BOEING 7E7 PROGRAM UPDATE

Boeing Frontiers recently sat down to discuss progress on the Boeing 7E7 with program leaders Vice President of Sales and Marketing John Feren; Vice President of Engineering, Manufacturing and Supplier Alignment Walt Gillette; and Vice President of Business Operations and Finance Craig Saddler. Here are excerpts from that discussion:

Q: How important are the business plan and business case for this program, and why?

Saddler: If we don't have the right business case and business plan, we won't have the right airplane, we won't get the supplier support and we won't get customer interest. So you'll see that the 7E7 program is really integrated. The business case, the business plan, the airplane, the suppliers, the customers all have to be lined up properly. It's all about understanding how to get the best value out of the program. That's why the leaders are working so closely together and having our teams interact so much. Our industry has evolved to a point that having a great airplane is not enough. You have to have a great airplane, a great services plan and the right business case and business plan to be successful.

Q: How big is the 7E7 effort with customers?

Feren: It's a huge effort because so many customers are interested and because we are working with each, one at a time, so we can get better input. The 7E7 program is using resources from across Commercial Airplanes and in some cases Boeing International Relations. The BCA Sales organization has taken the lead on the 7E7 effort with customers, and scheduled more than 35 visits since the beginning of the year. Teams of Boeing professionals from Marketing, Sales, Customer Engineering, Commercial Airplane Services and 7E7 program participate in the discussions.

Q: What has customer reaction been?

Feren: I would characterize the customer reaction to date as overwhelmingly positive. The depth of questions and attention of our customers has been very encouraging. We are being told how important it is to our customers for Boeing to go forward with this program. Some customers want the airplane to be larger, some want it smaller, some with more range, and others are very concerned about the flight deck commonality. We will be working through these issues throughout the year.

At this point in the dialog, we are exchanging ideas and attempting to have a crisp understanding of the market requirements. Perhaps the greatest uncertainty we have is to accurately cast the requirements in the timeframe we will be going to market—five years from today.

Q: Based on what you're hearing in discussions with customers, what might represent the biggest challenge—the airplane design, supplier alignment or manufacturing?

Gillette: There are two big requirements—create the airplane the airlines want and do so at a price that meets their business expectations. All three sectors of activity—design, build and the global team—have equal challenges in meeting these two requirements. One aspect that will be different for the 7E7 team will be they have to treat airplane build cost as an independent variable. In the past, airplane build cost was somewhat driven by the airplane performance and features we determined would be included. In the case of the 7E7, airplane cost—both non-recurring and recurring—and airplane performance will each be treated as independent variables by the program. This means the global team will be finding ways to bring the right performance to market at the right cost.

Q: What are the biggest challenges the program faces in the near term?

Feren: We have a number of challenges in 2003, and right now there are three key activities that we're very focused on. First, we need to provide the design team with the necessary information to continue the development process. This is critical in 2003. Second, we need to determine what will be offered with this airplane; we need to know what services we should offer in order to increase the airplane's value. The primary driver for increasing value is decreasing costs associated with owning, operating and maintaining our airplanes—we are taking on these challenges as well. And finally, being in a position to begin making proposals to our customers is a significant priority later in the year.

Gillette: On the manufacturing side of things, the most important assignments for the airplane team are to achieve the firm concept for the airplane and its related services this year. We also must commit the technologies and processes associated with the airplane and its creation, and assemble the core global program team.

Q: How important is this year in terms of the business plan and business case?

Saddler: This is the year. We want to ask the board of directors for permission to offer this airplane to customers by the end of the year. We won't get the go-ahead from them if we don't have the business plan—how we are going to operate the 7E7 program as a business—and business case—how we and our partners will invest and make returns—nailed down.