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
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
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
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