Sponsor Message:
Civil Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
Boeing Commercial Aircraft Strategy  
User currently offlineMonteycarlos From Australia, joined Mar 2005, 2107 posts, RR: 28
Posted (9 years 3 months 3 weeks 2 days 5 hours ago) and read 5018 times:

As part of a university assignment we've been given the task of analysing Boeing Commercial Aircraft division.

What I'd like to find out is a bit about what people think about their business strategy and the challenges Boeing face in the next 5 years.

Firstly, what are a couple of things that define the image of Boeing? (i.e. What markets will they be concerned with, what sets their new planes apart from the old? Anything in terms of market strategy)

What challenges do Boeing face in the next five years?

How will they meet these challenges? What adjustments might they have to make?

Its a pretty open topic, and anyone's opinion is useful to me. Note that this is not an A v. B thread - its simply not useful for me to hear about Airbus unless its relevant to the challenges Boeing face.

Cheers!


It's a beautiful night to fly like a phoenix...
17 replies: All unread, jump to last
 
User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 1, posted (9 years 3 months 3 weeks 2 days 5 hours ago) and read 5006 times:

A good starting-point to get an understanding of Boeing's strategy is probably Randy Baseler's blog:-

http://www.boeing.com/randy/archives/2005/05/index.html

It's new, there isn't much on it yet, doesn't take long to read through all the entries in the archive. And the links he provides are interesting too.

As to 'challenges', I would identify three main ones - not in any particular order:-

1. They need to make a clear profit, each and every year.

2. They have to bring all their new and up-graded models (obviously the 787, but also the 772LR, the 737, probably the 747ADV) to the production stage, smoothly and quickly.

3. They may soon face a problem of 'prioritisation'. With the orders they appear to be getting for the 787, it begins to look as if they could turn virtually all their production resources over to that one aeroplane for several years. But they need also to serve customers wanting other models, particularly Triple Seven variants. So, quite soon, they may have to start turning down orders for the 787 (or rather, offering delivery dates much later than the customer wants, and risking losing the orders) in order to keep their other types in the market picture.

[Edited 2005-05-04 05:13:39]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineMonteycarlos From Australia, joined Mar 2005, 2107 posts, RR: 28
Reply 2, posted (9 years 3 months 3 weeks 2 days 1 hour ago) and read 4944 times:

Just what I was after, thanks NAV...

Does anyone else have any opinion regarding this?



It's a beautiful night to fly like a phoenix...
User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 3, posted (9 years 3 months 3 weeks 1 day 18 hours ago) and read 4865 times:

Just come across Boeing's possible fourth 'challenge' - on a thread about the Indian row, ("Airbus - who decides the price of aircraft?" or something).

"Why should IA pay an extra Rs 5,000 crore for 43 aircraft when the EU major has offered Air Asia a price of $26 million or less per aircraft in ready-to-fly condition for delivery in 2006? the MPs ask. If IA benchmarks its contract on the price offered to Air Asia, it will spend $1.2 billion against the $2 billion reportedly being paid out.

http://www.hindustantimes.com/news/181_1347363,0008.htm

This is possibly the emergence of the trend that I've been worrying about - Airbus (backed by the EU) cutting prices to the point where they are selling below cost, or at least at nil profit. Airbus doesn't appear to have the same absolute need to make a profit that Boeing does.

Given that their aeroplanes (particularly the 787) look like being more fuel-efficient, Boeing can probably still compete by proving that their aircraft will repay any extra purchase cost in fuel savings over a year or two. But they may still have to cut their own prices to the bone.



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineMrocktor From United States of America, joined Jan 2005, 1668 posts, RR: 50
Reply 4, posted (9 years 3 months 3 weeks 1 day 16 hours ago) and read 4829 times:

Quoting NAV20 (Reply 3):
This is possibly the emergence of the trend that I've been worrying about - Airbus (backed by the EU) cutting prices to the point where they are selling below cost, or at least at nil profit. Airbus doesn't appear to have the same absolute need to make a profit that Boeing does.

Yeah, their financial report clearly shows their operating margins in a death spiral. NOT.

mrocktor


User currently offlineN60659 From United States of America, joined Mar 2005, 654 posts, RR: 24
Reply 5, posted (9 years 3 months 3 weeks 1 day 15 hours ago) and read 4804 times:

Last night (here on the west coast of the US), I went to sleep with the thought that when I wake up, this thread is going to get tons of responses. I am very surprised to see only a handful. NAV20 has very clearly outlined some of the primary challenges and I agree with them. If I may be permitted to add my  twocents :

(1) Supply chain management: Boeing has started relying more and more on a plethora of suppliers for various components used on their line of aircraft. One of the critical issues to successful aircraft delivery is to effectively manage the supply chain in order to deliver a complete and reliable product to their customers and not incur penalties stemming from late deliveries.
(2) Effectively managing market upswings and downswings: Airlines are slowly emerging from from the red back into the black and are turning their focus to re-equipping their fleets. Typically, history has shown that these cycles last about 10 years. While, from an industry perspective, this is a very positive trend, Boeing (as well as Airbus, Embraer, Bombardier etc) will have to effectively manage backlogs so as to be able to ride out the times when new orders are lean. Airbus did a great job of this during the last such downswing.
(3) Marketing: One area Boeing has repeated fallen short (until recently) was the ability to effectively market their products. More often than not, pricing has always been an issue with Boeing products. More recently though, they have stepped up their sales and marketing efforts and it is beginning to pay dividends.
(4) Segment identification: Another area Boeing has suffered in (but is making strides to rectify) is listening to their customers and identifying market segments to launch new products or extend existing ones. The 777 was truly the first time a broad consensus was reached on identification of the market and the product that best fits the market. This trend needs to continue. In this same effort, Boeing must be careful in not being driven by the needs and whims of a handful of powerful and important customers. It appears that Boeing is performing well at this task as well based on their reluctance to extend the 787-9 to over 300 seats to satisfy EK.
(5) Not losing site of the competition from the smaller end of the spectrum Embraer and Bombardier are making great strides into the RJ market and the capacity of aircraft are slowly creeping up to 737 end of the spectrum. Boeing definitely should keep it's eyes open towards that segment of the industry and plan accordingly.

I'm sure given time, I could come up with afew more but this is what I can think of for now.

-N60659



Nec Dextrorsum Nec Sinistrorsum
User currently offlineUSAF336TFS From United States of America, joined Apr 2005, 1445 posts, RR: 52
Reply 6, posted (9 years 3 months 3 weeks 1 day 13 hours ago) and read 4727 times:

Quoting Mrocktor (Reply 4):
Quoting NAV20 (Reply 3):
This is possibly the emergence of the trend that I've been worrying about - Airbus (backed by the EU) cutting prices to the point where they are selling below cost, or at least at nil profit. Airbus doesn't appear to have the same absolute need to make a profit that Boeing does.

Yeah, their financial report clearly shows their operating margins in a death spiral. NOT.

mrocktor

Then perhaps you could provide a link to where Airbus reports it's yearly profits/financial data, because no one else, even Airbus' stanchest supporters, can find them.

[Edited 2005-05-04 20:33:17]

[Edited 2005-05-04 20:55:53]


336th Tactical Fighter Squadron, 4th Fighter Wing, Seymour Johnson AFB
User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 7, posted (9 years 3 months 3 weeks 1 day 5 hours ago) and read 4604 times:

Quoting USAF336TFS (Reply 6):
Then perhaps you could provide a link to where Airbus reports it's yearly profits/financial data

EADS has its AGM next week. It's expected to report total sales of about E33 billion, profit of about E2.5 billion, of which the Airbus division has contributed some E1.8 billion.



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineRushed From Australia, joined May 2000, 248 posts, RR: 0
Reply 8, posted (9 years 3 months 3 weeks 19 hours ago) and read 4539 times:

What uni are you at Monteycarlos? and what course are you doing? Im doing an MBA in Aviation Management at RMIT.... we may have similar assignments.. wanna share notes etc?

rushed



travel blogging enthusiast :)
User currently offlineMonteycarlos From Australia, joined Mar 2005, 2107 posts, RR: 28
Reply 9, posted (9 years 3 months 3 weeks 19 hours ago) and read 4507 times:

Quoting USAF336TFS (Reply 6):
Then perhaps you could provide a link to where Airbus reports it's yearly profits/financial data, because no one else, even Airbus' stanchest supporters, can find them.

Yeah, I would have to agree that you can do alot better things with that much money and still get better returns (with much less risk).

Quoting N60659 (Reply 5):
Last night (here on the west coast of the US), I went to sleep with the thought that when I wake up, this thread is going to get tons of responses. I am very surprised to see only a handful. NAV20 has very clearly outlined some of the primary challenges and I agree with them. If I may be permitted to add my

I had hoped, but alas. Its not too bad though... I have quite a bit of information for what we need to do thanks to yourself and NAV! Cheers guys!

Quoting NAV20 (Reply 7):
EADS has its AGM next week. It's expected to report total sales of about E33 billion, profit of about E2.5 billion, of which the Airbus division has contributed some E1.8 billion.

Not bad... I noted on the current full year results that the EADS profit for 2003 was a mere 152million euros? I am having trouble finding all Boeings financials... anyone have a link that has the actual profit figure? It would be really helpful!

Quoting Rushed (Reply 8):
What uni are you at Monteycarlos? and what course are you doing? Im doing an MBA in Aviation Management at RMIT.... we may have similar assignments.. wanna share notes etc?

Yeah sure.... drop me an email if you'd like to know if I have something!



It's a beautiful night to fly like a phoenix...
User currently offlineLeelaw From , joined Dec 1969, posts, RR:
Reply 10, posted (9 years 3 months 3 weeks 19 hours ago) and read 4498 times:

Quoting NAV20 (Reply 1):
They may soon face a problem of 'prioritisation'. With the orders they appear to be getting for the 787, it begins to look as if they could turn virtually all their production resources over to that one aeroplane for several years. But they need also to serve customers wanting other models, particularly Triple Seven variants. So, quite soon, they may have to start turning down orders for the 787 (or rather, offering delivery dates much later than the customer wants, and risking losing the orders) in order to keep their other types in the market picture.

IMO, the limiting factor is more likely an issue of partner/supplier capacity than a shortage of resources at Boeing. This is historically where most "production problems" have arisen.

IMO, lack of delivery slots due to limited production resources as a significant limiting factor for potential 787 sales is likely a tempest in a teapot. How many times in the past have we heard the same thing...I recall similar concern about the lack of future delivery slots for the 737NG in the late nineties (remember the serious talk of opening a second production line at Long Beach); before that the 744 and the MD-80 in the late eighties. Which operators were ultimately denied what they needed because of the lack of delivery slots? There will always be a fair rate of order attrition and/or deferrals because of normal business cycles, recessions, airline failures, etc., which always seem to take care of this problem.

If you've got to have a problem, this is the one you want.


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 11, posted (9 years 3 months 3 weeks 18 hours ago) and read 4478 times:

Montey, go to this, click on 'investor relations', it's all there:-

http://www.boeing.com/flash.html



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineVH-KCT* From Australia, joined May 2001, 479 posts, RR: 2
Reply 12, posted (9 years 3 months 3 weeks 18 hours ago) and read 4465 times:

Rushed. I'd be interested to hear from you too! I'm also in the middle of an aviation degree - some notes exchanges could be quite useful!


I am The Stig
User currently offlineMonteycarlos From Australia, joined Mar 2005, 2107 posts, RR: 28
Reply 13, posted (9 years 3 months 2 weeks 3 days 2 hours ago) and read 4359 times:

On the challenges faced by Boeing over the short and long term I came across some figures and statements that made me think...

"Events such as September 11 and the SARS epidemic made BCA (Boeing Commercial Airplanes) realise how vulnerable their position in the industry truly is. What was identified in the aftermath of this was that one of their major challenges within the industry in the long term was to sustain their business levels and to make their position less vulnerable if an event such as this was to occur again."

My question is, what about the estimations of world fleet planes doubling over the next 20 years?

And how about if (god bless it doesn't) an event such as 9/11 was to occur again - how would that affect this prediction?



It's a beautiful night to fly like a phoenix...
User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 14, posted (9 years 3 months 2 weeks 3 days 1 hour ago) and read 4330 times:

Another good question, Montey.

I suppose the two 'cataclysmic events' (thankfully economic only) that occurred while I was in business were the 1973 oil crisis, and the 1980s property crash. In each case, what you would expect happened; rapid, 'across-the board' cutbacks in business activity, followed by a climb back which was slow at first, but gathered speed until, quite suddenly, business was 'hot' again. It happened to be my personal job in both cases to forecast the likely timescale, and I concluded (guessed?) 1 year to the 'bottom' of the recession, 2 years to equilibrium, 1-2 more years to full recovery. Which turned out to be right (so I stayed in a job both times  ).

In part, I based that judgment on the fact that companies (especially their accountants) think in 'years'. Obviously, they'd have one year where the accounts were only slightly affected; two when they had really bad figures; and then an improvement, gradual at first, which took time to show in the books and restore confidence. On top of that there was the 'lead-time' required for jacking up production.

As a matter of interest, at first I was considered by many colleagues to be too pessimistic. Not all that much later, positions were reversed; I was arguing that the pick-up was coming, on the basis of only slight improvements, and they were saying things like, "This might be a 'false dawn', maybe we should wait a bit."

So Boeing's strategy would have had to be to expect activity/sales to drop off drastically for 3 years; during which time they would have at least to restrict hiring, probably lay people off. Then expect a pickup, which would gather speed quite quickly. Meanwhile their task would simply be to keep the company in being, and use the time to stay in touch with their markets and prepare new products for the boom that would follow the bust. Which is what they appear to have done.

On the question of 'what if it happens again', you could expect the same cycle to repeat itself. We've actually had a recent example of that locally - the bomb in Bali caused a drastic reduction in Australian tourism to Indonesia in general, and Bali in particular. The tourist trade was just about getting back to 'normal levels' when the tsunamis struck - and no doubt that will cause a further downturn, or at least delay the recovery.

Hope all that helps a bit.

[Edited 2005-05-10 09:03:20]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineMonteycarlos From Australia, joined Mar 2005, 2107 posts, RR: 28
Reply 15, posted (9 years 3 months 2 weeks 3 days ago) and read 4299 times:

Quoting NAV20 (Reply 14):

Thanks NAV! Thats a great help!

If I come up with any other questions I'll post them... thats been a great help!



It's a beautiful night to fly like a phoenix...
User currently offlineMrComet From Ireland, joined Mar 2005, 539 posts, RR: 8
Reply 16, posted (9 years 3 months 2 weeks 2 days 18 hours ago) and read 4232 times:

Quoting Rushed (Reply 8):
What uni are you at Monteycarlos? and what course are you doing? Im doing an MBA in Aviation Management at RMIT.... we may have similar assignments.. wanna share notes etc?

That's called..... CHEATING!!!  Smile



The dude abides
User currently offlineMonteycarlos From Australia, joined Mar 2005, 2107 posts, RR: 28
Reply 17, posted (9 years 3 months 2 weeks 2 days 6 hours ago) and read 4165 times:

Quoting MrComet (Reply 16):
That's called..... CHEATING!!!

Why? I don't think it is! Its called "collaboration."



It's a beautiful night to fly like a phoenix...
Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
RE: Boeing Commercial Aircraft Orders Orders posted Sun Aug 15 2004 18:54:22 by NWA757
Future Boeing Prediction:end Of Commercial Aircraft posted Tue Dec 2 2003 06:53:22 by United777
Is Boeing Commercial Hiring At All? posted Wed Dec 6 2006 21:37:03 by Flybyguy
Airbus Sees 27,000 Commercial Aircraft By 2025 posted Wed Nov 22 2006 12:36:25 by Leelaw
Air India To Lease 4 Boeing Widebody Aircraft posted Mon Nov 13 2006 21:50:35 by B742
What If LM Produced Commercial Aircraft posted Mon Sep 18 2006 05:27:39 by KSUpilot
Can You Track Commercial Aircraft Movements? posted Wed Apr 12 2006 16:20:27 by Avi8tir
Boeing Commercial Vs. Boeing Military posted Mon Apr 10 2006 07:32:19 by AviationAddict
Boeing's Commercial Business Looking Up posted Mon Mar 13 2006 00:09:58 by Thebry
Commercial Aircraft Wreckage Remains posted Fri Feb 3 2006 18:31:02 by Markdirk