Chairman and CEO
The Boeing Company
"Beyond the Horizon"
Royal Aeronautical Society
92nd Wilbur and Orville Wright Lecture
November 10, 2003
As prepared for delivery
Thank you, Sir Peter (Norris), ladies and gentlemen. It is an honor to be at the Royal Aeronautical Society to deliver this 92nd lecture so near the centennial of the Wright brothers' auspicious flight.
The fact that this society was formed by the 8th Duke of Argyll and a group of "aerial navigation enthusiasts" 37 years prior to the Wrights' first flight says a great deal. This is an organization that historically has envisioned the future based on a passion for everything that flies, and so it is truly a privilege to be here tonight.
If we look back to that famous flight in Kitty Hawk, we see that it changed the world forever; in fact, progress has never really stopped. As we saw in the videos tonight, we have made incredible strides in air speed and range, and this has truly changed the world. We have gone from a fabric-and-wood, one-person airplane to passenger travel to jets carrying millions of passengers a day. If we look ahead -- as we go from speed and range to integration and capability -- we see that the future will be every bit as startling as the past century, but in new ways.
After the Wright brothers' flight on December 17, 1903, the quest to go higher, faster, and farther began in earnest, and we made leaps in progress. It took only six years from the Wrights' first flight until Frenchman Louis Bleriot flew over the English Channel in 1909, and 15 years to carry airmail. It was 24 years until Charles Lindbergh flew 33-1/2 hours across the Atlantic for a $25,000 dollar prize in 1927.
By the end of the first third of a century of powered flight, airplanes had gone from fabric and wood to metal to the DC-3 that made it possible to make money carrying passengers. In 1941 -- just 38 years after the Wrights first flew -- Sir Frank Whittle created the first jet engine, which allowed us to reach high altitudes.
Before the completion of the first half of the century of powered flight, the marriage of the jet engine and swept wing allowed dramatic leaps in speed and altitude: Chuck Yeager flew faster than the speed of sound 44 years after that flight at Kitty Hawk; it took 67 years to get to the 747; and 73 years for the first supersonic Concorde passenger flight in 1976. Could the Wright brothers ever have imagined Heathrow, LAX, or Narita? Or flying London to San Francisco nonstop?
Commercial air travel has come a long way, and so has air defense. Only three years after Kitty Hawk, Billy Mitchell predicted in the military publication Cavalry Journal that future conflicts would probably be carried out in the air. More than nine years later his vision became reality with the first use of air military power in World War I: with Sir Thomas Sopwith's airplanes, named the Pup, the Triplane, the Snipe, the Dolphin, the Salamander, and the Sopwith Camel, challenging the Fokker Red Baron. Fifteen years after his air power prediction, Billy Mitchell tested his theory and sank a battleship from the air. Forty-two years after the Wright brothers first flew, we had Hurricanes, Spitfires, Tempests, Typhoons, Mustangs, B-17s, and Lancasters in World War II, and it took just 49 years from the Wrights first flight to the Boeing B-52 longer-range, swept-wing bomber in 1952. Could the Wright Brothers ever have imagined the Harrier, F-22 Raptor, or B-2?
From the time Wilbur and Orville took their first heavier-than-air powered flights, it was 23 years before space pioneer Robert Goddard developed and shot a liquid-fuel rocket in 1926; 39 years for Wernher von Braun to fly the V-2 ballistic missile; and 54 years to launch Sputnik, the first artificial Earth satellite, into orbit in 1957. It took only 66 years from Kitty Hawk for Neil Armstrong to walk on the moon in 1969. Could the Wright brothers ever have imagined leaving footprints on the Moon?
In one century, the aerospace industry has seen invention and growth, peace and war, and incredible progress -- so what's ahead? What can we expect in the next 50 to 100 years? I believe the possibilities are endless as we move beyond speed and range and graduate into capability and integration. I'm convinced that the developments will be every bit as amazing as those of the first 100 years, but in different dimensions.
Let me talk, first, about moving from speed to capability.
Airlines began their life as a highly regulated industry because, as I mentioned earlier, they carried the mail. In the United States, the primary customer was the government. As time went by and passenger air travel grew, airlines began to grow more and expanded into an international business.
Rules were set in a highly regulated fashion and routes that airlines could fly were governed by bilateral negotiations. The United States, for example, has an agreement with the United Kingdom, with Germany, with India, and with Japan. Each one of those is bilateral, and every country has multiple bilateral agreements that fix the number of flights allowed; in other words, who can fly and what destinations they can serve. So it's not exactly an open market.
Things began to change in 1978, when the U.S. government deregulated the U.S. airline industry. The market started to segment, and this change has only just begun.
Let me share an example of what I mean. Imagine a hotel that has a big central lobby. To the right of that lobby is the Ritz-Carlton wing; straight ahead is the Marriott wing; and to the left is the Novotel wing. All are served by a common lobby. If you happen to be staying in the Ritz-Carlton wing, the people staying in the Novotel wing walk through your room on the way to theirs, and if their bathroom is busy, they come and use yours. If that sounds vaguely familiar, you might recognize today's airline business model. However, all that is changing with market segmentation, which is part of an open market system.
We have now started to see more segmentation with the advent of AirTran, easyJet, JetBlue, Ryanair, and Southwest Airlines. All are serving a segment of travelers, and I think it is a trend that will continue. We have a different business model emerging. In addition, if you look at almost any retail business, 80 percent of the transactions occur in the value segment, with 50 percent of the revenue. Today value air carriers carry about 20 percent of the travelers, and that means there is likely to be enormous change ahead. This is a market that will segment. It may take a while, but it will segment.
There are a lot of other changes coming as well.
If we go to an open market system - a globally regulated open market system where an airline could compete on the basis of its products, cost, and service -- we would see radical change from today. For example, if you are British Airways, and you fly from Heathrow to JFK in New York, and want to fly on to San Francisco, you can't pick up passengers today in New York and carry them to San Francisco because that part of the market is not open, and it's not economical to do that. So we have to ask: "What would happen if that became an open market?"
As we look forward, it is extremely important to ask, "What do passengers really want?" I get a very common answer most of the time when I ask the following question: "Would you rather fly direct, nonstop, from where you are to where you want to go? Or would you like to stop at several places you don't want to go and risk the fact that your connection might not work?" The data says that when given a choice, people always will take the nonstop, and, in fact, they will pay more for it.
There will be another change in the future too. Because airplanes were of military value, the initial rules said that people in one country couldn't own an airline in another country, so today there are limitations to cross-border airline ownership. We have clearly seen those restrictions break down in industry after industry. But they have not broken down in aerospace, and this is a business that today has incredible fragmentation on a global scale.
Normally, in a mature market-based industry, you would expect the market leader to have around 25 percent market share -- and maybe more -- on a global basis. The biggest airline in the world today has less than 6 percent market share. Aerospace is an industry ready for consolidation on a global scale and that means cross-border ownership.
So if you put the pieces together -- markets that are segmenting, new business models developing, global open market capability, the capability for the best airline with the best service, with the right price to serve, the potential of cross-border airline ownership -- and add in the impact of information technology (and the access to pricing, which allows anybody to see prices transparently and find the lowest cost fare that fits), we have an industry that, over the next decade or two, will change radically.
In the next 100 years, we also will want to build a capability, a system, an infrastructure that allows us to do what we want and need to do. One that allows us to go directly anywhere we want to go efficiently and safely, point-to-point, in commercial aviation. One that allows us to use network-centric capability in the military to make decisions on the front lines about what to do next in the battle, such as soldiers using satellite communication to direct attacks and bypass the standard and often slow command and communication structure. One that allows us to build the right capability in space to go to Mars, to asteroids, or back to the Moon. It would give us the opportunity to explore some more, to discover gold on the asteroids, to mine helium-3 on the Moon for future fusion reactors.
I also believe we will move from range to integration.
Today the trend is toward integrated airlines, integrated battle space, and unmanned vehicles, and this opens up more opportunity for progress. We will need to operate in a system that requires a global air traffic management structure that allows us to integrate the amazing capability of the aerospace industry...from satellites to GPS to surveillance.
As we move toward that integration, we will need to do some things better and together. Investment in research and development is one way. It is important all over the world. Investments made 40 years ago were so great that they have allowed us to benefit for decades. It is time to invest again in cutting-edge research and development and to do that by working together more so we can prepare for the next 50 years.
Research and development investment has side benefits. It stimulates scientific and technical employment, aids economic security, and enhances countries' competitiveness and balance of trade. Throughout the aviation system, there also needs to be R&D investment in Europe that matches that in the United States. Investment geared towards improving capacity, infrastructure, and environmental impact.
Technology is yet another way we can do things better and together. If we are going to be integrated, it will be important to share technology and protect technology so it doesn't get into the wrong hands. Technology transfer remains a fundamental issue, and it's time for some companies to lead the way. International cooperation will be of paramount importance as we become more integrated. Sharing development and operational costs among nations will reduce costs.
In the years ahead, cooperation, not competition, will be key, because if everyone replicates what has already been done, we're chasing our tails. Replication doesn't get us far. Right now, for example, there are 13 different families of boosters available from five different countries and Europe, and all are ready to put an estimated 14 communications satellites a year into geostationary orbit. We have to ask, "Does the world really need almost as many different launch vehicles as there are satellites to launch each year?"
But what if we worked together more to end duplication and use our energies to focus on endless opportunities ahead? In space, for example, between now and the year 2020, we, as a world, have the opportunity to work together to launch robotic probes that will touch every part of our solar system and beyond. We have the opportunity to map out our solar system remotely, to send fly-by and land rovers to retrieve samples, to go to Mars, and back to the Moon. If we find subsurface water there, we have the opportunity to colonize. One of the great discoveries of the lunar mapping satellite, Clementine, was the tantalizing hint that there may be water in very deep chasms on the Moon; who knows what hidden resources we will find on Mars. Imagine the incredible notion of humans living and working on another planet.
Let me paint a picture for you of what exploration to Mars might be like. The first few missions could prove concepts for making the basic consumables: air, water, and fuel. That could pave the way for a real settlement, one shielded from ultraviolet rays by a covering of Martian soil or tanks full of locally extracted water. If we could live off the land, producing on site most of the resources to sustain life, this settlement could act as a base camp for explorers. Humans and robotic rovers could traverse the surface of Mars in a long-term program of scientific study.
What happens, however, if one of our settlers gets sick with a serious tumor or other illness? Obviously, they can't take an operating room with them, or a battery of surgical specialists. So the challenge is to get ready today and make advances in molecular surgery. Just like "smart missiles," the shells of viruses could be selected to carry chemicals to tumors, attach to specific receptor sites, and destroy the tumor without breaking the skin. We will have to recognize that major leaps in space exploration will take a while. It took a long time for passenger air travel to become as safe as it is today.
Now let me wrap this up.
I believe we will need to work together to create a future -- in commercial travel, in military use, and in space exploration -- that will be even more amazing than what any of us can envision today. It is very tempting to look back at our history, to see all that has been accomplished before, and to believe that "what needs to be done has been done." But I am convinced as we move ahead -- from speed to capability and from range to integration -- that we will mark the next century with innovation that is every bit as filled with challenge, excitement, and discovery as the last century. The possibilities are endless.