ktliem@YVR
Posts: 158
Joined: Thu Aug 16, 2001 3:25 pm

BW: Is Boeing Bailing Out Of Passenger Jets?

Thu Apr 10, 2003 5:08 pm

From Business Week March 10, 2003:

"A new study says the giant plane maker's actions point to an exit strategy for the low-margin commerical-aircraft business.... The study (by Alan MacPherson and co-author David Pritchard) argues that Boeing will transform itself from a manufacturing operation into a global services corporation. MacPherson and Pritchard base their case on a trend that will be hard to reverse: the shifting of commercial-airplane manufacturing to low-wage outposts overseas, caused partly by the rise of European competitor Airbus Industrie."

The study is published in the March issue of the journal Futures.

For the rest of the article go to http://www.businessweek.com:/print/bwdaily/dnflash/apr2003/nf20030410_9298_db035.htm?pi (Subscribers
only)
 
ConcordeBoy
Posts: 16852
Joined: Thu Feb 01, 2001 8:04 am

RE: BW: Is Boeing Bailing Out Of Passenger Jets?

Thu Apr 10, 2003 5:23 pm

is it me... or does that article remind you guys of what covers the grounds of a cattle pasture as well?  Laugh out loud
Faire du ciel le plus bel endroit de la terre c'est impossible sans Concorde!
 
AC320
Posts: 2809
Joined: Fri Jan 05, 2001 11:29 pm

RE: BW: Is Boeing Bailing Out Of Passenger Jets?

Thu Apr 10, 2003 5:28 pm

Not really, it presents some interesting things to think about rather than dismiss it as BS outright.
fuddle duddle
 
cfalk
Posts: 10221
Joined: Mon Dec 04, 2000 6:38 pm

RE: BW: Is Boeing Bailing Out Of Passenger Jets?

Thu Apr 10, 2003 5:33 pm

Financially, from the shareholders' point of view, it could make sense.

It would be a potential killer for many airlines, however. Giving Airbus a monopoly on 100+ seaters will inevitably lead to price gouging.

Charles
The only thing you should feel when shooting a terrorist: Recoil.
 
Ikarus
Posts: 3391
Joined: Mon Jan 08, 2001 10:18 pm

RE: BW: Is Boeing Bailing Out Of Passenger Jets?

Thu Apr 10, 2003 6:14 pm

Boeing quickly dismissed the study as "wrong" and declared it has no intention of giving up on a business that accounts for nearly 60% of its total revenue. "This report is riddled with factual inaccuracies and mistaken conclusions," Boeing spokesman Todd Becher told BusinessWeek Online. "We intend to continue our leadership in commercial airplanes for the long term."


Hmmmh.

I'll take Boeing's word ahead of that of some PhD student "analysts"...


Besides, doesn't the article (among other things) argue that Boeing may simply outsource more and more of the manufacturing? That could of course happen. Why not produce airplanes dirt cheap where wage costs are lower, and work motivation higher?

But all in all the article looks more like an Airbus-biased aviation enthusiast's homework than serious analysis & writing. Predicting the 7E7 will not be launched, accusing Boeing of not having developped any new planes in ages (777 accused of being based on "early 90s technology" - hmmm. What's the A320, A330, A340 based on?), happily pointing at order backlogs, etc. - pretty much like the average Airbus-Fan's postings in airliners.net, not much more analysis gone into it than that...

2013 we'll look at the article again and see whether the prediction of Boeing changing so dramatically "within 10 years" has come true...
 
cloudy
Posts: 1613
Joined: Sat Apr 06, 2002 3:23 pm

RE: BW: Is Boeing Bailing Out Of Passenger Jets?

Thu Apr 10, 2003 7:25 pm

Financially, from the shareholders' point of view, it could make sense.

It would be a potential killer for many airlines, however. Giving Airbus a monopoly on 100+ seaters will inevitably lead to price gouging.

Charles

------


If that happened, there would almost certainly be a serious 3rd entrant into the business before Boeing goes out completely. An Asian consortium, perhaps.

IMHO the reason Airbus has developed airplanes at a faster rate than Boeing is because they have needed to create a whole product line from scratch. Now that Boeing and Airbus have more or less equal product lines, they are developing new products at about the same rate. Both will produce one new airframe this decade - the 7E7 and the A380. Both the 777 and A340 are seeing major upgrades. Perhaps the RJ makers will enter the 100-200 seat narrowbody market and force them to replace the 737 and A320 as well.

In the late 90's when defense was hurting and civil business was booming, things like this were not said as often. Even financial writers and engineers can have trouble thinking past the current business cycle, it seems.
 
cfalk
Posts: 10221
Joined: Mon Dec 04, 2000 6:38 pm

RE: BW: Is Boeing Bailing Out Of Passenger Jets?

Thu Apr 10, 2003 9:44 pm

If that happened, there would almost certainly be a serious 3rd entrant into the business before Boeing goes out completely. An Asian consortium, perhaps.

Most certainly. Any time you have no competition, high margins, and no legal monopoly, someone will step in. The only barrier to market entry would be the high cost of entry (a new design in that range would cost $10+ billion), but like you said, a consortium could do that.

IMHO the reason Airbus has developed airplanes at a faster rate than Boeing is because they have needed to create a whole product line from scratch.

True. Virtually the whole current Airbus product line dates back less than 15 years. And since each was designed with the other ones in mind, they are very complimentary without excessive overlapping of capabilities. Boeing's product line is not very rational. To improve the situation, the B7E7 would have to replace both the 757 and 767 lines, and cover the range between 200 and 300 passengers in order to match that. The 717, sadly, also has a difficult position, as it competes with the 737-600.

Even financial writers and engineers can have trouble thinking past the current business cycle, it seems

Hell, they can't even see past the next quarter.

Charles
The only thing you should feel when shooting a terrorist: Recoil.
 
FlyPNS1
Posts: 5287
Joined: Wed Dec 01, 1999 7:12 am

RE: BW: Is Boeing Bailing Out Of Passenger Jets?

Thu Apr 10, 2003 10:00 pm

I don't think Boeing will completely abandon the commercial business. However, I have argued for quite a while that Boeing will likely become more of a niche player with a smaller portfolio of clients. While Commercial accounts do make up 60% of Boeing's revenue's, the real profit margins come from the defense side. And since I don't see world peace breaking out anytime soon and we are likely to have a Republican administration through 2008, the defense business will serve Boeing well.

Even when the Commercial business comes back, the profit margins just aren't there anymore....especially since the largest potential growth market in the next five years are planes with 70-100 seats. This is an area where Boeing is weak to nonexistent.

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