Former Executive Vice President, Boeing
Boeing May Add Conversion Lines Amid Strong Cargo Demand
Ted Colbert, president of Boeing Co.'s services division, discusses the planemaker's strategy and outlook. Boeing has almost ...
About Theodore Colbert
Theodore "Ted" Colbert served as Executive Vice President of The Boeing Company and President and CEO of Boeing Defense, Space & Security. In December 2023, he told CNBC that Boeing was "in progress" toward launching astronauts on the Starliner spacecraft, targeting a first crewed flight in the "March, April time frame." He also discussed the company's approach to fixed-price defense contracts, stating that future bids would be "based in the realities of our experiences" and "a set of disciplines that sets us and our customer up for success." Colbert has addressed quality and safety issues at Boeing, stating the company implemented a new Safety Management System that "connects the entire company" and is "a reflection of what our customers use to manage safety." Colbert has spoken publicly about diversity and inclusion initiatives at Boeing. He stated that the company invested "at minimum 25 million dollars in nonprofit organizations that advance equity by 2023," including a commitment with the Thurgood Marshall College Fund. He described creating a racial equity task force with representation from employee resource groups to help move the company's equity plan forward. Colbert also discussed his personal background, noting that he is a graduate of Morehouse College and serves on the board of the Thurgood Marshall College Fund. In 2022, he was named Black Engineer of the Year.
Transcript (18 segments)
I
Interviewer0:00
Give us a sense of the conversion that you've seen. When did you see that surge, or was it strong leading up to COVID-19?
T
Theodore Colbert0:06
Yes, so the conversion market has been strong for a long time. We saw freight improvement before the pandemic, but obviously as the pandemic settled in, as people began to order more products from home and the cargo market increased, we saw demand just really skyrocket and became very strong. In fact, because of that demand, we've opened 10 more lines. We've gone from 12 to 22 lines for converted freighters around the world.
I
Interviewer0:36
Given the optimism and the greater demand expected, are you adding more in addition to what you've already added?
T
Theodore Colbert0:42
We're in discussions right now about additional capacity. We have capacity in China, we have capacity in Costa Rica, in the UK, in Canada, and we're working very closely with the industry and our customers to determine how to make sure that we are ready for those demands.
I
Interviewer0:58
Are you ready for more supply chain disruptions? Because the pandemic has suddenly caused havoc and making it really difficult, especially for markets like China. Your thoughts on that?
T
Theodore Colbert1:08
Yeah, so we're working very closely with the supply chain. We do see disruption, especially in the second and third tier of the supply chain. Those are really driven by the impacts of the pandemic. Now, that said, in our industry we tend to keep significant amounts of inventory within the supply chain, and since demand has been relatively low, we see that being okay for the time being. But as we begin to ramp back up, we have to keep track of demand and make sure that there aren't any challenges created by that increase in demand.
I
Interviewer1:39
How much clarity do you have? How is it today versus three to six months ago, and how do you see it headed in the next 12 months?
T
Theodore Colbert1:46
You know, one of the things the pandemic did for us, it gave us an opportunity to get even closer to our customers. That transparency has gotten even better because we're implementing digital tools that create a clearer sense of demand and supply signals and transparency of what's needed around the world. So it's getting better and better because we're linking our systems together to make sure that we're all working as best we can to support the needs of the markets.
I
Interviewer2:14
Ted, give me a sense of what the backlog is like, because you know there tends to be this sort of syndrome, it affects shipping, I would say transportation or logistics, in other words, of people over-ordering in good times and then having to scrap in bad times. The thing being here is that we're slowly normalizing, and as things do normalize, people might have too many aircraft on their books.
T
Theodore Colbert2:44
Yeah, so in the converted freighter market, the latest study we saw from IATA saw about a 7% increase in cargo demand from pre-pandemic times. There are other studies that show that out to 2040 there could be as much as a 70% increase in demand in the cargo market. So, you know, that's a big number, and obviously we'll stay close with our customers to work within that and mitigate all the risks of overcapacity and creating too many assets that we don't need. But right now we see that demand being pretty strong. As I mentioned before, we've added several lines. We have 17 lines for our 737 converted freighter, we have five for our 767 converted freighter, and we're in talks to add additional potentially. So we see the backlog being strong, and obviously as e-commerce continues to grow driving cargo, we'll stay right in lockstep with those demand signals.
I
Interviewer3:42
Ted, I just also want to get a look at, you know, how right now you've got of course a chip shortage as well in the whole supply constraints dilemma here. How does that affect a company like Boeing?
T
Theodore Colbert3:59
Yeah, right now, obviously we're tracking the chip shortage just like every industry. At the moment, it's not having a major impact on us. As I said again before, we keep inventory of these parts at a pretty significant level. We are a long-cycle business, so we are not moving at the pace as some other industries, and we've had dampened demand for a while because of the pandemic. So, a watch item, staying close with our leaders in the supply chain in those companies, but right now tracking this to be an okay issue to work through.
I
Interviewer4:33
When it comes to demand going forward, Asia versus the US versus Europe, how do you see that?
T
Theodore Colbert4:37
So we look at our market outlook, and broadly from a services perspective, we see about a $3.2 trillion market out about 10 years. The Asia market is about $500 billion of that market, and about 70% of that is in the MRO space. The digital space is growing very quickly. You will have seen that we announced that we just last year sold $2 billion worth of parts products into the world, and that is just a reflection of how the markets are sort of coming back and people are buying and there's just strong demand, and that demand is also in Asia as well.
I
Interviewer5:16
Ted, just a quick question on the 777X. It's at the moment may not get this type inspection authorization now until later this year. If it doesn't come later this year, or if it is even delayed further, how does that actually affect you?
T
Theodore Colbert5:35
So as you can imagine, 777X is a platform that we are incredibly proud of and incredibly excited about getting into the hands of our customers. That said, we have to stay in lockstep with our regulators of both the United States and around the world as we go through the certification process. And so we'll go through that process at the pace that they lead, and we will get it to our customers when we get it to them.
I
Interviewer5:59
Ted, before we let you go, how does sustainability fit into all your plans?
T
Theodore Colbert6:03
Oh my goodness, what an important question. You know, obviously from a broad perspective, the company is working on this really hard with our customers and regulators around the world. We're working on sustainable aviation fuel, new technologies, etc. From a Boeing Global Services perspective, this is something that I'm particularly excited about. We have digital solutions today that are supporting our customers and their ability to improve flight planning. That means getting a plane from A to B in the most efficient way, which saves fuel. We also have fuel optimization software that helps optimize the use of fuel. We have a customer in the Asia region that has improved their cruise costs by 1.65% by using tools that we've delivered to them. And in this region, there's also a strong focus by ICAO on emissions reporting. Voluntary mission reporting is coming, and we have tools that we are offering our customers and they're using here as well. So in the short term, we're going to give them every tool that they can to drive sustainable operations and reduce their carbon footprint. In the long run, we're working on all the technologies that matter in this space for aerospace and defense around the world. So really excited about sustainability and our partnerships that are emerging around the world.