Re: Boeing craziness (was Re: 767-400 "a different type"?)

Date:         19 Aug 98 00:57:42 
From:         Evan McElravy <evanm@penn.com>
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Not convincing, huh? I'll do my best.

>>The fact that Boeing filed suit against US (one of the most ignorant
>>tricks I've heard of), couldn't have helped relations either.
>
>USAir had a binding contract with Boeing to accept and pay for a number
>of aircraft.  Boeing bent over backwards to renegotiate the deal but
>USAir simply said "screw you," refusing to negotiate in good faith.
>Under the circumstances, had Boeing *not* filed suit, I as a stockholder
>would have expected a good explanation from Boeing executives as to why
>they were not protecting the interests of myself and other stockholders.
>It would be "ignorant" to expect them to take no action.

In a long term business with a very small number of potential customers,
suing your customers should be your absolute last resort. Nothing will ever
convince me that Boeing had no other alternative besides filing suit. I'm a
Boeing stockholder, too, and, quite frankly, I'd be surprised if US Airways
orders a single Boeing aircraft in at least 30 years. US Airways was in
financial peril when they "said 'screw you'" and one would expect Boeing to
show a little more flexibility.

>>the absurdly conceived 757-300 and 737-900
>
>What do you think is so absurd about them?  Do you think all stretches
>are absurd?  The 757-200 had "excess range" for charter operators, and
>the 757-300 allows them to use the aircraft's capabilities where they
>need it -- payload (passengers), not range.  The 737-900 was launched
>because airlines wanted 737-800 capacity in a mixed-class configuration.
>If Boeing can build such derivatives and make a greater profit at doing
>so than could be made by otherwise deploying the resources, it is absurd
>to not build them.  (I'm assuming that Boeing management acted rationally
>in terms of profit maximization.)

Certainly not: I think stretches that sell are a marvelous idea. As you may
have noticed, the 753 isn't exactly flying off the shelves. A handful of
charter carriers does not a profitable aircraft make. When some major
carriers (American is rumored) place large 753 orders, I'll eat crow. In the
mean time, I stand by my opinion. And your assumption that Boeing managament
acted rationally: that's what we're debating! If I thought they were
behaving rationally, I wouldn't have written the original message.

As for the 739, it competes too closely with the 757-200. Not a direct
overlap, certainly, but close enough that it is troubling. Boeing would have
targeted that market much better with a 757-100, which would retain the
significant performace advantages the 757 has over the 737. I am willing to
make a small exception in this particular instance since it does appear to
be selling rather well but we'll see in the long term. But really I think
that 4 variants of the same basic aircraft in production at the same time is
really too many. Douglas' insistance on building an DC-9/MD-80 special for
every customer that came along (a lesson learned after the one-size-fits-all
DC-8) played a major roll in sinking that company.

>>plus they are still making -300/400/500s
>
>Because they had commitments to do so.  Should they unilaterally cancel
>their commitments the way USAir did?  In any case, 737 Classic production
>will end soon -- I think 2000 is the date I heard.

Not entirely true, Boeing has taken new orders for second-generation 737
equipment from several leasing companies and major carriers, Alaska among
them. If they keep the order books open, production will be going on long
after 2000 (particularly if delays in manufacturing keep up).

Aircraft manufacturers have unilaterally changed orders before. All A320s
after Ship 21 were -200s. Once again, this is not the same circumstance as
Boeing is facing but it has happened

>>the never-ending parade of hairbrained 777 schemes
>
>This is supposed to be new?!  Airframe manufacturers are always coming
>up with ideas to try to meet their customers' needs.  One could argue
>that the NLA (Boeing), VLCT (partnership of Boeing, Aerospatiale, DASA,
>etc.), A3XX (Airbus), and MD-12 (the four-engined superjumbo, with MD
>and the Taiwanese acting in partnership) are equally hairbrained schemes.
>And what of the A340-8000, which as recently as a few weeks ago still
>was on the Airbus web pages as if it were likely to be build.  Even more
>bizarre were the 1970s proposals for a three-engined 747 to compete with
>the DC-10 and L-1011.

There is a difference between experimentation and indecision. In the case of
Boeing, they have changed their "official" long term 777 strategy a number
of times without attracting any new customers. And the Airbus webmaster's
tardiness may or may not be indicative of any indecision on Airbus' part.
They actually put the A340-8000 up for sale (and got a whopping 2 orders).
Boeing has offered none of its 777 experiments to the airlines yet.

And lets face it, some of the ideas they are batting around are right off
the charts. The third engine in the tail for take off assistance, for
example. Makes the so-called "hunchback of Mukilteo" look downright sane.
And lets not forget the folding wingtip debacle. Catering to every
*potential* whim of an airline is no way to stay in business (see my above
on Douglas).

>>The 717 could potentially be a blockbuster but they seem to be doing
>>little to push it to airlines like Northwest, TWA, AA, and even US that
>>could very potentially be interested in buying it.
>
>How do you know they're doing little to push it?  Given the recent bugs
>in NW's DC-9 life extension program, I'd be very surprised if Boeing
>were not aggressively pursuing a 717 order, possibly tied to a deal on
>more 747s which NW is considering.  TWA might be a good opportunity,
>but AA is probably fine with the F100s for a while.  I know that UA
>briefly considered the 717 (it might still have been the MD-95 at that
>point) but it didn't have the range.

Some rumors indicate that Boeing is working hard on Northwest and just as
many rumors say that the plane is doomed after the AirTran order is filled.
And as much as Boeing wants the Long Beach floor space for the 737, I'm more
inclined to the latter view (a shame becuase I really love the DC-9 family).
We've heard this story from Boeing before: weren't they going to just market
the blazes out of the MD-11 as a cargo plane? That lasted about three
months. If Boeing were truly aggressively marketing the aircraft or if it
stood any chance on the market (which I think very much it does), there
would have been more orders by now. (Unless some of the undisclosed orders -
there are several - are major.)

>>I think a management change is in order.
>
>Perhaps, but your arguments aren't convincing.

The company's financial results speak for themselves. Rumors have been
flying around that Ron Woodard's neck is under the axe for months despite
Phil Condit's assertions that the company's problems are "no one's fault."
Well guess what? I think Phil's head is under the axe, too. Or at least it
ought to be. Enough with touchy-feely management styles like "Working
Together" and "Bringing People Together." Start moving some airplanes out
the friggin' door! Seen Airbus's order book lately? Pretty damn good. And
from what I here, they've pretty well got the BA order wrapped up. That
would be a ugly little disaster for Boeing, wouldn't it?

And how about lay offs? They just layed off several thousand emplyees. Just
two years ago, they couldn't hire enough people. With a gigantic order
backlog, those don't sound like the actions of a healthy company. I suspect
that in the future, Boeing is going to have difficulty finding qualified
employes becuase few people want to pack up the family and move to Seattle
for what is probably glorified temp work.

Evan McElravy
evanm@penn.com