Technological developments in airline design

Boeing is one of the United States’ largest exporters and is a predominant aerospace and defense corporation. Boeing is the world’s largest global aircraft manufacturer (by deliveries and revenue), and the second-largest defense and aerospace contractor (ranking in Defense News). The history of Boeing is as exciting as any in history, and encompasses thousands of individuals, innovations, and spectacular technological developments in airline design and manufacturing. Of course, most everyone is familiar with the 1903 Wright Brothers flight at Kitty Hawk, North Caroline. That same year, 22-year-old William Boeing left college at Yale and moved forward to the West Coast. Through a series of events, Boeing wanted to learn more and more about aviation finally partnering with George Westervelt, a former engineer and airline enthusiast. By 1915, Westervelt and Boeing designed a new twin-float seaplane called the B&W (Yenne, 2005, 3-18).

What followed was a series of challenges, setbacks, successes, and innovations. During World War II, Boeing was responsible for building up to 350 bombers per month. After the war, the company quickly tried to recoup its production and in the 1950s developed numerous new military applications and the Boeing 707 jetliner, one of the most successful aircraft ever designed. The 1950s also saw Boeing move into the development and production of advanced weaponry, securing a place in the burgeoning Cold War defense industry. In 1960 Boeing improved the 707 with the 727, which launched for service in 1963. Numerous adaptations from the 727 resulted in the 737 in 1967, which surpassed the 707 as the best-selling commercial jet aircraft in international aviation history — still being produced and utilized (Norris, 1996, 29-40). Changes in the seating capacity resulted in the intercontinental 747, rolling out in 1969 and becoming the backbone of most major airlines’ international fleets.

The 1970s were hard on Boeing, having been one of the major contractors for NASA’s Apollo program, which was cancelled. This, coupled with the cancellation of the Supersonic 2707 caused Boeing to cut its Seattle staff by 50%. In 1983, Boeing assembled the 1,000th 727, and began to face increasing competition from Europe’s Airbus. Boeing contributed to the Space Shuttle project, as well as the International Space Station. This competition also caused Boeing to develop the 757 and 767, as well as move into more advances in tactical military fighters. In 1994, Boeing introduced another innovation, the 777, the longest range twin-engine aircraft in the world at the time. (Ibid).

In 2001, Boeing moved its headquarters to Chicago, lost its military fighter contract to Lockheed Martin, and lost world-position to Airbus by 2003. Boeing turned its attention to the new 787 Dreamliner, using every technological trick possible to make this the most advanced and comfortable airliner ever. Boeing continues to innovate, but has faced strong competition from Airbus, as well as local problems because of outsourcing and other union issues on the 787. It continues to innovate and find ways to become more environmentally sound, and turn its attention to not only advanced aircraft manufacturing, but greater focus on satellite and space technology (See: Future Developments in “The History of Boeing,” in boeing.com/history).

The Boeing issue is not unique to the Puget Sound, but is played out in many areas (e.g. cities, states, countries). One is reminded of the steel industry – huge in areas like Pennsylvania and Colorado at the early part of the Cold War in the 1950s and 1960s, then being replaced by Japanese steel in the 1970s and 1980s. Washington recognizes that Boeing is of such paramount importance to the overall health of the state that it, in fact, set up a new Aerospace Council, unofficially titled the “Keep Boeing Happy Program.” It is also important to extrapolate Boeing’s performance in the United States, as opposed to just the Puget Sound. Boeing employees almost 200,000 people in the U.S., so its performance actually affects almost 1 million people. Boeing’s lobby expenditures total almost $10 million per annum, but, on the flip side, in April, 2009, BusinessWeek magazine reported that Boeing was one of 25 companies that paid the least U.S. taxes. Based on the magazine’s analysis of company financial records for 2005-2008, Boeing paid an average of only 3.2%, far less than the standard 35% corporate rate, and far less than the average individual (Byrnes, et.al., 2009).

Thus, there is a great deal of complexity surrounding the planning function of management within Boeing. It is complex not just because of the technology, but of the human issues that surround the company as well. For instance:

Technological/Engineering — Each new aircraft requires thousands of man hours in planning. Most of the tools that Boeing uses are self-constructed; and the supply chain managerial issues require parts from global suppliers, some that take a great deal of time to make. Even one delay in parts of tools put an entire project on hold. Because of the complexity of the newer aircraft, too, hundreds of systems must work together to perform properly. This has been a managerial issue regarding outsourcing some of the new functions to other plants and areas (wing technology, for instance). Even though the engineering plans were clearly noted, subtle differences in interpretation caused a number of systems to “not fit” properly; requiring time and energy that resulted in delays for numerous projects (Ireland, et al., 2009, pp. 153-4).

International — Boeing is now constantly at odds with its EU competitor, AirBus. Boeing feels that AirBus receives unfair advantages because it is propped up by various EU governments (subsidies), low tax regulations, and employee supplemental payments. A great deal of planning must go into each bid requiring strategic competitive analysis and a more globalized approach to management that in the past. Culturally, Boeing is moving to a more globalist approach, outsourcing many of its component parts around the world. Airbus, on the other hand, has so much pressure from certain countries in Europe to maintain employment, that it must use personnel in those countries and maintain production levels to continue receiving governmental support. Similarly, both companies face significant ethical challenges in the 21st century. Airbus responds to Boeing’s criticisms by saying that both Boeing and McDonnell Douglas have benefitted from “hidden” government subsidies through military contracts (Davis and Ingersoll, 1993).

Sales/Marketing — The international market certainly causes a number of managerial planning issues for Boeing, and makes the Sales/Marketing cycle quite different in the 21st century. Prior to that, the airline market tended to be so robust that Boeing had hundreds of aircraft on backorder, barely keeping up with the need. The new paradigm of sales and marketing, though, for the industry is to engender a way to underbid the competition, seek out lucrative contracts, and still have the correct margin to stay in business. There are barriers in research and development that must be funneled into sales; and certainly within the planning structure of sales and marketing, month or year long delays only cost the company money, and lessen its credibility in the marketplace (Spreen, 2007, pp. 58-60).

Human Resources — One of the trickiest issues within the planning cycle for Boeing is keeping the right amount of workforce at its various locations for the available work. Everything ties together so much, and requires such preplanning that often workers are shifted to other projects in a less than efficient manner in the cases in which parts, tools, or retrofitting delays warrant. In most of the United States, Boeing must contend with huge Union issues that require long-term planning and negotiation and, from both sides, often contribute to stress in the marketplace. Management understands the employee perspective of needing regular work, guaranteed by contract and previous planning. However, when parts do not become available, finds it hard to pay employees for down time. Workers do understand that the company must be profitable, but also feel that their livelihood and contract necessitates regular work (Lawrence and Thomton, 2005, pp. 130-2). At the end of 2009, for instance, Boeing was forced to lay off about 7% of its commercial airplane workforce — in essence to contend with pressures raised by the economic downturn and heightened competitive conditions. The company has a substantial backlog of plane orders, but is losing some new ones. This will have a substantial effect on the economic cycle of not only its workforce, but of almost 1 million Americans. Boeing contends that “acting in this manner will allow [Boeing] to keep employment reductions to a minimum while [they] adapt to the uncertainties of this economic cycle” (Weber, 2009).

Community Issues-

With such a massive employee base, though, and such ties to individual communities, it is not surprising that Boeing actually “becomes” part of the community — the Boeing Employee’s Credit Union is now open to all Washington residents; there are Boeing sales, Boeing specials, and Boeing holidays — all designed to integrate into the psyche of the individual community, providing spirit and goodwill, but also cementing ties so the community knows how important it is to keep Boeing happy.The overall lesson for any region or city though, is to follow through with a plan of cultural, social, and economic development regardless of the timeframe — similar to what Seattle attempted in the 1970s. No economic organization is safe, technologies change, evolve, and adapt to their own environments, thus causing their geographic areas to do the same. Two decades ago, it would have been unheard of for Boeing to outsource any of its products to foreign countries. Now, the new Dreamliner has parts made in France, Germany, Greece, China, and components from all over the world. Just as it is unwise for any business to tie itself to one customer too much, it remains the same for a community to tie itself to one company or organization.

Thus, we can see that there are various legal, regulatory, ethical, and corporate issues continually at play within the structure of Boeing. It must keep employees happy, compete in the marketplace with some disadvantage, continue to work to become environmentally sound, and remain at the forefront of innovation and technology. All the planning and managerial efforts, for instance directed towards the Dreamliner, epitomized the complexities for an aircraft manufacturer in the 21st century. Not only did Boeing need to maintain appropriate relationships with a number of global entitites, many of them in the EU that work side by side with its arch-rival, but with other foreign governments as the developing world moves into the global transportation network. This, coupled with a down economy after 2007, environmental and human resource pressures, continues to plague the company’s margin. Yet, most agree that as a forward-thinking company, Boeing remains solid and committed to the new age of aerospace (Norris and Wagner, 2009).

REFERENCES AND WORKS CONSULTED

Boeing Inc. (2009). annual reports, information, Cited in:

http://www.boeing.com

“Boeing to Bring 12K Jobs to SC.” (October 29, 2009). The Greenville News. Cited in:

http://www.wyff4.com/news/21452616/detail.html

“Can Boeing Reinvent Itself?,” Fortune, 8 March 1993, pp. 66-7

“Reinventing Boeing,” Business Week, 1 March 1993, pp. 60-67.

Defense News. (2008). Cited in:

http://www.defensenews.com/static/features/top100/charts/rank_2007.php?c=FEA&s=T1C).

Byrnes, N., et.al. (2009). “U.S. Companies that Paid the Least TaxesGates, D. (February

1, 2007). “Boeing Soars, Local Economy Wins.” The Seattle Times. Cited in:

http://seattletimes.nwsource.com/html/businesstechnology/2003550608_boeingnews010.html

Davis and Ingersoll. (1993, March 8). Cloudy Issue. The Wall Street Journal, p. A1.

Ireland., R., et al. (2009). Understanding Business Strategy: Concepts and Cases. Mason, OH:

Cenage.

James, A. (June 2009). “Aerospace news.” SeattlePIBlogs. Cited in:

http://blog.seattlepi.com/aerospace/archives/170405.asp

Lawrence, P. And Thomton, D. (2007). Deep Stall: The Turbulent Story of Boeing

Commercial Airplanes. Burlington, VT: Ashgate Publishing Services.

Markusen, A. (1991). The Rise of the Gunbelt” The Military Remapping of Industrial

America.” Oxford University Press.

Newhouse, John, (2008), Boeing vs. Airbus: The Inside Story of the Greatest International

Competition in Business, Vintage.

Norris, G. And Wagern, M. (2009). Boeing 787 Dreamliner. Minneapolis, MN:

Zenith/Quayside Publishers.

Spreen, W.E. (2007). Marketing in the International Aerospace Industry. Burlington, VT:

Ashgate Publishing Company.

Tim, T. (November 1, 2009). “If Boeing Leaves Puget Sound.” The Seattle Times.

Cited in:

Poll: If Boeing leaves the Puget Sound by 2030, the area will sustain…

Weber, J. (January 9, 2009). “Boeing Will Cut 4500 Jobs.” Business Week. Cited in:

http://www.businessweek.com/bwdaily/dnflash/content/jan2009/db2009019_791015.htm

Yenne, Bill, (2005), The Story of Boeing, Zenith Press.


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