Boeing analysis
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In this presentation there is analysis for Boeing, history, sales, supply side analysis, Commercial Aircraft Demand Determinants, Market Drivers, Order Comparison, Delivery Comparison, Current Strategy
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Boeing analysis
- 2. Overview Founded in 1916 in Puget region of Washington state Headquartered in Chicago with presence in several locations around the world Designs and assembles: commercial jetliners defence systems satellites and launch vehicles
- 3. Brief history 1997: Boeing merged with McDonnell 1996: Acquired Rockwell’s aerospace and defence units 2005: JV with Lockheed Martin – rocket launch services to US govt. Acquired Aviall which became wholly owned subsidiary
- 4. Global Presence Customers and customer support in 150 countries Total revenue in 2012: $81.7 billion 70 percent of commercial airplane revenue historically from customers outside the United States More than 170,000 employees in 70 countries - More than 8500 employed outside US 28,000 global suppliers partners globally in more than 100 countries - with 1.2 million employees Boeing airplanes represent 75% of world’s fleet, with nearly 12000 jetliners in service
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- 6. Boeing Suppliers Boeing is essentially into assembling a plane in its facility in US Sources airplane parts from its 28000 suppliers from all over the world Assembles the plane in Everett, Washington Outsourcing manufacturing of body parts Focus more on research and assembly 787 has 30% foreign material - compared to 5% in 747.
- 7. Some Boeing Suppliers Firm Country Component Latecoere France Passengers door Labinel France Wiring Dassault France Design and PLM software Messier-Bugati France Electric Brakes Thales France Electric power system Messier-Dowty France Landing Gear structure Diehl Germany Interior Lighting Cobham UK Fuel pumps and valves Rolls Royes UK Engines Smiths Aerospace UK Central computer systems
- 8. Some Boeing Suppliers Firm Country Component BAE SYSTEMS UK Electronics Alenia Aeronautics Italy Upper center fuselage & horizontal stabilizer Toray Industries Japan Carbon fiber: wing and tail Fuji Heavy Industries Japan Center wing box Kawasaki Heavy Industries Japan Forward fuselage Chengdu Aircraft Group China Rudder Hafei Aviation China Parts Korean Aviation South Korea Wingtips Saab Sweden Cargo access doors
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- 11. Revenue breakdown 2010 Source: Data from Boeing’s 2010 Annual report p. 18
- 12. Geographic Sales Distribution Asia, 16 United States, 59 Europe, 12 Middle East, 6 Oceania, 3 Africa, 1 Latin America, 1 Canada, 1
- 13. Supply Side Analysis: Major Players Boeing and Airbus are the only two players in the large commercial aircraft market Canadian-based Bombardier and Brazilian aircraft manufacturer Embraer are the industry leaders in the regional and business airplanes market Market Concentration: Top 4 companies account for 70% of Market shares Source: IBIS World: Global Civil Aerospace Products Manufacturing Reports
- 14. Commercial Aircraft Demand Determinants Major airlines are the largest customers for civil aerospace product manufactures. (78.5% Market Shares) Their demand is driven by the need and desire for airlines to expand their fleet or replace ageing models Product Innovation: Fuel efficiency Lower maintenance & operating cost Timing Average life of about 30 years. Therefore, when the time comes to replace these older models, demand for aircraft increases. Source: IBIS World: Global Civil Aerospace Products Manufacturing Reports
- 15. Market Drivers Total Immigration The level of immigration in the world may boost the demand for air travel. The fastest growing regions will be in Asia, where economic growth and infrastructure improvements will lead to a rapid rise in passenger numbers. Boeing expects that passenger numbers will increase globally at 5.0% per annum over the next 20 years World GDP The industry is in the mature stage of its Life Cycle. The historical industry annual growth is in line with global real GDP growth. (1.9% in the past 5 yrs.) Price of Crude Oil High crude oil prices will increase the operating cost of air carriers and aircraft owners, which will deter them from acquiring new aircraft. Source: IBIS World: Global Civil Aerospace Products Manufacturing Reports
- 16. Industry Outlook Industry revenue will rise at an average annualized rate of 2.7% over the five years through 2016 to reach $161.6 billion. Although Boeing significantly lowered its forecasts for global aircraft deliveries over the next two years, it still predicts strong growth in China. Boeing forecasts total volume growth for Chinese air transport over the next two decades of about 7.2% per year Industry Revenue,Million 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: IBIS World: Global Civil Aerospace Products Manufacturing Reports
- 17. Duopoly Boeing and Airbus compete in a near-duopoly in the global market for large commercial jets comprising narrow-body aircrafts, wide-body aircrafts and jumbo jets. • • Acquired former archrival, Mcdonnell Douglas, in 1997 The largest global aircraft manufacturer by revenue, orders and deliveries. • • Began as a consortium of aerospace manufacturers. Subsidiary of European Aeronautic Defense and Space Company (EADS)
- 18. Order Comparison Orders of Boeing and Airbus follow almost the same growth pattern for the recent 20 years, reflecting extremely high level of competition and lobbying efforts.
- 19. Delivery Comparison Delivery of Airbus is growing steadily during the recent 20 years while delivery of Boeing experienced wide fluctuation due to production delays, such as the frequent delivery delay of 787 Dreamliner.
- 20. Effect of currency on competition Production cost Mostly in US Dollars Mostly in euros Sales Currency Prices its aircraft only in dollars Prices most aircraft sales in dollars but is more flexible, sales in Asia and Middle East are in multiple currency Effect: When the dollar appreciates against the euro the cost of producing a Boeing aircraft rises relative to the cost of producing an Airbus aircraft & vice versa
- 21. Current Strategy More reactive than proactive e.g Launch of Boeing 737max in response to A320neo Aim to regain market leadership with Boeing 787 Dreamliner Strategies of its business units and aligns with the expectations and aspirations of the countries in which it operates Research and development partnerships worldwide in biofuels, manufacturing processes, structures and robotics
- 22. Key Challenges Synchronising thousands of designs and deliveries to build an airplane Maintaining supply chains while evolving business processes and technology Cost overruns 787: Offshore outsourcing disaster?? Italian supplier Alenia Aeronautica: fuselage issue Rise in oil prices: affects whole industry
- 23. The pendulum swung too far Boeing enthusiastically embraced outsourcing with intention to “reduce the 787′s development time from six to four years and development cost from $10 to $6 billion.” The end result was the opposite. It reduced Boeing's ability to supervise design and manufacture. The project was billions of dollars over budget and three years behind schedule. “We spent a lot more money in trying to recover than we ever would have spent if we’d tried to keep the key technologies closer to home. The pendulum swung too far.” , Jim Albaugh, Chief of Commercial Airplanes at Boeing
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