When it comes to new airplanes, Boeing (BA) doesn’t want to reinvent the wheel. Or the wing, or fuselage, or much else until it really, really needs to do so.
As part of a multiyear effort to boost the output of its commercial airplane division, wring costs from its suppliers, and improve returns for shareholders, the airplane maker proudly touts its new-found religion when it comes to limiting financial risks and avoiding the kind of “moonshot” programs best represented by such milestones as the revolutionary 707 jet and new 787 Dreamliner, a technical advance owing to its carbon-fiber body and heavy use of rechargeable batteries.
“The more-for-less world will not let you pursue moonshots,” Boeing Chief Executive Jim McNerney told investors Wednesday at a company conference in Seattle. The kind of generational technology leaps that once marked new airplane models have given way, he explained, to more cost-effective incrementalism in the approach to design and building. “What we’re learning now is how to maintain platforms over a long period and spiral in technology.” One example: Boeing’s best-selling 737, which dates to 1967 and is being fitted with new engines for the next-generation 737 MAX version.
That method is aimed at letting Chicago-based Boeing assume fewer financial burdens for new products, avoiding what McNerney called “apocryphal risk” every quarter-century when an all-new aircraft is planned. “That’s the wrong way to pursue this business,” he says.
Boeing’s recent travails with its 787 Dreamliner—which won’t see profitability until 2015 and possibly later—is one of the primary reasons why the company has changed its thinking on how much revolutionary tinkering it will fund for new programs. The 787 program suffered several delays and cost overruns because of its far-flung supply chain, including expensive rework required on many of the initial planes. Boeing assembles 787s in Everett, Wash., and North Charleston, S.C., from parts flown in from Japan and Italy.
McNerney said Boeing’s largest 787—the planned 787-10 version, expected to be delivered in 2018—”would have been a more unique airplane in a prior Boeing life.” The company’s new 777X also generated heavy internal debate about how much new technology Boeing should apply to the airplane. “We want to be more like Apple (AAPL) than the apocryphal, every 25 years, because the risk in this company is in the integration, is in the [building].”
Boeing executives on Wednesday also outlined their progress at squeezing $2 billion in structural costs from the company’s defense business and improving its market share in the single-aisle aircraft market, where it has about a 50 percent market share. Moreover, Boeing is working to extract cost savings from its suppliers, which represent as much as 70 percent of the company’s costs, President and Chief Operating Officer Dennis Muilenberg said.
