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Sir Michael Arthur, Boeing

16 March 2016

Boeing may be a global company, but it still looks to the UK for its strong supply chain, focus on innovation and business-friendly environment, explains its UK and Ireland president

Over the next 20 years, the number of aeroplanes in the sky will double. A predicted 38,000 of them will be new, which means Boeing is “making planes as fast as it can”. And with at least one million parts in every craft, the company is relying on a highly skilled engineers, a strong supply chain and, increasingly, after-sales services to meet demand.

This is the challenge for Boeing internationally, but for Sir Michael Arthur, president of Boeing UK and Ireland, it’s particularly resonant given the company’s strong growth here. It already employs more than 2,000 people at sites across the UK and is taking on a new employee every day on average.

The value of the UK supply chain – which feeds into the global business – doubled between 2012 and 2014 to reach £1.4bn, and Arthur reveals that 2015 saw a further jump to £1.8bn.

And the way the company has worked with the British government has shaped the “through-life” support services it is now expanding to commercial clients.

“The UK is a particularly big buyer of Boeing defence aircraft, of which the most famous are the Chinooks and the Apaches. But what’s interesting here is that we have contracts with the government to keep them flying,” says Arthur.

He draws parallels with Rolls-Royce’s “power by the hour” service model as he explains that Chinooks flying into Afghanistan have Boeing engineers close at hand.

“We do the bits that aren’t war fighting,” says the former diplomat.

“The British government is very innovative in its contracting,” he continues. “It’s definitely been driven by the government, under cost pressures and pressures for rationalisation. It’s very much a partnership.”

Learning from this experience, at the end of January the company officially launched a new division based in Frimley, Surrey. Boeing Commercial Aviation Services Europe has 100 employees supporting passenger airlines based not just in the UK but in Europe and beyond.

An attractive environment

The UK is also making its mark when it comes to Boeing’s supply chain. It’s the third biggest source for parts, after the US and Japan and, as a result, Boeing directly supports 12,700 jobs in this country.

UK content on the new Boeing 787 Dreamliner accounts for up to 25 per cent of the total value planes that have Rolls-Royce engines. Every pilot seat on the Dreamliner is made in Southend-on-Sea, by a firm called Ipeco.

On the defence side, 16 UK suppliers contribute £3m to the value of each Boeing P-8 Poseidon, a maritime patrol aircraft. The British government announced it was buying nine in November; Australia and India have also put in orders.

“All the world is buying them, and every plane, everywhere in the world, has fuel tanks made by Marshall Aerospace in Cambridge,” says Arthur.

“The UK is the second strongest aerospace industry in the world and it has attracted us here,” he adds, praising the industrial strategy that has supported its development over the past decade. He refers specifically to the UK’s Aerospace Technology Initiative, through which Boeing has “various projects in the pipeline” to work with the government to develop more activity in the UK, much of which will support SMEs.

Arthur also gives a nod to the current “business-friendly” environment and favourable corporation tax rates, which are supporting its UK growth. Yet his enthusiasm is tempered with a warning about increasing international competition. “China is the one to watch,” he says.

There are also obvious comparisons to be drawn with the successful manufacturing base in Germany – Arthur’s last diplomatic posting was as UK ambassador to Germany, and it’s another strong market for Boeing.

“We have partnerships with half a dozen universities to help on research and development in the UK, and we do exactly the same in Germany” he explains. “We play to their strengths. We do some really good work at Sheffield on titanium welding, for example, but we do really good work in Germany on robotics.”

He’s optimistic about what the Catapult network of innovation centres, modelled on Germany’s Fraunhofer research organisation, can achieve. And although the UK is generally seen to have lower productivity rates than France and Germany, he puts it down to the structure of the UK’s service economy. “When you get to our sector, the UK is as competitive as anywhere.”

Partnerships for success

Even so, Arthur is keen to build on what he sees as improving productivity. “It’s absolutely vital,” he says. “It’s why we’ve got close partnerships with our suppliers and we’re constantly talking to them about ‘More for Less’. Customers expect greater capability at lower cost so we need quality and to get it right first time.

“Our suppliers will tell you that we’re a very tough company, but they like working for us because they know ours is a gold standard, and it’s global. Once they’re onto our planes, they’ve got access to a huge market.”

Backing the productivity agenda also means putting effort – and money – into STEM education, he says. “It’s really important that we develop the next generation of engineers.”

Boeing runs the Schools Build-a-Plane Challenge with the Royal Aeronautical Society, through which it has provided the kit for six schools to build a light aeroplane that is certified to fly. “You can imagine the enthusiasm that it generates in children,” says Arthur.

To mark its centenary this year, Boeing is also sponsoring an exhibition – Above and Beyond – at the Greenwich Maritime Museum over the summer, celebrating the first century of flight. “It’s targeted at seven to 14-year-olds. It aims to inspire the next generation to get into aerospace and engineering.”

Opportunities on the horizon

So where will Boeing be in a 100 years’ time? “Our [confirmed] order book stretches out seven years and we value that at about half a trillion dollars. That's the equivalent to one-fifth of UK GDP,” Arthur says. “But we’re changing all the time. So the plane that we deliver in seven years’ time won’t be the same as the plane we’re delivering today. No question about it, it will be more sophisticated.”

Every plane is more efficient than the last, he adds, with the Dreamliner 20 per cent more fuel efficient than its predecessor.

“It’s going to be interesting to see where unmanned flight goes,” he adds. “If you wanted an unmanned freighter, we could give you one tomorrow. But the joke in industry is that the future generation there will always be a man and a dog in the cockpit for passenger flights. The man is to reassure the passengers and the dog is to stop him touching anything.

“The Dreamliner, for example, is really state of the art.”

And for a company that’s been involved in every American manned space mission, it’s no surprise Arthur predicts three-hour flights to Australia, via space  – as long as such travel can be commercialised.

As Boeing continues to diversify, it stands in good stead to be around for the long haul. Its dual strength in defence and commercial helped sustain the company when commercial airlines took a hit after 9/11. And, as planes get more sophisticated and software-heavy, Boeing is now eyeing a huge opportunity in services – not just for maintaining its aeroplanes, but on the ground in more unusual places.

“We have a big contract with the Ministry of Defence to run their IT systems for their logistics base, and it's very successful for both sides. It’s nothing to do with aeroplanes at all. It's just that we are good at integrating highly classified, complex IT systems.”

It has just won a similar contract with the Staffordshire Police. “It's amazing. Here we are, an aeroplane company, helping the Staffordshire Police run their IT systems.”

And for a company that has doubled in size in the UK over the past four years, there’s no sign of slowing down.

“My aim, when I took this job 18 months ago, was to double the operations in five years,” says Arthur. “I think we're going to beat that.”