leonardo had said in May that its costs from Boeing’s non-production could reach €50 million ($54 million) in 2024. In June, the company thought a 4-month closure would be needed but was able to come to an agreement with unions to drop the workforce to one shift per day. Roughly 1,300 people then worked at the Grottaglie site where the 787 fuselage sections are produced.
Leonardo scenarios for its Aerostructures Division
Cingolani explains that Leonardo’s Aerostructures capability is based on 4.5 million hours of engineering capacity, but the workload based on the announced rates by Boeing has decreased to 3.2 million hours between 2025 and 2029. That loss of work and revenue is not sustainable. This unutilized capacity is a burden on the financial position of the Aerostructures Division. Further, additional impact is expected due to inflationary pressure on material and labor costs.
“Leonardo has an international team of advisors as well as our engineers, production and finance departments studying potential scenarios to address this situation,” says Cingolani. “We’re not able to wait anymore for a solution on the Boeing situation.”
Leonardo has already implemented an improvement scenario which comprises introducing new programs, including military, and enhancing industrial efficiency. The latter has a strong focus on automation and an incremental optimization of the cost base and supply chain. This is a big issue, says Cingolani, explaining that 80% of Leonardo’s suppliers operate in countries where the cost of labor is very high, while its competitors are relying more on suppliers from areas where labor cost is very low. This scenario is ongoing, he explains, but likely will not be enough to create a self-sustaining Aerostructures Division.
Thus, Leonardo is also pursuing a scenario to achieve end-to-end transformation, which includes cost structure repositioning and new business opportunities. Regarding costs, the company will explore reconfiguring the Aerostructures Division footprint of facilities and restructuring its supply chain. Meanwhile, new opportunities are being analyzed that focus on diversification and higher profitability segments. All of this will be implemented with financial and/or industrial partners, says Cingolani. “We have to think in a totally different way and prepare alliances that can make the division attractive on an international level. The quality is outstanding — the situation, however, needs an evolution that may go toward a carve-out with alliances that can compete in the global market.”
Further details about this scenario and its possible implementation will be presented in Q1 2025, together with an update on the company’s recently announced New Space Division.
For additional commentary, see Dominic Perry’s Nov. 8 article at FlightGlobal.com and for Leonardo’s forward-looking investments at Grottaglie, see an April 2023 article.
Related Content
Cryo-compressed hydrogen, the best solution for storage and refueling stations?
Cryomotive’s CRYOGAS solution claims the highest storage density, lowest refueling cost and widest operating range without H2 losses while using one-fifth the carbon fiber required in compressed gas tanks.
Read MoreManufacturing the MFFD thermoplastic composite fuselage
Demonstrator’s upper, lower shells and assembly prove materials and new processes for lighter, cheaper and more sustainable high-rate future aircraft.
Read MorePlant tour: Spirit AeroSystems, Belfast, Northern Ireland, U.K.
Purpose-built facility employs resin transfer infusion (RTI) and assembly technology to manufacture today’s composite A220 wings, and prepares for future new programs and production ramp-ups.
Read MorePlant tour: Middle River Aerostructure Systems, Baltimore, Md., U.S.
The historic Martin Aircraft factory is advancing digitized automation for more sustainable production of composite aerostructures.
Read MoreRead Next
Gurit announces strategic alignment to preserve wind leadership, accelerate growth in other markets
While expected wind business revenue did not materialize for Q3 2024, Gurit is actively implementing measures to diversify its portfolio and position it for a wind sale increase in 2025.
Read MoreIntuitive Machines debuts moon buggy for Artemis program
IM’s Moon RACER is one of three lunar terrain vehicle (LTV) designs being considered by NASA for future operations on the lunar surface.
Read MoreAAM startup Lilium to file for self-administered insolvency
Two of its principal subsidiaries will file for insolvency and apply for self-administration, follows failed loan efforts from German parliament’s Budget Committee, Bavarian government.
Read More