"Time to Rededicate Ourselves"
First Tuesday Meeting
September 20, 2001
Thank you for inviting me here tonight.
It's great to be in Chicago! The welcome that Boeing has received from the Governor and his staff, the Mayor and his staff, the business leaders and all the other people of this great city and state is nothing short of fantastic. Thank you for being so gracious.
I'm only sorry we couldn't get together earlier for this meeting - due to the tragic circumstances under which we postponed it in September. Those events - along with the anthrax threat, our current military operations in Afghanistan and the global war against terrorism - have certainly affected our lives in profound ways. They have made us appreciate our own vulnerability. And they have made us appreciate all the more the courage and sacrifice that the men and women of our fire and police departments and our armed services have made - and are making -- to keep our lives free, safe and secure.
Recent events have highlighted another thing as well -- the significant role that the aerospace industry plays in our lives for national security, business and pleasure.
We are nearing the 100th anniversary of the first power flight by the Wright brothers back in 1903. Since then - thanks to the vision and dedication of people like Bill Boeing, Donald Douglas, James McDonnell and more - aviation and aerospace have played an important role in defining what our country has become today - and what the world will be like in the future.
I'm proud to say that the men and women of Boeing have made incredible contributions to aerospace over the years.
- We have helped connect people...bring families, business leaders, and heads of state together for reunions and meetings.
- We have helped protect people...bring air superiority, troops, humanitarian aid, and help when duty and disaster call, such as the war on terrorism.
- And we have designed and built every manned spacecraft in U.S. history.
To better illustrate this point, I brought a short video with me tonight that shows just some of the contributions we've made to helping shape our great country.
As you saw in the video, we came far in the 20th century as a nation and a people - as did Boeing as a company and an industry. We also have a long way to go.
But before I talk about the future, let me say a little more about our past and where we stand today. Since the Wright Brothers, our business has evolved from being a novelty of flying for just a few people, to being a small part of defense in World War I, to carrying the mail, to carrying more passengers, and to being a key factor in defending our country in World War II.
The marriage of jet-engine and swept-wing technology in 1947 allowed us to make huge leaps in speed and altitude to carry even more people and payloads. And after the rocket-powered, supersonic flight of Chuck Yeager turned our thoughts more seriously to the possibility of space travel, we landed astronauts on the moon in 1969. Then airline deregulation occurred in 1978, which shifted the industry's focus to lowering cost while aggressively pursuing safety improvements. This helped significantly lower airfares and encourage significantly more people to travel by air. And with the end of the Cold War, our focus on developing and applying technologies that allowed aircraft to fly higher, faster and farther also changed to a greater focus on technologies that significantly improved safety, affordability and performance.
Let's take a little closer look at commercial aviation to see how it has grown in strength as technology has advanced. And let's start with the year 1927 - since that has some relevance to the city of Chicago. 1927 was a year when a lawn mower cost about $8.75, a loaf of bread nine cents, and a refrigerator was $195.
That same year, Chicago Herald Examiner reporter Jane Eads became the first commercial passenger when she flew the inaugural air mail route Chicago-to-San Francisco, a route that Bill Boeing had won from the U.S. postal service. It took her 22.5 hours to get to her final destination, and she made three stops along the way. She wrote her stories in longhand to tell the public what it was like to fly, what it was like to takeoff and land three times, what it was like to work and fly in a two-passenger cabin about the size of a freezer. She wrote: "The light in my cabin is not working, so I'm using a flashlight...it's cool and fresh and glorious...beacon lights here and there along the route are leading us on..."
Between that year and 1930, The Boeing Company carried 13,800 passengers and 176 million letters in the U.S. With the introduction of the jet-engine and swept-wing technology, we made huge leaps in speed and altitude -- and by 1961, some 60 million people in the U.S. were flying as passengers annually and about 110 million people worldwide. By 1961, people could take a Boeing 707 from Chicago to San Francisco and get there in four hours and a round trip ticket cost about $185.00. Meanwhile, a 24-inch riding mower, with a trade, cost $154.95, a loaf of bread was about 41 cents, and a GE refrigerator/freezer was $288.88, with a trade. By 2000, more than 600 million people in the U.S were flying as passengers annually - a ten-fold increase since 1961 and about 1.5 billion people worldwide. Chicago to San Francisco still takes about four hours, but a round trip ticket costs $400, which is almost half that of the 1961 cost, adjusted for inflation. Today, we might pay $3,000 for a 46-inch riding mower, $1.50 for a loaf of bread, and $1,000 for a refrigerator with an ice crusher and water dispenser.
Over the years, the cost of air travel has come down, flying safety has increased and access has grown -- all while the cost of most goods has increased significantly. And while we're on this topic let me say a little about safety. For the past half century, commercial aviation has been the safest mode of long-distance travel -- and has gotten increasingly safer over the years.
Thirty years ago, serious accidents on commercial jetliners occurred approximately once in every 140 million miles flown. Today, it's 1.4 billion miles flown for every serious accident. That's a ten-fold improvement in safety. In terms of accidents per millions of passenger miles, flying commercial jets is 22 times safer than traveling by car. In fact, there have been fewer deaths due to commercial airplane accidents in America over the past 60 years than are killed in U.S. auto accidents in a typical three-month period. And we plan to make air travel even safer in the future. So commercial air travel, as we know it -- and as Jane Eads from Chicago knew it -- has changed greatly over the years and has changed the world forever.
And because of September 11 and other recent events, we know much more needs to be done, and are rededicating ourselves to the task at hand - which includes efforts in defense and space. So let me say a little about technology in each of these areas.
The defense of our nation has changed as technology advanced, too. World War I was a four-year battle fought mostly on the ground, and World War II was fought both on the ground and in the air. Air power clearly was one of the reasons for victories in Europe and Japan. The next huge leap of progress was in technology in Desert Storm, which was fought mostly in the air, with a handful of American casualties, in 100 days. This decisive victory, at minimal cost, is something that technology allowed us to do and that we should be proud about. This technology included advancements in stealth, precision guided weapons, and command, control, communications, computers and surveillance - all of which allowed for more effective and survivable operations.
Over the past several weeks, as part of our war on terrorism, we have again been using this advanced technology in Operation Enduring Freedom in Afghanistan - which is beginning to shows signs of success. We need to acknowledge and be proud of this use of air power for defense. But it is still not enough; we need to do more. It's time to rededicate ourselves to defending freedom and ensuring a more secure world through even more sophisticated defense technologies.
The same is true for our challenges in space. Over the last 44 years, we have gone from watching the Soviet Union put Sputnik into orbit to the United States putting Astronaut Neil Armstrong on the moon to developing a habitat in space with the International Space Station -- our new star in the sky. Boeing has been a huge part of that space development. We have built every manned spacecraft in U.S. history -- Mercury, Gemini, Apollo, Skylab, Shuttle, and now the Space Station. We also revolutionized precision navigation by building the first 40 Global Positioning System satellites -- and we are now working to build the next-generation GPS system. We dreamed of blanketing the planet with continuous radio and television coverage, and so we built geo-stationary satellites that have changed the face of our world and global communications. Today, 335 satellites pass overhead that were launched into orbit with Boeing launch vehicles.
But right now, the thought of routinely traveling to other planets, mining their resources -- and even colonizing them for obtaining greater industrial, economic and security benefits -- is only a dream, but some time in this century it will become a reality. So it's time to rededicate ourselves to advancing the future of space - exploring the final frontier.
From a historical perspective, I think you can see that Boeing has helped define practically everything that flies in the 20th century. We plan to do great things in the 21st century as well.
Today, we're a $50-plus billion business that is part of a $400 billion-worldwide industry. We have approximately 190,000 talented people working in 62 countries and customers in 145 countries. And we're the largest exporter in the United States. We currently operate by focusing on three key business strategies: running healthy core businesses; leveraging core strengths into new products and services; and opening new frontiers. Last year, as part of "opening new frontiers," we formed a new Ventures group and established three new business units: Boeing Capital Corporation, Connexion by Boeing, and Air Traffic Management.
Our new Ventures group seeks to tap innovative business ideas from our employees on how we can leverage Boeing intellectual capital into new business opportunities. Our employees have submitted more than 450 ideas so far - one of which has been spun off into a new business, with some others in the process. The spinoff is called AVChem. It's a software and services business that does cradle-to-grave management of chemicals in a manufacturing environment. A new venture in process is an underwater information services business that applies our autonomous underwater vehicle expertise to the oil and gas exploration and telecommunications markets.
Our new business units have different goals. Boeing Capital Corporation is building on the company's strong balance sheet and access to strong markets. Connexion by Boeing will change air travel by providing high-speed Internet and entertainment services to commercial airplanes for their passengers - and could potentially be used to provide real-time video data from the cockpit and passenger cabin to the ground. And Air Traffic Management will develop new integrated approaches based on GPS satellites to help solve air traffic congestion in the world and make flight even safer.
So if it weren't for Bill Boeing landing the air mail route from Chicago to San Francisco, Jane Eads wouldn't have made history as the first commercial passenger. If it weren't for the marriage of the jet engine and the sweptwing and the 707, we wouldn't have the cost of flying economically. If it weren't for advancements in stealth, precision guidance and C4ISR technology, we wouldn't be resolving military conflicts as quickly, effectively and surviving as we are today. And if it weren't for breakthroughs in structures, materials and propulsion, we wouldn't be sending people and satellites into space.
It took us almost 100 years to get to where we are today, and I think it will take us about 25 more years to make our next leap in progress.
The future offers many opportunities and possibilities, but I only have time to talk briefly about two tonight: first, breakthroughs for better performance and second, harnessing information technology.
Nano-scale science and engineering most likely will produce the strategic technology breakthroughs of tomorrow. Our ability to work at the molecular level, atom by atom, to create something new, something we can manufacture from the "bottom up," opens up huge vistas for many of us. Breakthroughs could bring us nano-structured metals; ceramics and polymers at exact shapes without machining; nano-coatings for cutting tools, electronic, chemical, and structural applications; nano-instrumentation for micro-spacecraft avionics; nano-structured sensors and nano-electronics; and thermal barrier and wear-resistant nano-structured coatings.
There are huge possibilities for nano-technology applications. This technology may be the key that turns the dream of space exploration into reality.
One of the exciting parts of coming to Chicago is the closeness to the Institute for Nano-technology that has been established for research at Northwestern University at Evanston and is slated for completion next year. And I understand Argonne National Laboratory is planning a new center for nano-scale materials.
Second, we need to better harness all the power that information technology has to offer.
Today there are phenomenal systems that perform specialized work. The next step is to find innovative ways of integrating all this technology into more powerful system of systems.
This approach is critical to streamlining the business operations of a global company like Boeing, as well as for improving the safety, security and affordability of flight in the future.
At Boeing, for instance, we are using digital design to save significant time and money. We can collaboratively design an airplane in St. Louis, Seattle, and England, and have the pieces fit perfectly together and assembled in Palmdale, California.
E-commerce offers us another opportunity to improve productivity, and our neutral Internet trading exchange, Exostar, is one way to do that. This Web-based exchange serves the entire aerospace industry, so we all have the opportunity to create and capture value. The exchange helps improve productivity by making "paperless" procurement possible...from invoices to shipping documents to billing and payment. This saves non-value-added transaction costs and eliminates investments in redundant systems. Suppliers are able to serve customers better because they have improved visibility of inventory requirements, and the exchange enables "frictionless" commerce within the industry's supply chain. It also standardizes the procurement process because auctions and easy access move inventories quicker. This is expected to result in operating cost and working capital savings of one percent to two percent of current inventory valuations. In the future, the exchange will provide connections to other electronic marketplaces. So participants will also have one-stop buying opportunities.
But so much more can be done in streamlining our business operations, as they can be in improving flight controls and what we call "health management systems" of aircraft and spacecraft. For example, at Boeing we are developing adaptive flight control systems based on neural network technology and soft computing. These technologies can yield breakthroughs in safety and performance in flight controls by rapidly "learning" how to fly an aircraft or spacecraft through all kinds of new flight envelopes and automatically reconfiguring controls to quickly regain stable flight if other controls malfunction or are damaged.
And for the ultimate in safety, efficiency and affordability, we are advancing the use of embedded health management systems within structures, engines, electronics --and basically all systems of the aircraft. These systems are being designed not only to detect potential problems before they occur, but also to actuate the self-repair of problems that do occur. With such concepts, we will be able to produce "super-intelligent" vehicles that are not only safer, more reliable and more affordable, but will also be able to do things that we can't even imagine today. But as I said, in order to do all these things we need to better harness all the power that information technology has to offer.
In closing, I would like to say just a couple more words about aviation safety and security, since this is something on everyone's minds lately.
We all recognize that safety and security must be addressed if the aviation system is to grow, better connect our world, help improve its economic strength and opportunities for world peace, and make our lives more pleasant. While recent events have affected air passenger traffic, this is not forever. Through the creative, innovative and determined efforts of the people in our industry, we are identifying near- and long-term improvements for safety and security that will help regain the confidence of the flying public.
In fact, I led a team recently that solicited new ideas for improving aviation safety and security from both Boeing and non-Boeing people. More than 3,000 ideas were submitted in about a two-week period. That's impressive. Some of the near-term solutions have been given to appropriate teams for implementation, and the longer term solutions - which most were - are undergoing further review.
Based on this response, I am deeply optimistic about the future of global air transportation - as I am about manned space flight and exploration, about global communications and about national security. I do not pretend that making improvements in all of these areas will be easy -- but I see no limits that cannot be addressed if we band together and work together
In accepting the Democratic Presidential nomination in 1960, John F. Kennedy talked about a new frontier for America. He said as part of his speech: "The New Frontier of which I speak is not a set of promises -- it is a set of challenges." I believe we, too, have a set of near- and long-term challenges. I also believe that we can meet our challenges using tried and true ways - namely, imagination, invention, discovery and determination.
Where do we get such inspiration? It comes from many places -- from work in garages, near water, and airports, from Chicago to Kitty Hawk, from business leaders to political leaders.
But most of all it comes from people like you who dare to dream - have the courage to face and overcome challenges and adversity - and persevere in opening new frontiers for mankind.
I believe it's time to rededicate all of ourselves to opening new frontiers. At Boeing, we want to define the future of aerospace -- and in part that's why we have come to Chicago.
I'm asking you - as leaders of the Chicago technology community - to join Boeing in rededicating yourselves to the advancement of technology that will help shape a better future for our nation, our world and all of mankind. Thank you.