Boeing’s Golden Opportunity Will Probably be Squandered

737, Boeing

This doesn’t even need to be said, but I have to start this post somehow: It has been a terrible couple of years for Boeing Commercial Airplanes. The company tried to fight the Bombardier C-Series but ended up strengthening it, now as the A220, under Airbus. Its reactive strategy to rejigger the 737 into the MAX to try to compete with the Airbus A320neo family has resulted in, well, a whole lot of pain. And now, its deal with Embraer — which was also reactive — has been blown up from the inside, leaving an angry and bitter former partner down in Brazil. Demand for airplanes has dropped to zero in light of the COVID-19 pandemic, and there is no recovery in sight. Despite all this, Boeing has an incredible opportunity to re-make itself. It will probably blow it.

I’m not writing this as someone who covers the manufacturing sector. For that, you’re better off subscribing to The Air Current. No, I’m looking at this from the perspective of the airlines. What do they want… or what will they want when the time comes again? Boeing’s current portfolio is severely lacking.

Think of this in comparison to the Airbus line:

What does Boeing really have here? The cupboards are terribly bare. The Embraer E2 is no longer part of the plan after Boeing called off its deal. The lower end of the 737 MAX range has received almost no interest, so a new project is required if Boeing wants to compete at all in the world under 160 seats.

The MAX is obviously not flying at all, and it hasn’t been for over a year. Who knows when that will end. But when it does, it will still be an inferior aircraft to the A320neo family, most strikingly at the top end where the A321neo outperforms the 737 MAX 9/10.

Above that, the so-called middle of the market, or NMA, airplane is likely dead. That was an imperfect project that tried to shoehorn an airplane into the gap that Boeing created by focusing on evolving the 737 instead of building a new airplane.

At the top end, Boeing has recently begun flight testing the 777X, a bigger and modernized version of the 777. But who wants that capacity right now? It never sold all that well outside of a large orders in the Middle East (sound familiar, A380 fans?), and the current situation ensures no interest for years to come.

What Boeing really has is the 787, the shining star and the last real gamble that the company took in the commercial airplane space. The 777-300ER has done well, but there are fewer than twenty aircraft left to be delivered. Again, orders are likely to be hard to come by.

With the product offering in shambles, what can Boeing do? Boeing built its success on bold gambles and engineering prowess. The most famous example, of course, was the 747 which became a world-beater thanks to Pan Am CEO Juan Trippe’s partnership and Joe Sutter’s team’s engineering feats. That company no longer exists, as has been well-documented.

What Boeing must do is listen to what customers really want. As of now, the answer is pretty much nothing. That, however, is a temporary state of affairs that will eventually change. The lack of short-term needs means that Boeing could bet the company and work toward something bold for the future.

Airlines will probably want the same thing they wanted before… a stellar 175-225 seat narrowbody with excellent economics. That was what Boeing tried to do with the 737 MAX, but in comparison to the Airbus offering, it failed. Then it started crashing and that obviously made things even worse. Boeing has now been reduced to trying to sell airplanes by bending over backwards to make them attractive. That’s why IAG bought 737 MAX airplanes while the airplane was grounded. It’s also why the rumors are likely true that Boeing is considering taking back a bunch of 717s from Delta in order to place the MAX with the airline. Considering Delta has nothing on order with Boeing, this would be a big win. But at what cost?

The right thing to do now is what was the right thing to do a decade ago. It’s time to say goodbye to the 737 and devote efforts toward a new airplane that is built for the segment. Boeing needs an airplane that makes the A321neo look like a bad decision.

It has hundreds of 737 MAX aircraft already built, so once it starts delivering them again, it will have plenty of work for employees to finish and get them off the property. But while we’re in this lull, Boeing could take a risk and say, “the MAX is dead.” Pour money and efforts into a new rock star that will be ready at just the right time.

Combine that with the 787, and you have two horses that can keep racing for years. Forget about the lower and upper ends. The lower end is big, but Boeing is so far behind it should focus elsewhere. And while Boeing is well-positioned for the upper end — things larger than the 787-10 — it’s just not going to be a huge market. Rally around the new narrowbody and the 787, and win.

It’s easy to say this, but Boeing’s balance sheet is a mess. That’s where the feds come in. This kind of strategy plays right into President Trump’s wheelhouse. Go hat in hand and say, “look, we’ve lost our way, but we’re back. We’re America, damnit, and we are going to build the best airplane for the best airlines. We’ve walked away from those Brazilians and we want to provide good jobs to Americans for years to come.” Then stick your hand out and beg for money.

By the time airlines are ordering airplanes again, the new airplane will be ready for sale. And by the time airlines actually want to take delivery of airplanes again, this will be ready to go. You don’t get a break in demand like this normally. You can either look at this is a horrible challenge or as a real opportunity. The Boeing of the 21st century would look at this with the former view. But a Boeing of the past would be willing to take big risks, bet the company, and try to win in the long run.

Is there any of that left in the company’s DNA? I’m sure it’s there hidden in a back corner, but whether it can percolate up to the level of management needed to make these bold decisions is incredibly unlikely. Still, this is a great opportunity. If anyone at Boeing can avoid squandering it, the airlines, your employees, and yes, America, will thank you.

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40 comments on “Boeing’s Golden Opportunity Will Probably be Squandered

    1. @Evil Bob Crandall,

      *Agree 100%!*

      DELTA: Do *NOT* order this crappy jalopy (737 MAX).

      Let it go and plan for a different, and BETTER, future that does NOT include a problem plagued plane (no matter how cheap it may appear to be now) that if another one crashes, will be FAR WORSE than McDonnell Douglas’ last failed attempt to prolong the life of an obsolete, also problem plagued for the first decade in service model, the DC-10, that had such a terrible reputation that long after its first decade was viewed by many as an inferior aircraft they asked to me to avoid booking them on when I was a travel agent, if possible.

      Separately, unlike a recent Cranky commentary re stock buybacks, which I found way off the mark, this column/blog post re McBoeing is **SPOT ON!**

      As in could NOT agree MORE with Cranky and totally “Team Cranky” urging McBoeing to instead rediscover OG BOEING’s “bet the company” mojo, and use the current pandemic lull in orders to DITCH the 737 MAX and launch the all new, clean sheet 21st century model it should’ve done originally instead of attempting to force the ancient, 1950s/60s designed and engineered 737 platform to meet the needs of the 21st century airline industry which is completely different than it was 50+ years ago.

      As Cranky notes, McBoeing now has a once in a lifetime opportunity for a complete “do-over”, or “Mulligan” for this segment of the market, with the possibility of gaining Airbus-style “launch aid”, too (such delicious irony, too…touché Airbus! hehehe ? ).

      It would be wise to make the most of this unexpected opportunity instead of continuing to waste resources hoping to prolong the life of a model that NEVER should’ve been launched in the first place by its short-sighted, greedyAF, toxic McDonnell Douglas corporate cultured imbued managers and its irresponsible/derelict Board, that’s become a hopeless money pit, too.

      Go for it BOEING!

      GO. FOR. IT.

  1. There will be little or no market for any airplane in the next decade or two unless it’s climate compatible which means alternative fuel or electric.

    It’s time for the airlines and the travel industry in general to recognize the climate change is here and will be orders of magnitude worse each decade and that flying is a significant contributor to greenhouse gases.

    Between lingering fears of pandemics and the rising demands of youth and others the hand writing is on the wall for the airline industry. Do the right thing Boeing and advocate the right thing Brett.

    1. It’s hard for me to believe that significant numbers of people will decide to travel or not based on the fuel efficiency of the aircraft. It’s nice to think about, but I think this concern will have little impact on leisure travel and almost none on business travel.

      1. “It’s hard for me to believe that significant numbers of people will decide to travel or not based on the fuel efficiency of the aircraft.”

        Travel decisions will be made on the basis of do I need to go or not, plain & simple. Unfortunately I see leisure destinations like Orlando & Las Vegas getting the short end of the stick for quite some time as staying at home, maintaining employment & social distancing will take priority. Also why fly when you can zoom?

    2. Perhaps you live in a place like Cambridge, Boulder, Madison or Berkeley, but in most places the climate change advocacy protesters are on the fringe and would not represent any significant market loss. Interestingly, as such protests have risen, so has international travel by the same demographic group (until this virus). With all due respect, I do not see this as a factor as far as making radical industry decisions. And the newer, lower emission, engine technologies available should be enough to satisfy corporations that are concerned about sustainability.

      No, the more relevant issue here would seem to be this pandemic and the societal reaction to it. There will be a lengthy drought in travel, that is for sure. How long it lasts is the more difficult question to answer. I doubt it will be permanent, but it could last for a couple of very lean years.

    3. I believe climate change is real, but I also don’t believe electric motor technology is there yet for large jet aircraft. I know it’s being tried at the low end, with Cessna 208 sized aircraft. But it’s hard to match the energy density of petroleum. I think it will come in time; Airbus has their demonstrator BAe146 with one engine replaced with an electric motor. But we’re not there yet. Hopefully something that’s being researched somewhere at Boeing and at the engine makers.

      In the near term, I think we’re looking at more biofuel blends like various airlines like Virgin Atlantic have trialed.

      1. From the NYT.

        Boeing, Expecting a Long Slump, Will Cut 16,000 Jobs

        The company, which saw sales plunge in the first quarter, said air travel might not recover for years.

        By Niraj Chokshi

        April 29, 2020Updated 3:16 p.m. ET

        The breathtaking slowdown in global aviation is taking a huge toll on Boeing, which said on Wednesday that it would slash about 16,000 jobs after reporting that revenue tumbled by 26 percent in the first three months of the year.

        “The global pandemic has changed the way we live and work,” said Boeing’s chief executive, David L. Calhoun, in a note to staff. “It is changing our industry. We are facing utterly unexpected challenges.”

        Read more at https://www.nytimes.com/2020/04/29/business/boeing-layoffs-coronavirus.html

        1. SEAN – Please do not reproduce articles in full in the comment section. I have truncated this to a fair-use excerpt and linked to the story. I don’t want to get in trouble for illegally republishing works.

  2. The A320 and A330 series are around 30 years old – first flight. Yes, making them “NEO” adds some life but as we all know from the MAX that only goes so far. My take is I agree with you but would suggest going big is to roll out two aircraft simultaneously like Boeing did before with the 757/767. As stated, the 787 is relatively young and has years to go. So why can’t you have two aircraft covering the 100 seat to 250 seat segment? Give them a common cockpit, make them world class in efficiency, design, etc. It’s not like this has never been done before and it’s super bold to set them up for the next 30+ years.

    1. The problem is corporate America on the whole over the past several decades has become risk adverse. when it comes to change, it’s adapt slightly from what worked before. Big changes are viewed as to risky & what if it backfires, what will it cost us in share holder value.

      1. You’re so right Sean. And the MAX debacle happened exactly because of this very cowardly risk aversion. It was seen as “safe” and “easy” and it would “maximize shareholder value”. How did that work out for ya, Boeing idiots? Maybe you corporate knuckleheads should read the above article and follow Cranky’s advice.

        Except for one thing: unlike Cranky, I do see a glaring need for more A220 sized aircraft in the marketplace. If anything, the pandemic has made this more relevant now than before.

        1. You’re so right Sean. And the MAX debacle happened exactly because of this very cowardly risk aversion. It was seen as “safe” and “easy” and it would “maximize shareholder value”. How did that work out for ya, Boeing idiots? Maybe you corporate knuckleheads should read the above article and follow Cranky’s advice.

          Thanks for the laugh stogieguy7, I needed that & it was well put!

          “Perhaps you live in a place like Cambridge, Boulder, Madison or Berkeley, but in most places the climate change advocacy protesters are on the fringe and would not represent any significant market loss.” Interestingly, as such protests have risen, so has international travel by the same demographic group (until this virus).

          Not so sure if I agree with that statement as more climate change events are showing themselves & it’s no longer fringy to talk about them. All one needs to do is look at Miami Beach over the past few years & notice the city has been flooding more & more, even on days where it doesn’t rain. It’s become so serious that the city has been digging trenches & laying pipes to divert the excess water, but it’s only a temporary fix. Saw this on 60 Minutes.

          1. I agree with Cranky on most everything except I’m even more pessimistic than he is that Boeing will do anything other than stay the course. The recent changes in the C-suite pretty much point to that outcome.

            I also don’t think Boeing can really afford to ignore the small end of the market, as far behind as they are. The A380 (and to a lesser extent the 777X) was a bad bet on the market going for larger more densely packed planes. The 787 showed the way the market was going and it worked out well in the end after a disastrous production mess that screwed up Boeing’s DNA even more with how it impacted the MAX and the NMA. Now the A220 is going to be Airbus’ 787 only Boeing has no A330 Neo/A350 answer in the pipeline. That’s a lot of market share to abandon. I don’t think Boeing will want to abandon it…though I don’t think Boeing will come up with a cohesive response either.

            “Saw this on 60 Minutes”

            FAKE NEWS! FAKE NEWS! #Sarcasm

  3. From the outside looking in I couldn’t figure out why Boeing hadn’t cancelled the MAX already. It appears that the pandemic has given them a chance to win the war by losting the current battle. Hope they will be bold enough to try

  4. I remember hearing that with all the issues and overruns that the 787 went through in its design and production, it might never actually recoup its R&D budget. And flawed as that strategy turned out to be, that was why Boeing leaned so much on getting more out of its existing 737 and 777 cash cows. As much as I’m sure we’d all like to see the innovative, can-do Boeing of years past come back, I worry that they won’t be able to bounce back from another fumble like the 787’s development going forward.

    I suppose all we can do is do is hope they learned their lessons from that. At least the F-15, F-18, and P-3 lines should have enough work for the rest of the decade I suppose.

  5. “It has hundreds of 737 MAX aircraft already built, so once it starts delivering them again, it will have plenty of work for employees to finish and get them off the property.”

    I dunno. The bulk of the work is done. I don’t think that is going to keep the narrow body workers busy for very long at all. And some of those aircraft may no longer have a buyer anyway depending on how many airlines go under or are forced to cancel orders.

    Independent of the plan you outlined here (it takes years to go from idea to start of mass production), there will be some very tough years for the rank and file employees at Boeing (and to some degree, Airbus).

  6. If you kill the MAX, you loose your supply chain and assembly workers with their knowledge…

    To rebuild those is costly, problematic, and may be impossible.

  7. I’m biased because the 737 is really my least favorite plane of all time. At least a 727 had three engines and had some power and the 757 feels more spatious. But, I thought that the MAX was a horrible idea from the beginning. It’s taking a 1960’s design with a fuselage that dates to the 1950’s (same design as the 707) and than has to make it adaptable to a modern engine. It’s a frankenplane. Boeing would have been much better off building a new narrow body using modern composites with a fuselage that is wide enough to incorporate 18″ or even slightly wider Y seats. It would have been better for PaxEx and would be even more fuel efficient since composites weigh much less than aluminum.

    I’ve flown Delta’s A220 and it’s a much better experience. I’d take one of those over any narrowbody Boeing has right now.

  8. I can’t help but wonder if Boeing would make a move on MRJ with it having a lot of ties with Seattle and Moses Lake. Not to mention MRJ management’s seeming inability to get anything done would fit well with Boeing management these days.

    1. Dima – The problem is that the MRJ is too small. It’s really a regional jet without much prospect to grow into the 120-150 seat market. I’m not sure if Boeing would get enough value from that.

  9. Excellent analysis of this strategic opportunity! In the post-pandemic period, the surviving companies will pivot to new opportunities that match the new realities. It may be harder for large companies to move with agility but as you say, Boeing will need to take some big and bold risks in order to have a bright future.

  10. I think a nice revamp of the 757 would have been nice. It was a good plane to get to/from Europe and used for long thin routes anywhere, and it looked good.

    Did Boeing thing that one day there would be a 737 sitting 400 people and be a mile long?

    The 737 is a good work horse and should have been thought of as that and nothing more. But Boeing didn’t ask me for my thoughts, so what do I know….LOL

  11. Hi CF, You are spot on!  Boeing needs a replacement for the 737 that pushes the technology envelope in the same way as the 787.  But I too fear that they no longer have the guts to go for it.  Sadly, if they don’t, Airbus will eclipse them.

  12. Great article and assessment.
    Boeing only has a competitive widebody offering just as a large glut of aircraft will depress values.
    The MAX will fly again but it is unneeded capacity and still not competitive across much of what the A320NEO family can do.
    The real reshaper of the market will be if Airbus launches an A220-500 which is more likely than not. A320NEO family sales are heavily skewed toward the A321NEO; Airbus has already sacrificed the A319NEO for the A220-300 and will be willing to do the same for the A320NEO given that the A220-500 will easily outperform any aircraft on the market.

    Boeing’s challenge is to build a plane that can cover all the way from a small mainline narrowbody (A220-100/717 replacement/competitor) up to a small narrowbody (767ER replacement).

    Boeing has done enough research that they have options on the table. The future of the company is at stake.

    And the American people need to gain stock warrants for any taxpayer investment in Boeing. If they can pull off all the need to do to turn the company around and not accept federal money, great. But given that the economics of a new aircraft family launch ala 757/767 will not be favorable for years to come even while Boeing has no choice but to rebuild its product line, they might do well to take federal money and deal w/ the stock dilution and limitations on their stock and executive compensation.

    1. Several disagreements with your post:
      • 737NEO is more efficient than A320MAX on shorter routes, which are the majority routes flow by most airlines.
      • Boeing no longer needs cash, they just sold 25 Billion in bonds at a relatively low interest rate. So no need for federal money or micromanaging.
      • A220 program is very high cost. Airbus has its work cut out for it to make this program profitable. Bombardier sold too many early aircraft at a loss and Airbus is struggling to reduce costs. Considering how small Airbus’s investment is in this program so far, they may yet cancel it. I doubt they will, since the long term potential of the C Series/A220 is excellent, but right now the program is a financial disaster and it will take a lot of patience to see it through to profitability. The C Series already drove one company out of the airline business, not a great start to a program.

  13. for once, i wholeheartedly concur with @cranky. Boeing squandering their ONE chance to right the ship when they found a scapegoat for Lion Air crash and still refused to have any introspection, leading up to Ethiopian crash.

    This isn’t about MCAS or no MCAS. It’s about Boeing’s refusal to acknowledge MCAS exists in order to streamline type certification with existing NG line.

    You can call it the 737 MAXHUBRIS. I just call it – The Screamliner.

  14. I think you are right on, Brett! Boeing has become a reactive airplane company. The new airplane gamble (are they up to it?) should have, among other attributes, a wider fuselage to accommodate wider seats and more comfortable spacing. That beats the A-321.

  15. Great analysis/rallying cry!

    Speaking of Delta’s 717’s: I am not an engineer (and I don’t play one on TV) so this idea is probably rubbish… but Boeing owns the design plans etc for the 717. Could they not pull those out of the drawer, replace the dated stuff in that design with more modern materials and technology, and have a smaller aircraft ready for production relatively quickly, without having to go through a time and money consuming start from scratch?

    1. Not really they sold all the tooling and the supply chain was been completely shut down a long time ago for the whole Douglas T tails family. When you look at the cost of certifying an old aircraft to the new regulations, and standards, and rebuilding the supply chain with new vendors you get somewhere between 60-80% of the cost of just designing a new aircraft and this one won’t be as good. In general, once a supply chain is shut down its gone, and its not coming back easily.

    2. If I was an airline, why would I buy a 717, which is a DC-9 derivative (another 1960’s design) when I can buy an A220? I don’t hate the DC-9 like I hate the 737. But, the A220 is a much better plane these days.

  16. Risk adverse is something that is rampant throughout the intelligence agencies management. The best way to move ahead is to go with the flow. If you take a chance and fail it is held against you. If you succeed you make a lot of jealous enemies. I ve spent decades on the inside and outside of them. I wonder if Boeing is similar?

  17. Just lost a lot of respect/confidence in Cranky. Just a few points that you are incorrect on:
    • 737MAX is actually more efficient than A320NEO on shorter routes, which are most of the routes flown by most airlines. Therefore it is the more efficient, lower cost solution except for long segments.
    • If a few folks at Boeing hadn’t screwed up MCAS, MAX would have been very successful up until COVID. Acting like the whole idea of the MAX was a poor decision is absurd and revisionist history.
    • Development money has already been spent on MAX, cancelling now is just financially stupid.
    • How much more efficient can a new narrow body be vs. the MAX and A320NEO? It will have to be priced higher than the legacy designs. Even with the latest materials, wings and engines, can Boeing really justify the sales price it needs to make a decent profit? Probably not, that is why they chose the MAX in the first place.
    • 100-150 seat segment has had very low demand for the last 30 years. Maybe it will grow, but with COVID it appears A220 program may never be profitable overall. The industry certainly doesn’t need a third aircraft in a segment that can’t really even support 1. That may be a secondary reason why Boeing dropped the Embraer merger.

  18. I saw a documentary on the Smithsonian Channel about the development of the 747 the other evening. Boeing needs to go back to engineers running the development of the company, not worrying about the investors as the long term development is what made them one of the best developers in the 60’s and 70’s.

  19. I love this post so much! TRUTH! However, there is more to the NMA than simply trying to extend the 737. Actually, I wouldn’t say that is accurate at all…It’s a LOT dumber than that.

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