You know the great part about this is, at various moments I often think as we get later and longer into the event, it becomes more intimate. That's a posh way of saying there are fewer people, but it's quality. Thank you. The three guests here are Brendan Nelson, President of Boeing Global; Eric Martel, President of Bombardier; and Stefano Ponovo from Leonardo. Before we get into the issue – because I know you're all deeply concerned to discuss how aerospace will shape the future of the global economy – we're going to do a couple of questions on your individual companies, because you have fascinating companies in your own right. I'd be remiss if I didn't start with you at Boeing, as everybody would expect me to. We're not going to rehearse the difficulties and the issues, but I am interested in what Kelly, your new CEO, said about the change of culture that he admits has to take place. You obviously agree to that. How's it going?
Well, thank you, Richard. I regard it a bit like us as human beings. I say to young people that what transcends everything in life – rank, power, money, influence, looks, talent – is character. It's informed by worthwhile intrinsic virtues. And so too the character and the culture of a company and its leadership is everything. It's fair to say that over the last decade, certainly through the 2010s, the company lost its way. We have diminished trust in us and we've had some serious lapses in performance. We're carrying an immense amount of debt. One of the key things for us, and I'm paraphrasing what our new CEO has said, we not only have to have respect for every single one of our employees, particularly in our production lines, but we have to have a reverence for them. He's determined that people like me need to spend more time in the factory, understand our people and understand our products. I have no doubt simply on the basis of duopoly that Boeing will be around – nobody's questioning that. Your customers want it, the industry needs it. That is not an issue. The issue is can you get back to being fighting fit? Yes, of course we can, and it's not going to happen overnight. You've already seen we announced we're shoring up the balance sheet with the equity offering and making sure we deal with our liquidity issues and maturing debt. We also will get through this strike, we hope that will be very soon. We're working on that, and then we will progressively return to production. We're not going to rush that. I know our customers are disappointed and frustrated because they want our product, but we're going to make sure we get that production line up and running methodically so we can be 1,000% confident in every aircraft that comes out. We're shedding about 10% of our workforce at the moment. The next phase will be some strategic changes in the company, some divestitures, some elements of the business we're doing now that we will not continue. We are also going to be consolidating elements within our business. We're now methodically looking at the layers within the company. I started my life as a physician – a long story – but one of the things that happens in medicine is you prescribe one drug to fix a problem, then another drug to counter that, and over years companies can end up with all of that. So a streamlining of the company itself. We've got serious issues in terms of execution on programs, and we will be laser focused on getting them fixed.
Stefano, I look at Leonardo and the range of industries you are in. There are two hot wars; defense spending has gone through the roof. There is no diminishing in defense spending – if anything, it's going to get greater. So what's the Achilles heel in all of that?
There are actually two, maybe more than two, but two main ones. Speed – we're not fast enough. You can't take five years to bring a missile to market or to have a new product. The urgency has changed. Second is underinvestment. We are all – nobody excluded in the defense business – I don't know enough about the Chinese to be definite, but the rest of us are all under-dimensioned. Look at the Ukraine war: it's as tragic as it is, it's a regional war in a very limited time, and in two years all of us have run out of everything. Munitions, you name it. We are all scrambling to get up to speed. We are at the cutting edge, but this is a bonanza time for the defense industries. Everything I can produce, everybody buys. The issue is what's going to be needed in five years. How do I need to invest? AI and all that comes into rationalizing that. Do we actually know where we're going? We think we do, but we're not sure.
Hold that thought. To make those investments, you need multi-year contracts and governments prepared to invest in the long term. Bombardier's case – I went to Montreal 20 years ago and did a story at Bombardier maybe 15 years ago. I loved the company: lots of interesting things – Skytrain, planes. Now you've just got a few planes, expensive planes, but you are a one-horse race now.
Yeah, we decided five years ago to completely restructure the company. Sold the train business – that happened 20 years ago. So today we're the only company in the world that is focused on private aviation, because we thought we were the best at doing that. We do the Global and the Challenger. We have 5,500 airplanes flying around the world and a significant service business accordingly.
Aren't you at great risk of a shift in public perception? I mean, you're going to tell me that the pandemic showed that everybody wanted to fly more because of convenience, etc. But clearly the pandemic completely changed the profile.
Actually, today we have 55 airplanes flying about 38% more hours than they were pre-COVID. Plus we've been delivering new airplanes. Plane shaming is an issue, okay? I think we're all facing that. I saw that myself flying over here the other day. So this is a challenge. But to your first question, when you look at the challenge of environmental sustainability, we are an industry that has a track record of innovation and reducing emissions by more than 50% over the last 50 years. So I've got news for you: I think you may have found one audience in the world in this room where you won't find plane shaming, because most of them would be liking to be on board one of your planes.
Well, the problem with plane shaming is that people who can afford to fly and often fly for living are telling the 80% of humanity that have yet to get on a plane that in some way they should not be able to do so. That's the key challenge: decarbonize the industry while giving access to people who just dream of flying. Can I just have 30 seconds on this? Let me remind everybody that the plane industry accounts for 2.5% of global emissions. So what are we talking about?
I'll tell you what we're talking about. You've got onto my top area. You're talking about an industry that has done a truly appalling job of getting that message out. An industry that has successfully failed at its own messaging on that very issue.
Agreed. It's not my fault, I only produce planes for these guys, so it's their fault. But actually, I think it's important that we continue to say the right things. So yes, 2.5% – private jet is 0.4%. But the fact that it's not significant is not an excuse to do nothing. That's why we made a commitment and we're reducing it using sustainable aviation fuel. This is something we should all collectively work together because it's available now, but it's not available in anything like the capacity necessary or anything like the price that airlines would be prepared to pay without passing it on to passengers. Nor is that likely to happen within the confines of IATA. But I would say when I talk to customers, when it's available they take it. We as a company are taking it for 30% of the fuel we're using every year. But it has to be invested, and governments have to work together so that we can have the availability. Richard, I disagree with you on the point that we haven't told the story. We do tell the story, but unfortunately we are living in a world where a lot of people will not listen to evidence-based information. We're 2.5% of global emissions, 12% of the transport sector. This industry is 4% of global GDP. By 2050 it will be a $9 trillion economy. The transport sector – all of us, Airbus, everyone – we are working very hard on this and we will get to net zero by 2050. The technology that will allow us to get there at this very moment does not exist, but I'm confident that it will do very soon.
Your problem, all of you, I would suggest, is that you are not the masters of your own destiny when it comes to many of those issues.
That's correct. It's regulators. Good example: Single European Skies is the lowest-hanging fruit to save 10% of emissions, and you can't even get a sensible ATC system in Europe. That is absolutely correct. You know, we produce among other things helicopters. Our brand is Augusta Westland. I highly recommend them in the Kingdom. We flew about 200 of them last year. At COP28 we flew with the first ones – we flew with a Pratt & Whitney engine on an AW139 with SAF. We managed to do it only in Dubai because they allowed us to. In Europe we couldn't fly them. So there's a regulator. SAF costs three times as much as original fuel, which means the customers have to pay three times. Does the ecological conscience of the average passenger allow that? The reality why it's three times more is also because there's no availability, so everybody's fighting to have it. The market would change if we start flying SAF, then people will start producing it.
The title is 'How Will Aerospace Shape the Future'. We know you're going to be players. My hypothesis is you're not going to get to the position of optimum contribution to the global economy because there are so many headwinds of which you have no control.
This is arguably the most complex operating environment for any business since the end of the Second World War. We went through the Cold War and everything. The trajectory in aviation has been consistent. We had 9/11, the drop through the global pandemic, but the trend line is consistent. Humanity needs this industry – for people to see one another, their families and friends, conduct business, enable commerce, take cultures to the rest of the world, and bring the world to places like Saudi Arabia. This sector will continue to grow, but our social license requires us to decarbonize. And it's about propulsion, engine design, sustainable aviation fuel being the most pressing need, along with aircraft design, aerodynamics, efficiency in the cockpit and the airport. Our industry – even competitors – we are working together on the solutions. Governments need to regulate; they need to say there's a minimum amount of SAF you've got to use. But we need leadership right now. There are people who can shape the world. Aviation will continue to grow. We are super comfortable with that.
We have a survey – Honeywell gave us one last week in private aviation – that there will be 8,500 aircraft deliveries in the next 10 years. So our industry will continue to grow, but we need to do it responsibly. We are investing there. I have 85% of my R&D budget today in sustainability.
One of the amusing things I always find when I come to the Kingdom – if I come via Dubai, I watch the flight path screen. We will leave Dubai and go around CAT, never over CAT. I've tried to understand why for decades. I've heard every reason: military airspace, CAT is busy, no FIR, whatever. But the reality is your industry is being screwed by regulators or governments. Do you accept that?
Absolutely, absolutely. Overregulation in the U.S. then different regulations according to different zones. What we need is clarity on what the objective is from governments, and we'll work it out. Give us an objective – for example, sustainable air mobility – but don't give us a target and say you have to fight the case with one hand behind your back. You need to give us the framework, an ethical or budgetary framework. The two together don't always work. This all requires massive investment. At some point you have to build a new plane. Our new Global 8000 is going into service next year. As I said, 85% to 90% of our R&D budget goes to sustainability, and we use AI to do that.
What's your cheapest plane?
