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30 January 2006

Not easy being green

I've heard of credit cards giving you cash back on your purchases, but how about cash back on a purchase of a huge commercial airplane?

Maybe you've seen the piece in Flight International. Basically, the story goes, Airbus says it can compensate for the higher operating costs of the A340 family vs. the 777 by giving customers "cashback deals." Airbus offers this idea in lieu of investing "billions" to get a better, more fuel-efficient A340.

Now, aviation blogging site, Enplaned, has dissected the story further. The entry goes into a great bit of detail and might be worth your while.

Enplaned raises some intriguing theories: the "cash back" could amount to as much as $25-30 million per airplane. And what about current operators of the A340? Will they be entitled to a rebate?

But the question that really has me thinking is the one about the environment. As the Enplaned blog points out, environmental issues matter very much to Airbus' customers (and to Boeing's, I might add). So if Airbus is willing to pay customers to buy an airplane with significantly added fuel burn and emissions, just how green are they?

Enplaned concludes with a tongue-in-cheek (I might say "biting") solution for the A340 problem: if Airbus is serious about the environment, the right thing to do is "to stop selling the A340 if it can't improve it."

I guess Kermit the Frog had it right when he said, "It's not easy being green."

25 January 2006

Annus Mirabilis

Indeed it has been a “year of wonders,” not the least of which because of the ability of this blog to reach people around the world.

When I think about what an amazing year we just witnessed in the field of commercial aviation, it seems appropriate that we started 2005 by launching a blog. It was something brand new for Boeing, and a medium that still remains relatively new and rare in the corporate arena.

Boeing Red Barn photo

What would Bill Boeing think of blogging, I wonder?

In the past 12 months we’ve had about 200,000 individual visits from people around the world. And while that may not seem like a lot of visits compared to some of the mega Websites and blogs out there, it’s a lot to us.

I never would have predicted the universal appeal of a blog that is basically about commercial airplanes, market strategy, and global competition. In the past year we’ve had visitors and comments from across the U.S., certainly, but also from all around the globe, including:

Australia, France, Japan, Germany, the UK, Belgium, China, Singapore, Argentina, New Zealand, Trinidad and Tobago, Austria, South Africa, Hong Kong, the Netherlands, Lithuania, the Philippines, Dubai, Brazil, Malta, Canada, Kenya, Sweden, the Bahamas.

Folks in other parts of the world have stopped by, too, through numerous links from sites such as Google, Airliners.net, and MSN.

We’re even at the point where other bloggers are blogging about our blog.

But what I find most interesting are the informed, intelligent comments we get, such as this from a gentleman from Amsterdam recently:

” .. commercially, could this huge chunk of money spent on launching the A380 be better spent elsewhere? Getting the A380 to dominate the very large jet market is one thing, getting a reasonable return out of one’s investment is another .. ”

Speaking of the A380, did you happen to see the intriguing story out of Las Vegas the other day? Seems the odds are stacked against that airplane ever landing there. And another piece earlier this week on an ABC News broadcast raises questions about the huge airplane. You can watch the story here.

Anyway, back to blogging, not everyone, of course, is a huge fan of this Journal. We continue to hear from people who doubt our veracity - such as this guy from Munich who wrote:

“I understand your position as a Boeing man, but you should remain honest .. ”

And this comment, from a man in Toulouse, who seemed to be concerned about my health, but was he really?

“Randy you sound very stressed out.”

To which I can only reply: Stressed out? Moi?

18 January 2006

Field position

We're in the midst of a bit of a fever here in the Pacific Northwest. The local team, the Seattle Seahawks, is one game away from the "Super Bowl" of American football. So forgive me if a few sports metaphors slip through today.

For instance, there we were, more than two weeks into the year and finally yesterday we got a look at how the other team played in 2005. Except, I thought the game clock ran out back on December 31st. And this was January 17th. It's interesting that Airbus needed an extra period to reveal their score. I have my own private theory on that, which I'll share later.

Anyway, most of the headlines read that Airbus won a close orders race in a record year for commercial airplane orders overall. A lot of people have asked me over these past couple of days if I was surprised. And the answer is no. Not really. Airbus always seems to find a way to come up with bigger numbers.

To me, the real story is not about who got more orders or who delivered more airplanes in 2005. It was a big year for both companies. But the story itself is inside the numbers. It's really about which particular products did well this round and which stand to make it across the goal line down the road. And in that regard I really like Boeing's field position.

If you ask me what did surprise me, I'd tell you the big surprise is how poorly Airbus performed in the widebody segment. When you really break down the numbers, you see that the Airbus orders story is all in the A320 family. 82% of their orders were for single-aisles!

On the other hand, Boeing garnered about 70% overall of the high-value widebody orders this past year:

  • 63% of the market for 200-300 seats (787, 767)
  • 84% of the market for 300-400 seats (777)
  • 70% of the market for large airplanes (747)

It's obvious that questions surround the Airbus twin-aisle (widebody) strategy.

Here's what I mean. The Boeing 777 received 154 orders. Their A340 and A330-300 (the airplanes they match-up with our 777) received 15 orders each. Doesn't even seem like the same ballpark.

In the large-airplane market, the A380 recorded only 20 firm orders in 2005. The 747 more than doubled that order total with 43 net orders (including 18 for the new 747-8) in 2005.

That leaves us with the last category in the widebody market. The A350 ended the year with 87 firm orders - far short of predictions. The 787, going head-to-head against its competitor, gained 235 orders this past year. After several false starts, they're still making revisions to the A350. And no matter what it ends up being, the A350 has already sacked the 4-engine A340 line.

On the other hand, Boeing has a winning game plan for the twin-aisle market. We secured record orders for the 777 and 787 programs last year, a tremendous market response to these two game-changing airplanes. It's a balanced program, and the proof is that our orders in '05 comprised 44% twin-aisles and 56% single-aisles (including record orders for the 737 as well).

So as you really look inside the numbers you'll see why we believe we're better positioned for the future, and why we also like our share of the overall value of the market going forward.

Which now brings me back to the timing of yesterday's Airbus announcement. After all, January 17th wasn't just some random date decided in a coin toss or something. It happened to mark the one-year anniversary of this little blog! And because they chose to run with the ball on our special day, I'll have to talk blog some other time. Somebody ought to call a foul.

13 January 2006

Future tense

At the beginning of a new year, there's a lot of discussion about the previous year and the perceived Boeing - Airbus "horse race." We've already talked a little bit about the Boeing side of the ledger - 2005 was a record year for us in many ways. But I want to delve a little deeper, and set this in a proper perspective.

Reflecting on 2005, I must admit we're feeling pretty good about where we stood at the stroke of midnight. But it's our position going forward that really excites us.

Going into 2006 and 2007 - and even 2008 and beyond - I think we've got an outstanding set of products and services lined up to meet our customers' needs for the future. And as you can see in the graphic, we're simplifying our airplane product family.

Boeing Simplified airplane strategy chart image

Part of the BCA airplane product strategy is to simplify fleets from 6 to 4 airplane types, with better efficiency and more complete market coverage. This simplified product family enables more frequent, nonstop service with breakthrough economics and technology.

2005 positioned us well, not only in twin-aisles, but the single-aisle segment as well, with the launch of the 747-8 program, the 777 Freighter, the 737-900ER, the Boeing Converted Freighter program, and of course, the resounding success of the 787 family of airplanes.

And as I sit here today in Seattle, I can't help but wonder what discussions are going on in Toulouse right about now. Maybe we'll find out on Tuesday when Airbus releases its year-end results. But in light of the overwhelming response Boeing has had to the 787 and 777 this past year, do you think the other guys are beginning to ask some difficult questions? Could they be talking about whether their widebody product strategy is out of step with today's market realities?

Now, don't get me wrong - Airbus is a tough competitor. They obviously had a very good year in terms of orders, too, mostly with the A320 program. But their twin-aisle products had a tougher year. And they've got to be asking where they're going to go next with their twin-aisle strategy.

Separately, I also noticed this past week that Airbus is looking to follow our lead on technology, floating as "new," concepts that Boeing has already committed to and is already working on.

Take the recent comments from the chief executive of Airbus' parent company about building an airplane using composites - exactly what we're already doing today with the 787. Noel Forgeard is quoted in the "Financial Times" as saying Airbus is "actively engaged" in developing lighter composite airplanes as the way to go because of fuel efficiency. They're recognizing that with high fuel prices, they have to make more fuel-efficient airplanes. (I find this interesting, since Boeing has always recognized that lighter airplanes use less fuel. And that's why all our airplanes weigh less than the competition's across the board.)

Anyway, getting back to my reflections on 2005, I do have to acknowledge that Airbus has delivered more airplanes than us, and may do so for the near term. There are many reasons for that, which we can get into another time. But in that respect, I'll give them their due.

As to the future? Well, I don't know if I'd go so far as to say the future is ours. But I think the best is yet to come.

05 January 2006

Vr and beyond

In pilot-speak, VR is rotation speed, or the point at which an aircraft begins to rotate its nose into the air for takeoff. I think it's a good analogy for Boeing's trajectory as we look back on the past year, and look ahead to the new one.

Exactly when Boeing Commercial Airplanes reached VR is anybody's guess. All I know is we reached that critical juncture sometime in the past year and have been climbing.

This flight we're on has taken us higher than we've ever flown before. As we finalize business for 2005 it's clear that BCA has set a new record for airplane orders. Several new records in fact.

Our customers ordered a net total of 1,002 new airplanes in 2005. Let that number sink in a minute. This far exceeds the previous record by any measure. And we chose the most conservative measure as the benchmark, which is to say the most orders we've ever recorded in the past, including both Boeing and McDonnell Douglas legacy aircraft. That previous peak was in 1988, when the two companies combined (pre-merger) recorded a total of 877 orders.

If you want to get a real feel for what a remarkable year 2005 was, consider that in 2004 Boeing posted 272 orders for commercial airplanes. I think that says as much about the recovery of the airline industry as it does about the on-going transformation here at Boeing.

In 2005 we also achieved individual records in three airplane programs. The 737 program set a single-year record with 569 orders. 2005 also saw a record 154 orders for new 777s. And the 787 program, with 235 orders, established a new record as well. I should mention that the 747 and 767 programs also exceeded orders expectations in 2005.

The way I see it, every order announced during the year was a new validation that we've got the right strategy for the market. We've created a product line of efficient and reliable airplanes which offer a superior passenger experience. Airplanes ranging from 100 to 450 seats. Airlines around the world recognize that Boeing airplanes are the definitive choice for taking passengers where they want to go, when they want to go.

Although we don't have a final number for how Airbus did this past year, clearly the other guys had a tremendous year as well. What this says to me is, the recovery is in full swing. Air travel is growing in leaps and bounds, and airlines and nations are investing in new aircraft to accommodate that growth. Regardless of Boeing vs. Airbus issues, this is good news for everyone who works in or supports the commercial aircraft industry.

And while it's not for me to speculate about what 2006 might bring, I think it's fair to say that the New Year will see even more exciting milestones. Whether we've now reached cruising altitude, or have more yet to climb is something we'll have to sit back and find out as the flight progresses.