Cautiously, Boeing Mulls Over Making a New Plane
The Sonic Cruiser was supposed to have been Boeing Co.’s future, a super-fast jet for the 21st century that would protect the company’s long-standing status as the world’s largest commercial aircraft maker.
But in the cavernous hall of Boeing’s airplane design and engineering center here, the only reminders of the Sonic Cruiser are piles of promotional posters tossed on the floor, with a “free, no limit” sign next to them.
Boeing scrapped plans for the slick jet during the air-travel slump in 2002. Just a year earlier, the company had called a halt to a project to develop a super-sized 747 jumbo jet that could carry up to 500 passengers.
Now, Boeing is mulling over another new aircraft, a fuel-efficient, easy-to-build jetliner dubbed the 7E7 Dreamliner. And it, too, could end up on the design center floor.
At least two board members are said to be concerned about the 7E7’s development costs. What’s more, airlines haven’t shown any enthusiasm for it, in part because they have been disappointed by Boeing’s repeated failures to bring new planes to the market.
“They’ve come up with so many ideas in the past few years that I’d like to see more details before I comment,” Singapore Airlines’ chief executive, Cheong Choong Kong, said during a recent aviation conference. The carrier is considered one of the more influential buyers in the industry.
Boeing directors are expected to decide by year-end whether to begin marketing the 7E7. Analysts say the vote will be a critical turning point for the company. If Chicago-based Boeing opts not to invest in the new jet, it could lose more business to European archrival Airbus, which is expected this year to surpass Boeing for the first time in deliveries of passenger jets.
“It’s put-up or shut-up time” for Boeing, said Richard Aboulafia, analyst for the aerospace research firm Teal Group. “If they don’t do it, they’ll be sending a message that they won’t be doing anything else again. They’ll be coasting downhill for 20 years until there is no commercial aircraft business.”
The economic stakes are huge. Boeing is the nation’s largest exporter. Its commercial aircraft unit posted sales of $28 billion last year and employs nearly 58,000 workers nationwide.
The company is the largest private employer in Southern California, with 35,000 workers scattered from Palmdale to Canoga Park to Huntington Beach and Anaheim. Although most of those jobs are tied to Boeing’s expanding defense business, many subcontractors in the region rely on the firm’s commercial jetliner operations.
The company that pioneered jet travel hasn’t introduced a new passenger plane since 1995, when it rolled out the twin-aisle 777. Meanwhile, Airbus has launched several aircraft in recent years, and its 550-passenger A380 super-jumbo jet is almost ready to take off.
Developing an airplane can cost as much as $10 billion, a significant investment at a time when airlines are grounding jets and struggling to survive. Companies have folded or gotten out of the business altogether after betting the farm on one aircraft -- and losing the gamble. Following lackluster sales of its L-1011 jet, Lockheed Aircraft exited the commercial market completely in 1984.
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Secret Plans
Boeing began designing the 7E7 in earnest about a year ago, although small teams at the firm’s secretive Phantom Works research units in Seattle and Long Beach have been working on the idea of a super-efficient plane for years.
The 7E7 would seat 200 passengers, be powered by a new jet engine and built with mostly lightweight composite materials. It would use 20% less fuel than a conventional plane of comparable size, and have a range similar to Boeing’s larger 777 and 747 aircrafts, which can travel 8,000 miles or more nonstop.
In recent weeks, hundreds of 7E7 engineers who had been working in an obscure building in Everett, just north of Seattle, were moved to a sprawling facility nearby where Boeing came up with the 777 airliner nearly a decade ago. Desks have popped up in once-empty hallways, a sign that top company officials say shows Boeing’s commitment to make the aircraft.
“There is a whole lot of enthusiasm here,” said Walt Gillette, the head engineer leading the design of the 7E7. “We will have an airplane that will have broad appeal. It’s an airplane that I expect you’ll see even in the 22nd century.”
But will it pass muster with Boeing’s board?
None of the company’s 11 directors would comment publicly about the 7E7, but people familiar with their discussions say that at least two key members, Harry C. Stonecipher and John F. McDonnell, have raised questions about the cost of developing it. McDonnell, whose father founded the namesake aerospace company that merged with Boeing in 1997, is one of Boeing’s largest individual shareholders.
Although not opposed outright to building the plane, the pair has pushed Boeing engineers to dramatically slash development costs, by up to 40%, because of concerns about the uncertain future of the airline industry, according to one knowledgeable source.
Another worry for the two men is that the jet could be a drain on the company’s defense business, which has been growing steadily amid the biggest U.S. military ramp-up in two decades.
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The Bottom Line
Analysts say that making a more fuel-efficient plane isn’t as technologically challenging as producing a faster plane, as Boeing tried to do with the Sonic Cruiser. With the 7E7 projected to cost 10% less to operate than Boeing’s 757 and 767 jets, airlines may find it more appealing than a gas guzzler that flies faster. The makeup of the 7E7’s body also could help keep the plane flying longer, perhaps double the typical 30 years for the 737, because the composite materials that would be used last longer than aluminum, the main ingredient in most jet bodies.
“There is nothing sexy or exciting about building an efficient plane, but it’s a slam-dunk for accountants crunching the numbers,” said Adam Pilarski, who was chief economist for McDonnell Douglas before it was acquired by Boeing.
Boeing won’t say how much it has invested in the 7E7. But the company says it’s seeking to hold down costs by changing the way the plane is designed, tested and made, including altering the way the firm contracts out work.
Subcontractors would be asked to take on more work and responsibility, including helping to pay for research and development. In return, they would share the profits as well as the risks. But there wouldn’t be many subcontractors: Boeing officials say they are likely to end up with fewer than 100 subcontractors for the 7E7, in contrast to the 2,000 that help produce the 777.
And Boeing would hire only about 1,000 workers to assemble the 7E7, a far cry from some 3,000 who currently put together Boeing’s most popular line, the 737.
“We’ll be literally snapping them together like Fisher-Price toys,” said Gillette, a 37-year veteran who has helped design much of Boeing’s jet fleet. “We want an airplane that is very simple to assemble.”
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The Need to Innovate
Boeing officials also are hoping to cut down the 7E7’s development time by using new supercomputers to aid in the design, engineering and manufacturing. If all goes as planned, the first 7E7 would be in service by 2008, or four years after the formal launch of the program -- compared with six years for the 777 and eight years for the 747.
Wolfgang Demish, a longtime aerospace analyst, thinks Boeing will launch the 7E7 or come back quickly with something else. The company doesn’t want to slip further behind, he said, and become a fading giant of industry.
Referring to one defunct auto behemoth, Demish said: “Boeing is not interested in slowly becoming the American Motors of the jetliner business.”
