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Boeing Case Study

November 15, 2011

Abstract

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Boeing is one of the worlds largest aerospace firms. It manufactures airliners for
commercial and military segments. The company is based in Washington State. It
just opened a new manufacturing facility in South Carolina. Boeing is best known
for the 747 jetliner. They have large contracts with different airlines as well as the
U.S. government. Over the years, Boeing has been plagued with many labor,
manufacturing, and supply problems. Their latest problems are with the 787
Dreamliner. Boeing is outsourcing a lot more its processes. It has worked with
Japanese automakers to improve its production process. Airbus is Boeings main
competition. Both compete in the same market segments. The SWOT analysis
looks at Boeings processes and strategies.

Boeing

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The Boeing Company, together with its subsidiaries is one of the worlds major
aerospace firms. The company is organized based on the products and services it
offers. Boeing has five principle segments:

Commercial Airplanes,

Boeing Defense, Space, & Security (BDS) consists of three segments:

Boeing Military Aircraft (BMA)
Network & Space Systems (N&SS)
Global Services & Support (GS&S)

Boeing Capital Corporation

Engineering, Operations & Technology (EO&T): provides Boeing with technical

and functional capabilities, including information technology, research and
development, test and evaluation, technology strategy development,
environmental remediation management and intellectual property
management

Shared Services Group (SSG)

The Boeing Company was established in 1916 by William Boeing. It is the largest
manufacturer of commercial jetliners and military aircraft combined. It designs,
develops, manufacturers, sales and supports commercial jetliners, military aircraft,
satellites, missile defense, space flight, and launch systems and services. It is a
major service provider to NASA and operates the Space Shuttle and International
Space Station. Boeing provides products and support services to customers in 150
countries. It is one of the largest US exporters in terms of sales. Boeings large
scale of operation and market penetration gives it substantial bargaining power.
Boeing is headquartered in Chicago and employs more than 165,000 people
worldwide. Boeings vision is: People working together as a global enterprise for
aerospace leadership. Boeing plans to achieve their vision by running healthy

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core businesses, leveraging their strengths into new products and services, and
opening new frontiers (About us, 2011).
To realize their vision, Boeing considers where they are today and where they
would like to be tomorrow. They emphasize detailed customer knowledge and
focus that understands, anticipates and responds to customer needs, large-scale
systems integration that continually develops and advances technical excellence,
[and] a lean enterprise characterized by efficiency, supplier management, short
cycle times, high quality, and low transaction costs (About us, 2011).
Boeing is organized into two business units: Boeing Commercial Airplanes and
Boeing Defense, Space & Security. Supporting these units are Boeing Capital
Corporation, a global provider of financing solutions; the Shared Services Group,
which provides a broad range of services to Boeing worldwide; and Boeing
Engineering, Operations & Technology, which helps develop, acquire, apply and
protect innovative technologies and processes (About us, 2011).
The company merged with McDonnell Douglas (competitor) in 1997. Today, the
main commercial products are the 737, 747, 767, 777, and the Boeing Business Jet.
Boeings new product development efforts are focused on the Boeing 787
Dreamliner, and the 747-8. Boeing has nearly 12,000 commercial jetliners in
service worldwide, which is about 75 percent of the world fleet. Boeings
Commercial Aviation Services provides 24/7 technical support and a full range of
engineering, modification, logistics and information services to its global customer
base, which includes passenger and cargo airlines, as well as maintenance, repair
and overhaul facilities. Boeing also trains maintenance and flight crews in the 100seat-and-above airliner market through Boeing Training & Flight Services, the

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world's largest and most comprehensive provider of airline training (About us,
2011).
2010 Financial Results
Boeing recorded revenues of $64.3 billion during the financial year ended
December 2010 (FY 2010). Revenues for the year were down 6 percent from 2009
due to anticipated lower airplane deliveries and reduced defense volumes. Net
income (earnings) increased to $3.3 billion or $4.46 earnings per share (EPS)
compared with $1.3 billion or $1.87 EPS in 2009 reflecting solid performance across
core production and services programs. Boeing captured $69 billion of new orders
during the year and grew its backlog to $321 billionfive times current annual
revenues. It continued to provide strong liquidity with operating cash flow of $3.0
billion, and cash and marketable securities of $10.5 billion (The Boeing Company,
2011).
Boeing delivered 462 commercial airplanes, including record 737 deliveries for
the second year in a row, and won 530 net orders, increasing its backlog to 3,443
airplanes valued at $256 billion. It delivered 115 production military aircraft, two
launch vehicles and four satellites, and increased backlog at Defense, Space &
Security to $65 billion, and more than twice the business units 2010 revenue. The
company delivered the 900th 777 and started assembly of the 1,000th 767. In
addition, it extended core Defense, Space & Security programs, including contract
awards for 124 F/A-18E/F Super Hornet and EA-18G Growler aircraft for the U.S.
Navy; low-rate initial production of up to 51 AH-64D Apache Block III helicopters for
the U.S. Army; and six new commercial satellite orders . It Achieved key Defense,
Space & Security milestones, including delivery of the first P-8A Poseidon for flight
testing; unveiling of two unmanned aircraftthe fighter-sized Phantom Ray and the

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hydrogen-powered Phantom Eyein preparation for flight testing in 2011; first flight
of the UK Mk4 Chinook rotorcraft; and winning the coveted Collier Award for the
International Space Station. The company advanced their environmental leadership
by testing biofuels on commercial and military aircraft; creating sustainable aviation
biofuels research projects around the globe; demonstrating next-generation energy
smart grid technologies; improving the global air traffic control system; and
continuing to reduce the environmental footprint of Boeing operations (The Boeing
company, 2011).

SWOT
Favorable
Internal

Strengths:

Large scale operation and

strong global network

Strong association with
Federal Government

Robust inorganic growth

Focus on R&D

Strong order backlog

Strong financial performance

Realignment for growth and

expansion to new markets

Unfavorable
Weaknesses:

Production/supply problems
Labor/legal proceedings

Dependence on US
government

External

Diversified business offerings

Opportunities:

Threats:

Increased aircraft demand

Rising global defense

Intense competition and

spending
787 Dreamliner to gain

pricing pressure
Risks concerning labor issues
Uncertain airline industry
Rising fuel costs
Change in US budgetary

market share

priorities and contracts

Strengths
Large scale operation and strong global network
Boeing is one of two major manufacturers, equipped to produce aircraft capable
of carrying more than 100 passengers for the worldwide commercial airline industry,
and the second-largest defense contractor in the US. Boeing is one of the leading
producers of commercial aircraft and offers a broad spectrum of commercial
jetliners designed to meet passenger and cargo requirements of both the US and
non-US airlines. The company has customers in more than 150 countries around the
world and is one of the largest US exporters in terms of sales. It is the global

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market leader in design, development, manufacture, sale and support of
commercial jetliners, military aircraft, satellites, missile defense, human space flight
and launch systems and services. Boeings large scale of operation and market
penetration gives it substantial bargaining power (About us, 2011; Boeing
SWOT, 2009).
Strong association with Federal Government
Boeing has worked with the Federal Government for over 30 years. Its Defense,
Space & Security is a $32 billion business with 64,000 employees worldwide that
combines manned and unmanned airborne capabilities, intelligence and security
systems, communications architectures and extensive large-scale integration
expertise across several diverse business areas. Boeings Defense, Space &
Security strategy is to understand the enduring needs of customers and provide
capability-based solutions to meet their rapidly evolving requirements. The strategy
includes understanding the art of using current and emerging technologies to
improve the capabilities of existing products and deliver new solutions (About us,
2011; Boeing SWOT, 2009; Hill & Jones, 2009, C1-C15).
Boeings military aircraft business includes tactical and airlift aircraft, missiles,
unmanned airborne systems, and surveillance and engagement programs. FY2008,
Boeings contracts with the US government accounted for 46% of its total revenues.
The company deals with numerous US government agencies and entities, NASA,
and the Department of Homeland Security. Boeings IDS (integrated defense
systems) segment provides various research, development, production,
modification and support services to the US Department of Defense (80% of IDS
2008 revenues), NASA and other defense customers. Boeing also engineered and

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deployed various products for the Army, Navy and Air Force and tests complex and
mission critical hardware and software systems used by these agencies. The
company played key roles in improving the performance, reliability, maintainability,
supportability, and weapons effectiveness. The company has received significant
contracts from these customers. Most recently, Boeing received a $48.9 million
contract from the US Navy in May 2009, for development and testing of a
Distributed Targeting system for the F/A-18E/F Super Hornet strike fighter. In June
2009, Boeing received A-10 sustainment and integration contract from the US Air
Force. In the same month, the company also received a $5.2 million US Marine
Corps contract to provide a solution for recovering disabled Mine Resistant Ambush
Protected vehicles. In June 2009, Boeing received a contract from the US Army for
future combat systems. Strong relationships with major customers enable the
company to receive many new contracts and hence serve as a competitive
advantage (About us, 2011; Boeing SWOT 2009; Hill & Jones, 2009, C1-C15).
Robust inorganic growth
Boeing focuses on acquisitions as a business-level strategy to expand its
business and to earn more revenues. In FY 2009, the company acquired Vought
Aircraft Industries 787 business conducted at North Charleston, South Carolina.
Voughts 787 business produces fuselage sections, including the fabrication,
assembly and systems installation, for the 787 program. The acquisition
strengthens Boeings 787 program and bolsters its capability to develop and
produce large composite structures (Boeing SWOT, 2010).
In FY 2009, Boeing also acquired eXMeritus, a Fairfax Virginia based company
that provides hardware and software to the federal government and law
enforcement organizations, for sharing information securely, across classified and

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unclassified networks and systems. The acquisition of eXMeritus complements FY
2008 acquisitions of Digital Receiver Technology Ravenwing and Kestrel Enterprises.
These acquisitions are part of Boeings global-level strategy to expand its presence
in the cyber and intelligence markets. The addition of exMeritus enhances Boeing
capabilities developed through years of experience on secure networks for some of
the most complex systems in national security (Boeing SWOT, 2010).
In addition, during FY 2009 Boeing acquired Alenia North Americas half of Global
Aeronautica, a South Caroling fuselage subassembly facility for Boeings 787
Dreamliner. Alenia North America is a subsidiary of Italys Alenia Aeronautica, a
Finmeccanica company. This acquisition increases productivity for the 787 program
and allows Boeing to maintain its long-term competitiveness. Therefore,
acquisitions bring complementary technologies, support geographic expansion, and
leverage existing infrastructure for Boeing (Boeing SWOT, 2010).
Strong focus on research and development
Boeings strategy also has a strong focus on R&D activities. Its 'other' business
segment principally includes the engineering, operations and technology (EO&T)
activities. EO&T is an advanced research and development organization focused on
innovative technologies, improved processes and the creation of new products.
R&D expenditures involve experimentation, design, development and related test
activities for defense systems, new and derivative jet aircrafts, including both
commercial and military, advanced space and other company-sponsored product
developments. The companys R&D investment amounted to $6,506 million,
$3,768 million and $3,850 million in FY 2009, FY 2008, and FY 2007 respectively.
The Boeing military aircraft division continues to focus on R&D resources to
leverage customer knowledge, technical expertise and system integration of

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manned and unmanned systems that provide innovative solutions to meet the
warfighters enduring needs. The network and space systems division of Boeing is
investing in capabilities to enhance connectivity between existing and new
air/ground and maritime platforms; to increase communications availability, utility
and bandwidth through more robust space systems; and to leverage innovative
networking and ISR (intelligence, surveillance, and reconnaissance) concepts.
Investments were also made to develop concepts and capabilities related to cyber
and security products, as well as the development of next-generation space and
intelligence systems. Boeings global services and support (GS&S) continues to
focus investment strategies on its core businesses. Successful development of
adaptable systems has allowed GS&S to transition from Boeing platforms into the
broader aviation market. Strong focus on R&D allows Boeing to develop proprietary
products, strengthen its product portfolio, and have an advantage over its
competitors (Boeing SWOT, 2010).
Strong order backlog
As of June 30, 2011, the order backlog for Boeing Commercial Airplanes totaled
3,392. Unfilled orders broken down by aircraft type were as follows: 2,109 for the
737, 111 for the 747, 54 for the 767, 291 for the 777, and 827 for the 787. The
backlog at the end of June 2011 represents a decrease from the backlog at the end
of the previous month (May), which totaled 3,396. Both figures are decreases
compared to the company's year-end-2010 order backlog of 3,443 ("Boeing reports
second-quarter," 2011).
Strong financial performance

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The Boeing Company (NYSE: BA) reported second-quarter net income of $0.9
billion, or $1.25 per share, on revenue of $16.5 billion. Operating margin of 9.3
percent reflects higher Commercial Airplanes volume and strong core performance
across the company's businesses, partially offset by higher pension expense. The
company increased its 2011 earnings per share guidance to between $3.90 and
$4.10 per share reflecting the strong core performance. Total company 2011
revenue and cash flow guidance is unchanged. Boeing's quarterly operating cash
flow was $1.6 billion, reflecting strong operating performance and continued
investment in development programs. Cash and investments in marketable
securities totaled $8.8 billion at quarter-end, up from $7.8 billion at the beginning of
the quarter. Debt was essentially unchanged in the quarter. Capital expenditures
for 2011 have been reduced to approximately $2.0 billion, down from approximately
$2.3 billion ("Boeing reports second-quarter," 2011).
Boeing Commercial Airplanes second-quarter revenue increased by 19 percent to
$8.8 billion on higher deliveries, improved model mix and higher services volume.
Operating margin was 10.4 percent, reflecting the higher revenue and strong
operating performance, partially offset by higher R&D ("Boeing reports secondquarter," 2011).
Boeing Defense, Space & Security's second-quarter revenue was $7.7 billion,
while operating margin was 10.4 percent. Boeing Military Aircraft (BMA) secondquarter revenue was $3.6 billion. Operating margin was 10.6 percent, reflecting
strong operating performance. Last year's results were impacted by a charge on
the Airborne Early Warning & Control program. During the quarter, India signed an
agreement for ten C-17s, which are expected to be on contract later this year, and
BMA was awarded the U.S. Navy's study contract for the Unmanned Carrier-

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Launched Airborne Surveillance and Strike Program ("Boeing reports secondquarter," 2011).
Network & Space Systems (N&SS) second-quarter revenue decreased to $2.1
billion, due to funding reductions in Brigade Combat Team Modernization and lower
SBInet volume. Operating margin was 9.5 percent, reflecting United Launch
Alliance performance and a gain on the sale of property. Global Services & Support
(GS&S) second-quarter revenue was $2.0 billion. Operating margin was 10.9
percent, reflecting strong performance in integrated logistics. During the quarter,
GS&S was awarded modernization and upgrade contracts from the U.S. Air Force
("Boeing reports second-quarter," 2011).

Realignment for growth and expansion to new markets

The company focuses on realignment, which is part of a continuing effort to
successfully compete in a rapidly evolving global defense and security marketplace.
From January 2010, Boeings integrated defense systems business unit began
operating under the name Boeing defense, space and security (BDS). While BDS
will retain its current operating divisions (Boeing military aircraft, network and space
systems, and global services and support), the realignment consolidates some
businesses. Boeing consolidated two businesses in network and space systems
division, the combat systems business and the command, control and
communications networks business. These businesses will be unified as the new
network and tactical systems business (Boeing SWOT, 2010).
BDS operations principally involve research, development, production,
modification and support of global strike systems, global mobility systems,

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rotorcraft systems, airborne surveillance and reconnaissance aircraft, network and
tactical systems intelligence and security systems, missile defense systems, and
space and intelligence systems. Boeing anticipated flattening defense budgets and
shifting customer priorities for the past few years and has been taking aggressive
steps to position the company for profitable growth in a challenging economy. With
the latest strategic move, the company extends its core programs even as it
enhances its capabilities designed to capture business in promising markets in the
US and around the world (Boeing SWOT, 2010).
BDS provides affordable solutions and brings value to customers through its
ability to solve complex problems utilizing expertise in large-scale systems
integration, knowledge of legacy platforms, and development of common networkenabled solutions across all customers domains. Therefore, realignment positions
Boeing for further growth in new and adjacent markets while continuing to serve
existing defense and space customers (Boeing SWOT, 2010).

Diversified business offerings

Boeing is the largest aircraft manufacturer globally and delivers aircraft to a
large number of developed and developing countries. Its rank as defense
contractor with different countries is second. The designs of Boeings aircrafts are
efficient. There is no fault in its designs. Its production system is also very efficient.
It also has the strength of product diversification. It not only manufactures
commercial aircraft but also manufacture aerospace and defense aircrafts (About
us, 2011; Boeing SWOT, 2009; Hill & Jones, 2009, C1-C15).

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Boeing has been a manufacturer of commercial jetliners for more than 40 years.
Boeing merged with McDonnell Douglas in 1997 adding to its existing commercial
aviation product line. Today, the main commercial products are the 737, 747, 767
and 777 families of airplanes and the Boeing Business Jet. New product
development efforts are focused on the Boeing 787 Dreamliner, and the 747-8. The
company has nearly 12,000 commercial jetliners in service worldwide, which is
roughly 75 percent of the world fleet. Through Boeing Commercial Aviation
Services, the company provides around-the-clock technical support to help
operators maintain their airplanes in peak operating condition. Commercial Aviation
Services offers a full range of world-class engineering, modification, logistics and
information services to its global customer base, which includes the world's
passenger and cargo airlines, as well as maintenance, repair and overhaul facilities.
Boeing also trains maintenance and flight crews in the 100-seat-and-above airliner
market through Boeing Training & Flight Services, the world's largest and most
comprehensive provider of airline training ("Boeing: Boeing in," 2011).
Boeing Defense, Space & Security (BDS) provides end-to-end services for largescale systems that enhance air-, land-, sea- and space-based platforms for global
military, government and commercial customers. BDS designs, produces, modifies,
and supports fighters, bombers, transports, rotorcraft, aerial refuelers, missiles,
munitions and spacecraft for military, civil and commercial use. Boeing Capital
Corporation is a global provider of financing solutions. Working closely with
Commercial Airplanes and Defense, Space & Security, Boeing Capital Corporation
arranges, structures and provides financing to facilitate the sale and delivery of
Boeing commercial and military products ("Boeing: Boeing in," 2011).
Realignment for growth and expansion to new markets

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The company focuses on realignment, which is part of a continuing to
successfully compete in a rapidly evolving global defense and security marketplace.
From January 2010, Boeings integrated defense systems business unit began
operating under the name Boeing defense, space and security (BDS). While BDS
will retain its current operating divisions (Boeing military aircraft, network and space
systems, and global services and support), the realignment consolidates some
businesses. Boeing consolidated two businesses in network and space systems
division, the combat systems business and the command, control and
communications networks business. These businesses will be unified as the new
network and tactical systems business. Boeing anticipated flattening defense
budgets and shifting customer priorities for the past few years and has been taking
aggressive steps to position the company for profitable growth in a challenging
economy. With the latest strategic move, the company extends its core programs
and enhances its capabilities designed to capture business in promising markets in
the US and around the world. BDS provides affordable solutions and brings value to
customers through its ability to solve complex problems utilizing expertise in largescale systems integration, knowledge of legacy platforms, and development of
common network-enabled solutions across all customers domains. Therefore,
realignment positions Boeing for further growth in new and adjacent markets while
continuing to serve existing defense and space customers (Boeing SWOT, 2010).
Weaknesses
Production and supply problems
Boeing delivered its first 787 Dreamliner airplane to All Nippon Airways (ANA) in
September 2011, three years later than expected. The 787 is seen as the future of

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air travel as well as the future of Boeing. It is a sophisticated carbon-composite
aircraft. However, the 787 has been plagued by problems of delay and quality
control in the companys complex global supply chain and costs more than $32
billion, over double the usual development of a new airliner. Boeing experienced
problems with the availability of the new Rolls Royce Trent 100 engine. In August
2011, during a test near the Boeing facility in Seattle, a Rolls Royce engine blew
apart and caused severe damage to the testing facility. Consequently, the facility
had to be shut down for repairs. Officials at Boeing and Rolls Royce deny that the
delays with the Rolls Royce engine are due to the explosion (Logan, 2011; Reed,
2010).
Engineers have also had difficulties trying to remedy issues with a horizontal
stabilizer on the airplane's tail made by a subcontractor in Italy. In addition, there
were problems with the GEnx engine powering some of the 787s. There were other
problems with the design, supply chain and manufacturing such as a shortage of
fasteners. Boeing controls production of composites through a closely monitored
supply chain. Carbon fiber composites come from Toray Industries, which has been
rapidly ramping up capacity. Assembly of the composite components requires a
large number of high-quality, lightweight fasteners from suppliers such as Carpenter
Technology, Alcoa Fastening Systems and Allegheny Technologies (ATI). The 787
uses eight times more titanium fasteners by weight than the 737. Demand is
stronger right now for the premium fasteners used to build aircraft engines.
Aircraft fastener supplies have been negatively affected in the last three years by
speculation in the supply chain. Some distributors bet on strong demand for the
Dreamliner in 2008 through 2010 and were burned when production was postponed
multiple times. As a result there was a supply overhang that made it difficult for

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OEM suppliers to operate consistently. Instead of drawing primarily from its
traditional pool of aircraft engineers, mechanics and laborers in the Seattle area,
Boeing uses an international team of suppliers and engineers from the United
States, Japan, Italy, Australia, France and elsewhere that manufacturer Boeing
components. The repeated Dreamliner delays result from a splintered engineering
strategy and a complex supply chain of about 50 partners (Smock, 2011).
According to Bernstein Research, Boeing will not reach target goals for its 787
production of 10 planes per year until 2015. Boeing lowered its outlook due to
concerns over additional delays from eight 787s down to six this year and 51 (from
61) for 2012. Boeing had planned to reach 10 planes per month by the end of 2013
(Thomas, 2011).
Labor/legal problems
Boeing has been plagued with legal problems in the past. Its recent problems
involve a new Boeing plant in South Carolina. Boeing opened a new $750 million
assembly plant in South Carolina. The National Labor Relations Board (NLRB) is
accusing Boeing of breaking the law when it violated workers rights. The
controversy is over Boeing's decision to assemble its fuel-efficient 787 Dreamliner.
The NLRB is charging Boeing with retaliating against workers in Washington State to
punish them for past strikes by building the plant in a right-to-work state where
unions are not as prominent. They filed a complaint against Boeing in April 2011.
Boeing plans on keeping the original Washington state plant open and continue to
send the majority of its 787 Dreamliner business there. Boeing has added more
than 2,000 jobs there since the 2009 decision to open a second production plant.
Regardless, Boeing remains in the news about government attempts to force Boeing
to place the second final assembly line in Puget Sound, Washington and close the

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South Carolina final assembly and delivery facility (Devaney, 2011; Kesmodel &
Trottman, 2011).
In September 2011, the NLRB stated that they obtained documents under
subpoena that demonstrates that Boeing opened its second assembly line in South
Carolina to avoid labor problems, even though Boeing officials considered the
location its highest-risk option. The South Carolina plan is known as Project
Gemini. According to the NLRB, documents from 2009 reveal that Boeing
knowingly located the plant in South Carolina to help rebalance an unbalanced and
uncompetitive labor relationship. However, leaders at Boeing made a decision to
place the plant there based on numerous factors including the firms need to ensure
a competitive future and insist that the decision is consistent with the law. Boeings
objectives in the move were to improve its cost-competitiveness and regain a
reputation among customers for reliable products, deliveries, and support. Boeing
plans to assemble three of the wide-body Dreamliners a month at the South
Carolina plant and seven per month in the Washington plant by 2013 (Devaney,
2011; Kesmodel & Trottman, 2011).
Dependence on US government
According to Boeings 2010 Annual Report, the United States Department of
Defense (DoD) is BDSs primary customer, accounting for 82% of its revenues.
Other significant revenues were derived from the National Aeronautics and Space
Administration (NASA) and international defense markets, civil markets and
commercial satellite markets. BDS consists of three capabilities-driven businesses:
BMA (Boeing Military Aircraft), N&SS (Network & Space Systems) and GS&S (Global
Services & Support). Reliance on these governmental poses a threat to Boeing
(The Boeing Company, 2011).

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Any budgetary and spending cuts affect future revenues. While Boeing is
concerned about future cuts, current defense budgets exceed $700 billion for 2010.
Budgets are expected to increase in 2011. After 2011, fiscal policy changes could
drastically alter future earnings in the defense industry. To reduce its dependence
on the U.S. government, BDS has developed several diversification strategies.
Expanding its business overseas is one such strategy. Recently, the Obama
administration has sought Congressional approval for Boeing to sell $60 billion
worth of F-15 jets to Saudi Arabia. Additionally, the company recently delivered
three F-15s to the Republic of Korea. (Boeing: Boeing delivers, 2010).
Boeing depends heavily on U.S. government contracts that are subject to unique
risks. In 2010, 43% of its revenues were derived from U.S. government contracts.
In addition to normal business risks, these contracts are subject to risks beyond the
firms control. The funding of U.S. government programs is subject to congressional
appropriations. Many of the government programs may last several years and are
funded annually. Changes in military strategy and priorities can affect future
procurement opportunities and existing programs. Long-term government contracts
and related orders are subject to cancellation, delay, or restructure, if
appropriations for subsequent performance periods are not made. The termination
or reduction of funding can result in an adverse effect on Boeings earnings, cash
flow, and financial position. The U.S. government can modify, curtail, or terminate
contracts with Boeing without prior notice and at its convenience upon payment for
work done (The Boeing Company, 2011).
In addition, Boeings contracts are subject to audits by the U.S. government
agencies for incurred and indirect costs. The company is subject to cost
adjustments if any costs are found to be improperly allocated including refunds.

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They are also subject to government inquiries and investigations that could have
adverse effects on their financial condition. Their government business is also
subject to specific procurement regulations and other requirements that increase
Boeings performance and compliance costs (The Boeing Company, 2011).
Opportunities
Increased demand for aircraft
Air transport throughout the world is constantly changing in response to market
opportunities and challenges. The rise of new airline business models and rapid
growth of air travel in the worlds emerging economies are stabilizing worldwide
demand for airplanes. The emerging markets are driving economic expansion, with
China leading the way at 7.2% GDP growth, followed by Southwest Asia (6.1%),
Africa (4.9%), Southeast Asia (4.6%) and Asia-Pacific (4.4%). The global GDP is at
3.1% and North America is set at 2.1%. This translates into world average air travel
growth of 4.9%, of which Asia-Pacific, including China, will experience growth in air
travel of 6.9%. At a global level, the number of airplanes in the world fleet grows at
an average 3.2% each year. At the same time, passenger traffic, measured in
revenue passenger-kilometer, grows 4.9% per year and cargo traffic, measured in
revenue tonne-kilometers, grows 5.4% a year (Boeing SWOT, 2010).
According to Boeings Current Market Outlook for the period 2009-2028, the
demand for new airplanes worldwide is expected to be 29,000 over the next two
decades, of which 2,100 will be regional jets (less than 100 seats), 19,460 will be
single-isles, 6,700 will be twin-aisle, and 740 will be large. All this translates into
revenues of $3.2 trillion over a score of years, for an average of $160 billion/annum.
Boeing is well positioned both geographically and technically to service the huge
aircraft market in the future. The growing demand for aircraft represents an

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opportunity for Boeing to capitalize on this market and would be able to expand its
revenues and profits from this market (Boeing SWOT, 2010).
The FAA expects U.S. airlines will carry 1 billion passengers a year by 2021, two
years faster than previously forecast. In its annual report published in February
2011, the FAA expects international traffic to grow more rapidly than domestic
travel - with U.S. airlines handling 7.8 percent more international passengers but
only 3 percent more domestic passengers. This trend is expected to continue
through 2031 due to faster economic growth in other parts of the world. The
International Air Transport Association also predicted 3.3 billion air travelers
worldwide by 2014, up by nearly one-third from 2009, with China being the major
driver of growth (FAA sees 3.5%, 2011).
In a 2006 report, Boeing believes that the 747 range including the Airbus A380,
will account for some 3% of deliveries and 10% of value between 2006 and 2025.
Airbus believes that the demand for very large aircraft will be robust, amounting to
1,648 large passenger aircraft and freighters in the 747 range and above or 22% of
the total value of aircraft delivered. Airbus believes that hubs will continue to play
an important role in airline travel especially international travel, and that very large
jets will be required to transport people between hubs. However, Boeing believes
that travelers prefer nonstop service between cities and want to avoid congested
hubs. Boeing believes that the flights between city pairs will continue to grow (Hill
& Jones, 2009, pp. C1-C15).
Surge in the US defense spending
Defense spending is a long-term recession-proof industry which would not be
affected by cyclical downturns and upturns. The 2011 US budget allocates $708.2
billion to the Department of Defense (DoD). The US Federal Budget for FY 2011 is a

23
spending request by President Barack Obama, to fund defense operations from
October 2010 to September 2011. The 2011 Budget for DoD provides $548.9 billion
for the DoD base budget in 2011, a 3.4% increase over the 2010 enacted level.
This funding increase allows DoD to address its highest priorities, such as the
Presidents commitment to reform defense acquisition, develop a ballistic missile
defense system that addresses modern threats, and continue to provide high quality
health care to wounded service members. In addition, the 2011 Budget provides
$159.3 billion for DoDs ongoing overseas contingency operations in Iraq,
Afghanistan, and Pakistan. A supplemental funding request of $330.0 billion for
2010 addresses immediate funding requirements for these missions. Boeings
primary customer is the US DoD with approximately 80% of Boeing defense, space
and securitys 2009 revenues being derived from this customer. Therefore, a surge
in the US defense spending could provide growth for the company in the short to
medium term (Boeing SWOT, 2010).
787 Dreamliner to gain market share
Boeings 787 Dreamliner offers more comfort and convenience and is 20 percent
more fuel efficient compared to other airplanes the same size. It also releases 20
percent less carbon dioxide and flies 15 percent faster due to its ultra-light carbon
fiber components. The 787-8 Dreamliner will carry 210 - 250 passengers on routes
of 7,650 to 8,200 nautical miles, while the 787-9 will carry 250 - 290 passengers on
routes of 8,000 to 8,500 nautical miles. In addition to bringing big-jet ranges to
mid-size airplanes, the 787 provides airlines with excellent fuel efficiency, resulting
in exceptional environmental performance. It will also travel at a similar speed as
today's fastest wide bodies, Mach 0.85. Airlines also have more cargo revenue
capacity. The modern systems architecture also offers increased functionality and

24
efficiency. Since being launched in April 2004 with a record order from All Nippon
Airways (ANA), 56 customers from six continents have placed orders for 821
airplanes valued at about $145 billion, making it the most successful twin-aisle
launch of a new commercial airplane in Boeings history. The first 787 was just
delivered to ANA in September 2011 as the world watched. As of 2011, Boeing has
426 orders for the Dreamliner. It predicts the market at 3,310 units over 20 years
(2009-2028). Boeing estimates the plane to have a 30 percent maintenance
savings and a 10 percent better cash seat mile cost compared to peer airlines.
Boeing also estimates the 787 will connect 450 new city pairs ("Boeing: commercial
airplanes-787," 2011).
Boeing opportunities consist of a growing demand for small to mid-size airline to
serve the increase in travel through pair cities and nonstop destinations. As cities
become more populated, hub cities become more congested. Many travelers prefer
to avoid hubs and travel through city pairs. Smaller cities that offer nonstop flights
are more convenient and easier to get in and out of especially for business
travelers. In addition, the Dreamliner offers airlines a more cost efficient way to fly.
Airlines can reduce their operating costs. As older fleets near retirement, demand
for newer, quieter, faster, jets are heating up. Demand has been strong for the 787
(Hill & Jones, 2009, pp. C1-C15).
Threats
Intense competition and pricing pressure
The commercial jet aircraft market and the airline industry remain extremely
competitive. Boeing faces aggressive international competitors, including Airbus,
who are intent on increasing their market share. Boeing Defense, Space and
Security (BDS) business also faces strong competition in all market segments,

25
primarily from Lockheed Martin, Northrop Grumman, Raytheon Company and
General Dynamics. Non-US companies such as BAE Systems and European
Aeronautic Defense and Space Company (EADS), the parent of Airbus, continue to
pursue a strategic presence in the US market by strengthening their North American
operations and partnering with US defense companies (Boeing SWOT, 2010; Hill &
Jones, 2009, C1-C15).
International competitors who are intent on increasing their market share, offer
competitive products and have access to most of the same customers and
suppliers. Airbus has historically invested heavily to create a range of products to
compete with Boeing. Regional jet makers Embraer and Bombardier continue to
develop larger and more capable airplanes. Additionally, other competitors from
Russia, China, and Japan are likely to enter the 70 to 190 seat aircraft market over
the next few years. In addition, certain of Boeings competitors have occasionally
formed teams with other competitors to address specific customer requirements.
BDS expects the trend of strong competition to continue into 2012 with many
international firms pursuing announced intentions of increasing their US presence.
Furthermore, market liberalization in Europe and Asia has enabled low-cost airlines
to continue gaining market share. These airlines have increased the downturn
pressure on airfares. This results in continued cost pressures for all airlines and
price pressure on Boeings products. This market environment has resulted in
intense pressures on pricing and other competitive factors and Boeing expects
these pressures to continue or intensify in the coming years. Therefore, intense
competition across all business divisions of Boeing could erode the market share of
the company and could also affect its profit margins (Boeing SWOT, 2010; Hill &
Jones, 2009, pp. C1-C15).

26
Risks concerning labor issues
Boeing faces risk concerning labor issues at its plants. Approximately 57,000
employees, which constitute approximately 36% of the companys total workforce,
are union represented as of December 31, 2009. Boeing experiences work
stoppages from time to time due to worker strikes. The company experienced a
work stoppage in 2008 when a labor strike delayed commercial aircraft and certain
BMA program production. Also in May 2010, 1,700 Boeing workers who assemble
giant C-17 cargo jets in Long Beach, California were on strike for a month over
pension and medical benefits. As a result, theC-17 production line was shut down
although 3,000 non-union workers were on the job. The work stoppage was tough
at a plant where workers were accustomed to rolling a new C-17 onto the tarmac
every three weeks. The strike was halted in June 2010, as Boeing offered to pay a
$4,000 payout and a 3.4% over the life of the agreement. It also offered an
increase in the basic pension benefit to $79 per month for each for each year of
service, from $70. Boeing may experience additional work stoppages in the future,
which could adversely affect its business. The company cannot predict how stable
its relationships will be with 14 different US labor organizations and 7 different nonUS labor organizations. Union actions at suppliers can also affect the company.
Work stoppages and instability in the companys union relationships could delay the
production and development of its products, which could strain relationships with
customers and cause a loss of revenues (Boeing SWOT, 2010).
Uncertain airline industry environment
Boeings main competitor is Airbus. The competition between Boeing and Airbus
is fierce. Airbus can offer large discounts because it is subsidized by European
markets. Both have spent millions lobbying politicians for various reasons from

27
industry regulations and funding to contracts. With time and use, airplanes age and
must be refurbished or replaced. Airlines are focusing on refurbishing old aircraft
rather than new ones which can decrease the demand as well as sales of new
aircraft. Boeing has an opportunity with its Dreamliner to capture the aging
airplane market. It may be more cost effective over the long haul for airlines to
replace planes due to the fuel efficiency and cost savings of the Dreamliner
(Boeing SWOT, 2010; Hill & Jones, 2009, pp. C1-C15).
In addition, there has been a decrease in air travel due to the economic state of
the global economy. Travelers do not have the money to travel. Businesses are
spending less on travel. Since business travel is directly related to corporate profits,
airlines are dependent on the overall health of the business environment. Losing
those premium travelers could prove to be a huge hit to carriers corporate profits.
Indicators for business travel point to a continued slowdown for the remaining
months in 2012. Stock prices and profits are down for American, Delta, and United
airlines as they struggle to keep up with rising fuel costs and thinning demand. The
airline industry will likely face a decline in profitability heading into 2012, with total
industry profits falling to $4.9 billion from $6.9 billion this year. The decrease in
passenger economy travel has been a problem for airlines over the last decade, but
the slowdown in corporate premium travel poses new risks and has the potential to
cause even more damage. Passenger tickets now account for just 71% of U.S.
airlines' total passenger revenue, down about 17 percentage points from 1990,
according to the Department of Transportation, and profits from business travelers
typically make up a majority of that. Although there was a significant rebound in
travel after the recession officially ended last year, there is also a shift away from
travel on business and first class seats towards economy. Before the drastic decline

28
in the economy two years ago, premium travel made up 9-10% of total international
air travel. In the latest periods, that has fallen to about 7.5-8% placing more
pressure on airlines to cut costs. Air travel in the European and North Atlantic
markets have dropped significantly which reflects the economic conditions of this
part of the world. These regions used to be one of the strongest for air travel. On a
positive note, travel to Asia continues to be robust as those emerging markets
become more attractive to foreign businesses. With the increased economic
interest in Asian markets, premium travel growth within the Far East was up for July
and August 2011. First-class travel to the Far East from the U.S. also grew modestly
and showed little sign of any slowdown. However, travel on the spacious leather
seats within the U.S. dropped 13.2%, which is on top of a 9.7% decline in July
(Booton, 2012).
Rising fuel costs
Rising fuel costs are threatening airline margins. So far in 2011, the U.S. airlines
have increased airfares six times compared with four times in 2010. A strong
demand could offset some of the price of fuel. Demand began to build in 2010 as
airlines kept the number of seats available for purchase relatively low and the
recession started to ease. Revenue offset the steady climb of jet-fuel prices last
year. In the early months of 2011, however, conflict in the Middle East led to jetfuel prices increasing at an accelerated pace compared with 2010. The volatility of
fuel threatens profitability and dampens plans airlines have to increase capacity in
the next year. In fact, many airlines have had to cut system wide capacity for 2011
by as much as 2 percent. United, American, and Delta Airlines reduced their
capacity-growth plans due to fuel prices. The industry is predicted to remain flat for
the remainder of this year. Delta expects its fuel bill to be about $3 billion for 2011,

29
a 35 percent increase over 2010. Besides adjusting capacity, airlines may be forced
to furlough and lay off employees and add ancillary fees to tickets as fuel price
increases and demand decreases. Ancillary fees include charges for checked bags,
blankets, and snacks. To combat rising fuel prices and improve cash flow, some
airlines are deferring delivery of planes and may cancel future orders (Neighbor,
2011).
Airlines are threatened by the volatility in jet fuel prices. Today, jet fuel ranges
from 35 to 40 percent of airlines operating costs. Jet fuel was at an all time high in
2008 when prices were over $4 per gallon. Airlines are in a better position today
than in 2008, however, there are fewer travelers. After 2008, the airline industry
downsized and removed a lot of capacity. Utilization rates are higher and there are
not many empty seats on planes. Reducing and maintaining capacity has meant
the difference between hardship and survival for many airlines. For Boeing and
Airbus, the reduced capacity affects their bottom line in airplane sales. However,
with the continued threat of rising fuel prices, Boeing has a great opportunity with
its Dreamliner aircraft (Neighbor, 2011).
Change in US budgetary priorities and contracts
One of Boeings strength is its contracts with the government. However, heavily
reliance on these contracts also represents a threat. As war conditions change, the
military requirements also change. Boeing was awarded one of the biggest
contracts in military history consisting of $35 billion to build the next generation of
air refueling tankers. These new tankers will replace 179 of the Air Forces aging
tankers which are equivalent to a flying gas station ("Boeing receives $35," 2011).
Boeing provides commercial aircraft to many foreign airlines and is one of the
largest exporters in the U.S. It is also one of the biggest defense contractors or the

30
military and other government departments. Boeing gets a lot of support from the
U.S. Export-Import Bank due to its overseas sales volume. It is receiving about $15
billion in loan guarantees from the bank which help finance foreign commercial
customer purchases. In 2010, Boeing received about 63% of all guarantees from
the government entity. However, despite this business, Boeing as well as other
defense contractors, is facing the potential for major cuts and reductions in overall
defense spending by the United States. This means that there may be fewer
tankers, transports or other products purchased from them. The contract Boeing
received for the new KC-46A refueling tanker helps offsets the end of the C-17
production for the Air Force and the end to other programs. However, the Air Force
is looking at moving a great deal of their logistic support back to their own depots
and away from commercial providers which affects Boeings bottom line (Potter,
2011).
Personal Observations
Boeing has been building commercial airliners since 1927 with the first Boeing
commercial jet airliner, the 707, introduced in 1957. Boeing is best known for its
747 jumbo jet it introduced in 1966. Boeing merged with McDonnell Douglas in 1997
primarily for its strong military business and has been a dominant player in the
commercial aerospace industry. However, the firm has been losing market share to
Airbus since the mid-1990s. Boeing and Airbus directly compete with each other. In
2006, Boeing enjoyed strong sales of its 737, 777, and its newest wide-bodied
super-efficient jet, the 787 Dreamliner. Boeing started taking orders for the 787 in
2006, however, due to production delays the first aircraft was three years late. All
Nippon Airlines did not take delivery of the first plane until September 2011.

31
Boeings competitor, Airbus, had its own production problems with the A380 super
jumbo jet (Hill & Jones, 2009, pp. C1-C16).
Historically, airline manufacturers tried to manage the supply process through
vertical integration making many of the component parts that went into the aircraft.
Their functional level strategy of keeping production in house had many flaws.
Airplanes were housed in garages where they were assembled. When one process
was complete, the plane was moved to another area for the next process. This
process was labor intensive, inefficient, and costly. However, over the past two
decades, there has been a shift to contract out production components and entire
subassemblies to independent suppliers. Contracting out has caused production
problems and delays. It has been difficult to coordinate the manufacturing process
with suppliers. Boeings 767, introduced along with the 757 in 1982, was the first
aircraft in which the firm contracted out a significant portion of work to Japanese
manufacturers. Over the years, Boeing had numerous problems with suppliers and
manufacturers causing significant delays with its aircraft. Airbus also had
outsourcing problems. Its largest A350 wide-body aircraft that competes with
Boeings 777 has been delayed for 18 months (Rothman, 2011).
By the late 1990s, Boeing was plagued by a number of production problems. In
an attempt to gain share from Airbus, Boeing cut prices. Delivering aircraft meant
that Boeing had to more than double its production schedule between 1996 and
1997. However, the company ran into some severe production bottlenecks. The
company scrambled to hire and train about 41,000 workers, recruiting many from
suppliers, a move it came to regret when many of the suppliers could not meet
Boeings demands and shipments of parts were delayed. In 1997, things got so bad
that Boeing shut down its 747 and 737 production lines so that workers could catch

32
up with out-of-sequence work and wait for back-ordered parts to arrive. Ultimately,
the company had to take a $1.6 billion charge against earnings to account for
higher costs and penalties paid to airlines for the late delivery of jets. As a result,
Boeing made very little money out of its mid-1990s order boom. The head of
Boeings commercial aerospace business was fired, and the company committed
itself to a major acceleration of its attempt to overhaul its production system,
elements of which dated back half a century (Hill & Jones, 2009, pp. C1-C15).
Boeing changed its business strategy to an outsourcing manufacturing process.
They looked at the Japanese automobile manufacturing processes. Toyota, after
analyzing their production and manufacturing process and discovering numerous
flaws, switched to a process known as lean production. In contrast to conventional
or mass production, lean production shortened production runs by using a system of
levers and pulleys which reduced setup times for production equipment which is a
major source of fixed costs. In addition to shorter runs and quicker turnover times,
the change to lean production enabled Toyota to provide better customer
responsiveness and operate more efficiently. In the 1990s, Boeing looked at what
Toyota had done. Until then, Boeings production was about producing parts in high
volumes and storing them in warehouses until they were needed. Boeing was
drowning in inventory and had the huge financial expense of housing the inventory.
In addition, expensive equipment took up a lot of space and remained idle for long
periods of time. Boeing created cross-functional teams to develop lean production
processes. These moonshine teams started developing their own equipment and
machines that were essentially like moving garages and assembly lines. Instead of
moving the aircraft, they wheeled machines around the plant to work on the planes.
This cut down assembly time and manpower. This small scale and quick turnaround

33
made it possible to produce these parts just in time, eliminating the need to
produce and store inventory. Portable machines such as routers were built for a
fraction of the cost of large fixed machines. Set-up times were minutes instead of
hours. Boeing reduced labor hours by 74% and reduced manufacturing space by 50
percent. Boeing was now able to produce smaller lots of parts economically and
switch to just-in-time inventory systems reducing waste. The moonshine teams also
adopted other process improvement methodologies including Six Sigma quality
improvement processes and total quality management systems (TQM). Boeing also
moved from a static assembly line to a moving line in which the aircraft is moved at
a rate of 2 inches per minute moving past a series of stations where tools and parts
arrive the moment needed. This reduces time and work and eliminates workers
from wandering around for parts and tools. These arrive on workstations delivered
to the assembly area. In addition, the moving line is stopped when a problem
occurs. These changes have had a significant effect. By 2005, assembly of the 737
went from 22 days to 11 days. Work-in-progress inventory was reduced by 55% and
stored inventory was reduced by 59 percent. By 2006, all Boeings production lines
except the 747 had shifted from static bays to moving lines. It shifted the 747 to a
moving line with the production of the new 747-8 jet. Changing its functional-level
and business-level strategies from large inefficient production processes to lean
production processes has enabled Boeing to reduce cost, manufacture and produce
more efficiently, and improve customer responsiveness. Although Boeing had
made great improvements in their production and manufacturing processes, they
were mired with supplier problems. Boeing outsourced more work for the 787 than
any other aircraft to date. In addition, Boeing asked it major suppliers to bear some
of the development costs. Supplier problems caused major delays. Coordinating

34
suppliers proved to be complex, costly due to delay penalties, and time consuming.
Boeing lost orders for the 787 due to the delays and potential customers switched
to Airbus (Hill & Jones, 2009, C1-C15).
Both Boeing and Airbus have had similar problems with production and suppliers.
However, they had have had very different views for demand projections. Annual
projections of future demand is based on assumptions about future global economic
growth, the resulting growth in demand for air travel, and the financial health of the
worlds airlines. In 2006, Boeings report showed that passenger traffic would grow
at 4.8% per annum over the next twenty years versus Airbuss forecast of 5.3
percent. Boeing forecast demand for 27,210 aircraft valued at $2.6 trillion over the
next twenty years. Boeing believes that the majority of aircraft will be for regional
jets (which have fewer than 100 seats) and the large 747 aircraft. According to
Boeing, aircraft in the 747 and the Airbus A380 range will account for about 3% of
deliveries and 10% of the value. On the other hand, Airbus believes that demand
for very large aircraft will be robust, amounting to 22% of the total value of aircraft
delivered. These differences reflect different views of future demand. Boeing
believes that airline travelers will demand more frequent nonstop flights between
city pairs, not larger aircraft. After Boeing introduced the 767, airlines introduced
more flights between city pairs in North America and Europe and more frequent
departures. In 1984, 63% of all flights across the North Atlantic were in the 747. By
2004, this declined to 13% with smaller wide-bodied aircraft such as the 767 and
777 (Hill & Jones, 2009, pp. C1-C15).
Boeing developed the wide-bodied 777 in response to Airbuss A330 and A340.
The 777 was the first jet to be designed entirely on a computer. In addition, for the
first time Boeing used cross-functional teams composed of engineering and

35
production employees. It also brought major suppliers and customers into the
development process. As with the 767, a significant amount of work was
outsourced to foreign manufacturers, including the Japanese companies Mitsubishi,
Kawasaki, and Fuji, which supplied 20% of the 777 airframe. In total, some 60% of
parts of the 777 were outsourced. Boeings break-even point with the 777 is 200
planes. By mid-2006, they had 850 orders (Hill & Jones, 2009, pp. C1-C15).
Although Boeing encountered a lot of problems, there is a lot that they are doing
right in the area of their lean efforts. They have continued these efforts for over a
decade now and seemed to have learned a few things along the way. Some of the
problems were due to poor planning, poor execution of their plans, and in some
cases a combination of both. Good plans should consider risks and allow for
contingencies. Questions that arise are Why did things go so wrong for Boeing; did
they have a good plan or just good intentions? In addition, what was Boeings
philosophy behind their approach? Exactly what was Boeings mission? According
to Miller (2008), The mission statement of the purchasing group of any company
aiming to become a world class lean manufacturer should be a variation on the
theme of: Buy the best products at the lowest price, on-time in a way that ensures
long-term stability by building strong supply base. The work of sourcing or
purchasing within an organization should create value. This means not running out
of parts, being on-time with good quality, and purchasing at a low price. In addition,
purchasing activities should create profit in a real and concrete way by streamlining
the entire process and building a strong supply base. Boeing should learn from its
supply chain mishaps with the 787. Firms can take actions toward a better lean
supply chain strategy. Firms should develop a mindset of mutual trust and
responsibility by building good and strong cooperative relationships as equal

36
partners with suppliers. Fair and reasonable commitments that both sides can live
up to and fulfill are simply good business. Cut-throat supply chains that erode trust
or relationships based on one-way responsibility work for a short while, and then
can fail. A firm should organize its SPTT (Supplier Parts Tracking Team) to make sure
there is a smooth start up of production and delivery from suppliers. For example,
Boeing was not paying attention to the detail and intensity when it managed to run
out of fasteners. Boeing should spend less time putting out fires and more time on
a SPTT to prevent these fires (Miller, 2008).
The next ten years will be interesting for Boeing and Airbus. The economic
environment that the world faces today is much different than in the past. War,
economy, and terrorism all affect the future of these airlines. They have some of
the same problems but deal with them differently. Both companies see growth in the
industry but differ in the amounts of growth and the market segments that will
experience growth. Personally, I see airline travel growing more in the city pairs
segment with smaller aircraft and more frequent nonstop flights going from city to
city. The major hubs will grow but at a lower rate. The industry will always require
bigger aircraft like the 747 and A380 for international flights. People that travel on
longer transcontinental flights prefer larger, more comfortable aircraft.
Boeing has made a lot of changes to its manufacturing strategy and supply chain
strategy. The company needs to be careful not to make the same mistakes. It
needs to work on strategies that will ensure better predictions on delivery dates. All
projects have delays. However, a 3 year delay with the 787 seems unreasonable
and unacceptable. In all research for this paper, I did not find information on the
project management team responsible for developing the project time schedule.
Managing projects as big as the 787, should be monitored with precision. The level

37
to which Boeing managed the project management team is unclear. It would be
interesting to see a copy of the project management plan.

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