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 in a sense. That's a posh way of saying there are fewer people, but it's quality. The three guests here are Brendan Nelson, President of Boeing Global; Eric Martell, President of Bombardier; and Stefano Ponto, I pronounced that wrong, from Leonardo. But before we get into the issue, because I know you're all deeply concerned to discuss how will aerospace 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. Look, we're not going to rehearse the difficulties and the issues, but I am interested in what Kelly said, your new CEO, about the change of culture that he admits has to take place. You obviously agree to that. How's it going?
Well, look, thank you, Richard. It's interesting. I regard it a bit like us as human beings, and I say to young people that what transcends everything in life—rank, power, money, influence, looks, talent—is character. It's formed 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, I think, that over the last decade, certainly through the 2010s, the company in terms of culture 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, and I think 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. And 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've announced we're shoring up the balance sheet with the equity offering and making sure we deal with our liquidity issues and also maturing debt. But we also will get through this strike. We hope that will be very soon. Of course, 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 to make sure we can be 1,000% confident in every aircraft that comes out of that production line. We're shedding 17,000 of our staff at the moment, about 10% of the workforce. The next phase you're going to see is some strategic changes in the company. So there will be some divestitures, there will be elements of the business we're doing now that we're not going to continue to do. We are also going to be consolidating elements within our business, and we're now methodically looking at the layers within the company. I started my life as a physician. It's a long story as to how I got here, but one of the things that happens in medicine, one of the mistakes is you prescribe one drug to fix a problem and then you prescribe another drug to counter that drug, another drug to counter that drug, and over a period of years what organizations and companies can do is end up with all of that. So a streamlining of the company itself, and we've got serious issues in terms of execution on programs, and we will be laser-like focused on getting them fixed.
Stefano, I look at Leonardo and the range of industries that you are in. I mean, there are two hot wars, defense spending's gone through the roof. There is no diminishing in defense spending; if anything, it's going to get even greater. So what's the Achilles heel in all of that?
There are actually two. There are 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. Simply, time has changed, the urgency has changed. Second is underinvestment. We are all of us, nobody excluded in the defense business—I don't know enough about the Chinese to be definite about them—but the rest of us, we're all underdimensioned. You look at the Ukraine war, it's as tragic as it is, it's a regional war, takes place in a very limited area. In two years of the Ukraine war, all of us have run out of everything. Munitions, you name it, we don't have it. We are all scrambling to get up to speed, trying to invest in what we need currently, trying to understand what we will be needing. And you know, we are at the cutting edge, us and others in the business, but this is a bonanza time for the defense industries. We're told it is a bonanza time. In fact, I mean, anything I can produce, everybody buys. That's not the issue. The issue is what's going to be needed in five years, where do I need to invest, and how do I need to invest? AI, all that stuff comes into as part of the process. It comes into rationalizing, or do we actually know where we're going? We think we do, we're not sure.
Hold that thought. And to make those investments, you need multi-year contracts and governments that are prepared to invest in the long term so Leonardo and similar companies can make the investments necessary to meet that defense demand. I support the previous speaker. Bombardier's case. I went to Montreal 20 years ago and did a story at Bombardier, maybe 15 years ago. I loved the company. You had lots of interesting things: skis, trains, planes. Now you've just got a few planes. You've got 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, sold the CRJ business 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. So we do the Global, the Challenger. We have 5,500 airplanes flying around the world, and we have a significant service business according to that.
Aren't you at great risk of a shift in public perception? Already there is the—I mean, you're going to tell me that the pandemic showed that everybody was now wanting to fly more because of the convenience, etc. I will, of course, but clearly the pandemic has actually completely changed the profile.
You know, if you take our airplanes today, we have 5,500 airplanes. They're flying about 38% more hours than they were pre-COVID, plus we've been delivering new airplanes. Significant boom. Plane shaming is an issue. Okay, I think we're all facing that. You know, I saw that myself flying over here the other day. So this is a challenge, but I think to your first question, clearly when you look at the challenge we have, you know, environmental sustainability, everything, 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 in here would be liking to be on board one of your planes or at least have one of your planes already.
Well, the problem with the plane shaming is the people who can afford to fly, who often fly for a living, are telling the 80% of humanity that are yet to get on a plane that in some way they should not be able to do so. And that's our key challenge we've got: is decarbonize the industry whilst giving access to people who just dream of flying.
Can I just 30 seconds on this? Just remind everybody, myself beginning with myself, that the plane industry amounts for 2.5% of global emissions only. So what are we talking about?
Yeah, right. I'll tell you what we're talking about. Now 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. You're talking about 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 I think it's important that we continue to say the right things. So yes, 2.5%, private jet is 0.4%. So but the fact that it's not significant is not an excuse to do nothing. And that's why we made a commitment and we're reducing it using sustainable aviation fuel as an example. This is something we should all collectively work together because it's working out. 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 without passing it on to the passengers. And nor is that likely to happen within the confines of IATA.
But you would be surprised, Richard, that there's a lot of people that are willing to pay that price. Now I would say when I talk to customers, when it's available, they take it. We are as a company taking it, you know, for 30% of the fuel we're using every year. So 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 about we haven't told the story. We do tell the story, but unfortunately, as you know, we are living in a world where a lot of people will not listen to evidence-based information that comes to them. We're 2.5% of global emissions. We're 12% of the transport sector. This industry is 4% of global GDP. We estimate that by 2050 it will be a $9 trillion economy, the air transport sector. The work that's going on, all of us, every one of us, and Airbus, everybody, we are working very hard on this and we'll get there. We'll 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. In terms of a good example, single European skies, it is the lowest hanging fruit to save 10% of emissions, and you can't even get a sensible ATC system in Europe at the moment. But that is absolutely correct.
You know, we produce among other things helicopters. Our brand is AgustaWestland. I highly recommend them. In the Kingdom, we fly about 200 of them. Last year in Dubai, at the COP28, we flew with the first ones. We flew with Pratt & Whitney motor. We flew an AW139 with SAF. We managed to do it only in Dubai because they allowed us to do it. In Europe, we couldn't fly them. So there's a regulator. SAF costs three times as much as original fuel, right? Which means that you're going to have to pay three times that. The customers are willing to pay. Does the ecological conscience of the average passenger allow you to pay three times? But the reality why it's three times more also is there's no availability. So everybody's fighting to have it because there's none. You know, it's 0.0. I think the market would, if we start flying SAF, then it kind of turns around, 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.
Well, this is arguably the most complex operating environment that any business that we've had since the end of the Second World War. We went through the Cold War and everything else. The trajectory in aviation has been consistent. We had 9/11 and the drop there. We've had 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 to take cultures to the rest of the world, and bring the world, for example, to Saudi Arabia. And this sector will continue to grow. But our social license requires us to decarbonize. And Richard, it's about propulsion, it's about engine design and how they work, it's about the fuels we put in those engines, sustainable aviation fuel obviously being the most important and pressing need along with other things, the design of airliners themselves, the aerodynamics of airplanes, and the efficiency of what happens in the cockpit and then what happens in the airport. Our industry, all of us, even competitors, we are working together on the solutions. Governments need to regulate. Governments do need to say to us, right, there's a minimum amount of SAF you got to use.
That's because you're in the UK. You would say over-regulated. I mean, we in the UK are over-regulated.
But I think one thing that's important, you know, we need leadership right now. There's people that can shape the world, okay? And there's people going to be elected next Tuesday, and there's people that will tell you that, you know, everything's going to go down the drain in the next 10 years, in the next 20 years. Aviation is going to grow. We'll continue to grow. We're super comfortable with that. Honeywell gave us a survey last week in private aviation that there'll be 8,500 airplanes delivered in the next 10 years. So our industry will continue to grow, but I think we need to do it responsibly, and we're 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'm one of those avgeeks. I like to watch the little screen, and sure enough, we will leave Dubai and we will either go around Qatar or we will go around Qatar, we will never go over Qatar. And I've tried to understand why for decades, and I've had every reason from military airspace to Qatar's very busy, it hasn't got its own FIR, blah, whatever. But the reality is in every case your industry is being screwed by regulators or governments. Do you accept that?
Absolutely, absolutely. It's over-regulation. In the UK, then you have different regulations according to what different zones you're going to. So it's over-regulated. What we need to get clear is what is the objective by the governments, and we'll work it out. I mean, the industry will work it out. You give me an objective which has nothing to do with governments, but you're talking about sustainable air mobility. There's a walk-up out here, it's a wonderful company. Either sustainable at this point, it's either sustainable or it's air mobility, you can't have both. So you give us the objective, you give us a target, we'll work it out. If we can't work it, but you can't give me a target and say, okay, you got to fight the cases, but one hand has to be behind your back. It simply doesn't work. You got to give us the possibility to work within a certain framework. You give us an ethical framework if you have to, or you give us a budgetary framework if you have to. The two together don't always work.
This is all going to require massive investment. At some point you're going to have to build a new plane. At some point, Eric's already said so. You haven't said when yet. You said you're not building a new plane anytime soon.
Not in the short term. Yeah, we're doing some derivatives, but we're not building a new airplane in the short term. We do have an airplane going into service next year, our Global 8000. We're investing the money to do that. But as I said, right now 85% to 90% of our R&D budget goes to sustainability, and we're using AI to do that also.
What's your cheapest plane?
The cheapest is our Challenger 3500.
You can't afford it. 30... sorry, you can't afford it. 20... some million.
20 million. 20 some million.
Yeah, we can talk afterward. Anybody give me a loan? It's 20 million. And your cheapest plane?
I'm not prepared to say. I can't tell you off the top of my head, but it'll be one of our smaller ones in the 737 range.
Yeah, we have an ATR. If you want it, we'll give you a good price.
