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Boeing’s Slow-Death Hand

From the Editor in Chief
September 1, 2003

If you’ve ever played poker, you’ve probably been dealt a “slow death” hand-cards just good enough to keep you betting but not good enough to win. You typically sense the truth, but delude yourself that you’ll get lucky, and so keep shoveling chips into the pot. Then, sure enough, the day of reckoning comes-and you realize you should have jettisoned the cards early on and waited for a new and better opportunity.

If ever a company was playing a slow-death hand, it’s Boeing. The aerospace titan, once a symbol of innovation, seems to be sticking increasingly with noninnovative, behind-the-times aircraft and watching its previously commanding lead in passenger airliners be whittled away. Consider the gruesome statistics: leading rival Airbus has soared from a 19 percent market share a decade ago to 40 percent last year. With 1,500 new plane orders on the books versus Boeing’s 1,100, the European aerospace consortium is set to grab the top spot in just a few years. By 2013, Boeing could be staring at a meager 30 percent share, according to an assessment from aviation industry consultants the Teal Group.

Unless, that is, Boeing innovates its way to reversing this trend. Which is why as a poker player, frequent airline passenger, and student of the research and development imperative to produce new products (and not just incremental improvements on existing ones), I urge Boeing to fold its slow-death bet on its current fleet and deal itself some fresh cards by building the proposed 7E7, aptly dubbed the Dreamliner.

The challenge, and promise, of constructing this state-of-the-art plane are laid out in a compelling story by TR senior editor David Talbot, “Boeing’s Flight for Survival”. Talbot tells us the 7E7 could roll off production lines and onto runways by 2008-marking Boeing’s first new commercial-jet design since the 777 debuted in 1995. The Dreamliner is not especially radical on the surface: a mid-size craft that can carry between 200 and 250 passengers and will set no speed records. But thanks to a wealth of technological improvements that range from increased use of lightweight composites and electronic controls to networked sensors able to diagnose structural problems well before they become critical, the plane could set a benchmark for efficiency and profitable operation.

Boeing says the aircraft will essentially match the speed and range of large jets like the 747; what’s more, it will burn 20 percent less fuel than other mid-size jets and save millions in operating costs over the life of the plane. Its long range and moderate size could enable airlines to open as many as 400 profitable new nonstop long-distance routes.

But even though Boeing is pouring an estimated $350 million this year (roughly half its commercial-jet R&D budget) into the design, it’s not at all clear the Chicago-based company will take the plunge. The big fear is that with the cost of introducing a new plane pegged at close to $10 billion, it will be a calamity if Boeing makes the wrong bet. As Boeing’s director of technology integration for the 7E7 program told Talbot, “If we get it wrong, it’s the end. And everyone here knows that.”

But it’s fair to ask whether staying the course might be even more dangerous. Earlier this year, the company killed plans for the Sonic Cruiser, a superfast luxury skyliner that would carry the same number of passengers as the 7E7, while promising to knock two hours off a New York to Hong Kong run. If the 7E7 is also dropped, the leading alternative for a “new” plane would seem to be a next-generation 747 that would be slightly larger and all of 5 percent more efficient than the last batch of 747s that rolled out in 1989. I hate to say it, but you just don’t get much more slow death than that.

Boeing’s board of directors will meet early next year to decide the 7E7’s fate. But I’m wondering, why wait? We’ve entered an era of air travel where operating reliability and efficiency are the watchwords-even more important than things like passenger load and speed. The 7E7 would likely be the world’s most efficient big passenger jet, and the one best attuned to these times. As such it offers new hope to airlines struggling to increase profit margins-and marks Boeing’s best bet to play some new cards and preserve its lead.

Farewell, Seth Shulman

A good friend and great journalist is leaving the magazine-at least temporarily. This month marks the last appearance of Seth Shulman’s “Owning the Future” column. For nearly three years, Seth has offered penetrating and entertaining insights into our intellectual-property system-putting Technology Review at the heart of the debate on this vital topic. We will miss him, and greatly look forward to his writing feature articles for us, which is something at which he is also stellar. One of his first TR articles, “Toward Sharing the Genome” (September/October 2000), was part of a package named a National Magazine Award finalist. Goodbye Seth-and thanks.

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