Bhushan Shori

8/4/2019 Bhushan Shori

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The Boeing Commercial


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Mission Statementy The Commercial Airplanes segment is involved in

developing, producing and marketing commercial jet

aircraft and providing related support services,principally to the commercial airline industryworldwide.


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Historyy Founded in 1916 in the Puget Sound region of Washington state

y Became a leading producer of military and commercial aircraft

y Undertook a series of strategic mergers and acquisitions to

become the worlds largest, most diversified aerospacecompany.Aerospace pioneers now part of the Boeing enterpriseinclude:

y North American Aviation

y McDonnell Douglas

y Rockwell International (space and defense business)y Hughes Space & Communications

y Jeppesen


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Boeing vs. Airbusy Boeing spent a reported $5 billion developing and

tooling up the 777 wide-bodied jetliner that it

introduced in 1994.y The development cost of the Airbus A380 super-

jumbo cost between a reported $10 billion and $15billion.

yA direct competitor to boeings profitable 747.


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y In terms of pricing, the A380s list price is significantly higher than the 747s listprice, $220 million vs. $185 million, yet Airbus claims the combination ofincreased capacity and reduced operating costs provides superior economics.According to company documents, the operating cost per flight will be 12%more than the 747s cost, but given the planes 35% greater capacity, it willprovide almost 25% more volume for free.

y The greater competition leads to more efficiency in the production of planesand more innovative ideas in relation to the speed of travel, capacity of planesand also ways of reducing pollution. The greater capacity of the Airbus willinevitably lead to less flights per day as planes are able to carry more travelerstherefore reducing the amount of flights to preferred destinations each day.

y Until the 1980s the U.S manufacturing firm had a virtual monopoly accountingfor two-thirds of the world market share after the buyout of McDonnelDouglas.


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Boeing SWOT Analysisy Strengths

y Innovation and Technical Expertise

y Strong reputation of quality and industry leadershipy Long-standing customer relationships

y International customer base

y Supplier-Component Manufacturer Networks

y Commercial Aircraft is one of six business divisions


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yWeaknesses

y Development Costs for new products: $8-10 Billion

y Reliance on Suppliers-Component Manufacturers (bothstrength and weakness)

yOpportunities

y New technologies to build lighter, longer range aircraft

y New airline customers in Asia and Pacific markety Airline travel pattern changes supporting Boeing

product line


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y Threats

y Aggressive Airbus Price Discount Practices

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WTO dispute regarding EU subsidiesy Changing economics

y Domestic airline bankruptcies

y Changing governments, politics and business partners

based in those countriesy Example: Dubai Port management controversy

y Air travel vision could be wrong


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Market Strategyy Three prong strategy

y Establish international partners in production

y Use light weight materialsy Develop new midsized aircraft

y Sales department overhaul

yWhat are the results?


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Market Strategy Payoff


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The comeback for boeingy Nearly 10 years ago it strongly appeared that boeing might

be a spent force in the manned fighter aircraft business.y The company that acquired tactical aircraft specialist

McDonnell Douglas in 1997 is still very firmly in themanned fighter business.y Boeing moved aggressively on other fronts, too. It's

prodding the World Trade Organization to end subsidiesfor development of Airbus aircraft, launching the ultra-long-range 777-200 jetliner, deciding soon whether tointroduce an upgraded 747-400 to compete against theAirbus A380 superjumbo, and planning to launch a 777freighter. New sales chief Scott Carson has boasted thatBoeing expects to book more commercial jet sales thanAirbus for 2005.


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y The 787 is turning into the fastest-selling newcommercial jet in history. Since Boeing launched the

program 15 months ago, it has won firm orders andcommitments for 203 planes from 17 airlines, includingKorean Air's Apr. 10 announcement that it wants 10

jets. Those familiar with the matter expect NorthwestAirlines to buy 18 of the 787s, worth about $2.1 billionat list prices, to replace its aging DC-10 jetliners.Northwest Airline officials couldn't be reached forcomment and haven't publicly confirmed the sale.


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y Boeing execs say the 787, the first commercial jetliner built out ofcarbon fiber, will offer passengers more comfort and require up to athird less maintenance than current commercial jets. Execs have longbragged that the 787 would be a "game changer," and it appears the

gamble to stretch the boundaries of commercial jetliner technology ispaying off.y Boeing also has been more aggressive in other areas. According to

sources familiar with the Northwest deal, it's offering enticingdiscounts. "We were going pretty deep there," says one insider. "Weknew this would be a huge win." Because the stakes were so high(experts estimate a market of up to 3,500 medium-size airplanes

worldwide), Boeing Commercial Airplane CEO Alan Mulally has beenpersonally involved in closing the deal, say sources. Boeing also wasconsidering various creative dealmaking schemes to help Northwest --

which has a huge U.S.-to-Asia business -- make the transition to the787.


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y An all-new Airbus A350 could have hurt early 787 sales.Instead, when Airbus opted for a derivative of its A330 -- anairplane that can't meet the 787's more efficient operating

economics -- it gave Boeing enough time to convinceNorthwest execs of the 787's merits.

y There has been some interest in the 747 advance," Carsonsays, estimating a market for 100 to 200 units. "We areencouraged by the responses we've received so far." Even

though the 747 advance would not seriously threaten the555-seat A380, it would certainly hurt A380 pricing anddeny it the monopoly on jumbo jets that Airbus has socoveted for two decades.


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y Boeing doesn't aim to stop there. It's launching moreversions of its popular twin-engine 777 jetliner. Justrecently, Boeing rolled out its ultra-long-range 777-200, whose two engines can carry it halfway aroundthe world. And it plans to launch a 777 freighter in thenext few months. What's more, Singapore Air (SPAAF) recently ordered additional 777 jetliners. Plus, Air

India is expected to buy 23 of the 777 widebodies,valued at a list price of $5 billion, and is also in themarket for 27 medium widebodies, worth about $3billion -- either the A350 or the 787.


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Thank you

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Bhushan Shori