Betting the company: Letter from Boeing replying to questions about new

aircraft plans
The moment Boeing Chairman Phil Condit made the announcement, the questions
started pouring in by letter, fax, and e-mail. Why wasnt Boeing following the lead of
its competitor, Airbus Industrie, in developing a new superjumbo jet?
For decades, Boeing Aircraft Company reigned supreme in the market for supersize
commercial airplanes, selling its popular 416-seat 747 jumbo jets to airlines around
the world. But shortly after you took a job in corporate communications for Seattlebased Boeing in 1999, the company took a big hit from its overseas rival, Airbus.
That year, Airbus sold twice as many planes as Boeing.
Airbus has always approached manufacturing differently. Founded by a group of
partners in Great Britain, Germany, France, and Spain, Airbus assembles its planes
in Toulouse, France, using parts manufactured all over the world. Boeing
traditionally manufactured everything in-house, until competition from Airbus and a
financial crisis in the mid-1990s brought about a corporate restructuring. Now
Boeing also uses subcontractors. But thats where the imitation is going to stop,
according to chairman Condit.
With huge fanfare, Airbus announced its vision of commercial air travel in the
future: more people wanting to fly to the major terminals, with airports unable to
handle more planes. So Airbus is spending $12 billion to create a superjumbo jet
that will carry 555 to 650 passengers in a double-decker design, using the latest
technology and lightweight materials. The company claims that its A380 will cost 21
cents less per seat mile to operate than a 747, but it wont fly any faster.
Boeing sees a different future: airlines wanting smaller, faster jets to reach smaller,
less-congested airports in the suburbs. So Boeing is designing the Sonic Cruiser,
which will save one hour of traditional flying time for every 3,000 miles flown by
traveling at Mach .95 (or 95 percent of the speed of sound). Thats 20 percent faster
than todays jets.
The Sonic Cruiser will cost $10 billion to design, but Boeing is betting that new,
smaller airports will be built and that its sleek, swept-back delta wing jet, which
will also fly at longer ranges, will become the ideal vehicle for reaching them.
Older airports may have to spend hundreds of millions of dollars to upgrade
facilities to service the two-level Airbus A380. And it will be useful only for heavily
traveled routes, since airlines will need to fill all 550 seats. On the other hand, the
sonic Cruisers faster flights will let airlines charge premium prices while costing less
to operate because of reduced flying time. Moreover, designing a new aircraft will
allow Boeing to develop more efficient manufacturing, using outside suppliers for
parts so that Boeings engineers can focus on the more sophisticated systems.

Boeing is betting that airlines will choose its Sonic Cruiser over the huge A380s, but
it will be years before either company knows wholl win the market. Both planes
arent due out until 2006 or later.