2. 1
Abstract
The air travel industry is a fiercely competitive industry and airlines are always looking
to reduce their costs. Boeing’s solution to this is the 787 aircraft, the future of the Boeing
commercial air division. This study discusses the 787 competition, how Boeing is positioning the
aircraft, problems Boeing has had with the aircraft both in manufacturing and certification, and
teething issues to the airframe. A conclusion is reached on the overall success of the 787 project.
3. 2
Case Description:
This case discusses the problems Boeing has encountered making the 787 a reality and its
efforts to help regain Boeing’s superiority in the market. Provided is evidence that Boeing has
introduced a worthwhile airframe, one that could change the face of aircraft manufacturing and
airlines expenses.
Introduction:
While Boeing is known for its world renowned engineering expertise, it has been facing
competition by Airbus, with certain product lines having matched or exceeded Boeing. In an
effort to regain leadership and again innovate in the aviation industry, the 7E7 project was born.
This new aircraft was to be a long-range, mid-size, wide-body, twin engine aircraft. Once Boeing
reached its goals the aircraft was named the Boeing 787 in 2005, and was first unveiled at a roll-
out ceremony on July 8, 2007 (Boeing, 2013). What makes the 787, also known as the
Dreamliner, so important is it is the first aircraft of its kind that reduces airline operating costs
(787 Program Facts, 2013). Boeing had timed the release of this airframe well, as many US and
foreign airlines are looking to modernize their fleets of both older Boeing and Airbus models.
Boeing faced many challenges with this airframe. This case study will look at Boeing’s
execution of this project and its effect on the Boeing companywide.
4. 3
I. Market
Boeing, in many ways, lost its dominance in the commercial line business as Airbus
gained. There are many reasons, but ultimately Airbus was making a better, newer product then
Boeing. Boeing realized this issue and set out to reclaim its dominance; thus the Dreamliner was
given the green light and expedited. The air travel sector was facing many challenges and
looking to reduce operating costs. Boeing took advantage of this void. The 787 uses 20% less
fuel than similar aircraft and has increased thrust, while also reducing emissions by 20%
(Boeing, 2013). Maintenance costs are estimated to be reduced by 30%, (Boeing, 2013) and also
improves cash seat mile cost compared to competitive airframes by 10% (Boeing, 2013). Boeing
has made its influence on the airframe, being cheaper to operate and maintain; a goal they have
achieved. Other engineering marvels include the state of the art electrical system which draws
35% less power from the engines and also eliminated 60 miles of copper wiring from the
airframe. (787 Program Facts, 2013). The aircraft also lays claim to other innovations such as
“onboard health-monitoring systems which allow the airplane to self-monitor and report systems
maintenance requirements to ground-based computer systems” (Boeing, 2013). Cargo storage is
cited as 20% to 45% larger than similar aircraft (787 Program Facts, 2013). Boeing is also very
proud of the aircrafts new design aspects. One that is quoted often, “manufacturing the 787
fuselage as one-piece sections eliminated 1,500 aluminum sheets and 40,000 - 50,000 fasteners
per section” (Boeing, 2013). As one can tell Boeing used its engineering expertise to build a
revolutionary product to compete with its rivals. Boeing also estimates that there is a potential
market of 3,300 units from 2011 through 2030 (787 Program Facts, 2013). With that sales figure
in mind, it is easy to see why Boeing is looking to claim this market.
5. 4
II. Competitors:
When discussing the 787’s competition it is important to realize that while Boeing has
many competitors as a company, currently the only threat to this segment is the yet to be
produced Airbus A350. However, Airbus does compete against Boeing in many segments and
has made an impact on Boeing’s overall market share. In 1996, Boeing claimed 70% of the
market and today it was estimated to be around 50% (Boeing: What Really Happened, 2003).
Boeing has seen increased pressure in every segment it competes in and hopes to regain its
superiority in the industry with the 787 airframe. Airbus currently has orders for 764, A350s and
currently none are operating for commercial air travel (Airbus, 2013). Various rumors have
circulated that Airbus’ parent company, EADS has concerns about the airframe and this has
slowed the completion of the project. Additional rumors are that EADS and Airbus management
have seen the struggles Boeing has had with the 787. This has led to additional testing to try and
avoid actual airframe function issues and potential PR disasters, should the A350 also have any
unforeseen faults. As for Boeing, they should see Airbus’s new entry as a serious threat, as a
majority of Airbus’s airframes have exceed customer expeditions and performed up to task.
6. 5
SWOT Analysis
The following is a SWOT of 787 airframe:
Strength It is 60 percent less noisy than other planes of its
size and capability (CNNGo Staff, 2013)
Fuselage made of lightweight composite materials -
- allow it to use less fuel than competitors. Has a
range of 15,200 kilometers, making it the only mid-
size plane that can fly long-range routes (CNNGo
Staff, 2013)
Has same flight rating as 777, allowing minimal
training for 787 (Federal Aviation Administration,
2011)
Measuring 48 centimeters high and 28 centimeters
wide, Dreamliner windows are more than 30
percent larger than those on most similarly sized
airplanes. Instead of pulling shades up and down,
passengers will adjust the brightness of windows
with a button (CNNGo Staff, 2013)
Lighting schemes include lavender light when
fliers need to relax, and warm, orange-tinted light
during meal service (CNNGo Staff, 2013)
Weakness Parts being supplied by international companies
Behind schedule on production
Most expensive product ever produced for
commercial aviation.
Opportunities Boeing is attempting to use this model to regain the
major top spot in the commercial aviation industry,
while providing travelers with a new sense of
comfort and hospitality.
Threats Competition from Airbus A-350
Used many international sources for parts and they
have not been up to par.
Companies cancelling orders (CNNGo Staff, 2013)
The Dreamliner by Boeing has a relatively strong SWOT analysis. It has many strengths
with regards to its features which could lead it to a new greatness in the aviation industry. It has
been built with a fuselage made of lightweight composite materials, which allows it to use less
7. 6
fuel than competitors. It has as a range of 15,200 kilometers, making it the only mid-size plane
that can fly long-range routes (CNNGo Staff, 2013). The787, has same flight rating as 777,
allowing minimal training for 787 (Federal Aviation Administration, 2011). Measuring 48
centimeters high and 28 centimeters wide, Dreamliner windows are more than 30 percent larger
than those on most similarly sized airplanes. Instead of pulling shades up and down, passengers
will adjust the brightness of windows with a button (CNNGo Staff, 2013).
It has a few weaknesses, too. They include parts being supplied by international
companies, being behind schedule on production, and it is the most expensive product ever
produced for commercial aviation.
The opportunity for Boeing far outweighs the threats. Boeing is attempting to use this
model to regain the major top spot in the commercial aviation industry, while providing travelers
with a new sense of comfort and hospitality. If they are successful it will prove to be extremely
beneficial for Boeing and the entire commercial aviation industry.
While there are not many threats, they should be taken seriously. Many companies have
already cancelled orders due to the long delay in production. The Airbus A-350 is also in the
works of being produced and could provide adequate competition for the Dreamliner.
Addressing Concerns:
The two largest issues, from a manufacturing aspect of the 787 has been issues with
suppliers and the battery system used for the air frame. Boeing decided to take a leap of faith and
fully trusted outsourcing parts for the 787. Boeing had done this to reduce cost, and in theory,
have a diverse supply chain. However when outsourcing various different threats are introduced
8. 7
to the company. A number of disadvantages arrived and Boeing suffered from these the most:
loss of managerial control, hidden costs, and quality problems (Bucki, n.d.). These three issues
have tremendously impacted the 787, project which lead to delays of roughly three years
(Telegraph, 2013). A majority of the delays center on part shortages, incorrect parts, or parts
being installed incorrectly (Telegraph, 2013).
The other issue that Boeing has faced, and has come to the public’s attention is the 787’s
battery issues. This issue is tough to address in a case study as an in-depth knowledge of battery
technology is required to understand the dynamics of the issue. It is important to point out that
every new airframe experiences “teething problems.” Airbus’s A380 experienced many issues
also at introduction (Naidu-Ghelani, 2013). Anyone working in the Aviation industry will attest
that for whatever reason the 787s issues especially the battery problem have been cover more
extensively by the media. One reason may be that the battery issue did result in a fleet wide
grounding, in the United States and Japan, on January 17, 2013; the grounding lasted 123 days
(LeBeau, 2013). Going forward, Boeing has made changes to the system to prevent future
problems of the same nature. The recommendations Boeing made are now on the master
minimum equipment list for the 787, which is governed by the FAA (Croft, 2013). This list is a
document that states what equipment is required to operate an airframe in air space managed by
the FAA. Many changes have been made in order to resolve the issue ranging from electronics to
monitor voltage levels, changing the wire type, and inserting spacers to improve thermal and
electrical isolation (Norris, 2013). Boeing, the FAA, and aviation experts believe this will
address the concerns related to Boeing’s battery design. The graphic below is from Boeing
showing the solution:
9. 8
As discussed, Boeing has taken a proactive approach to solving issues that have arisen
with the airframe. It is also important to keep in mind that the design, manufacturing and
supporting of an airframe is a very involved process. As the airframe gains more flying hours,
exposure to various environments, both scheduled and unscheduled, maintenance will find
additional issues that will need to be addressed. Of equal importance, the airframe itself may not
develop issues but, systems of the airframe may. An example of this is a new issue has risen with
787 powered by GE engines. On November 25, 2013 reports of icing on engine intakes can occur
in certain conditions (Levin, 2013). It is important to note that both Boeing and GE are aware of
the situation, both parties are already working on a fix, and has made the FAA aware of this
current issue. In short, no one should be surprised to see additional issues both small and large
arise in the near future; this is normal for this industry.
10. 9
III. Outlook
Boeings production of its 787 Dreamliner plane has been reduced to 1.5 airplanes per
month from its current 1.75 (Nordqvist, 2013). The company says this is due to lower demand
for large passenger and freighter aircraft. This new rate of Boeing production of 1.5 new
Dreamliners each month will continue until the end of 2015 (Nordqvist, 2013)
The company expects its long-term average growth in the cargo market to start picking
up again next year. Boeing forecasters predict worldwide demand for 760 large airplanes, worth
$280 billion (Nordqvist, 2013). Boeing has received 107 orders for the Dreamliner aircraft so
far, including cargo and passenger versions. Fifty-six have been delivered (Nordqvist, 2013).
Boeing added, “The first delivery at the new production rate is expected in early 2014. The
production rate change is not expected to have a significant financial impact” (Nordqvist, 2013).
According to a global survey, over the next thirty years Boeing expects global demand for new
airplanes will total 35,280 aircraft, worth $4.8 trillion. Wide body aircraft share of the market is
expected to grow from its current 23% to 24%. “The 8,590 new wide body airplanes will allow
airlines to continue expansion into more international markets” (Nordqvist, 2013).
Conclusion:
Based upon the competitive market, it is obvious that Boeing had to take steps to stop
losing market share. They had the options of either competing on cost reduction alone, which is
not a wise long term strategy, or doing what Boeing does best and building innovative aircraft.
Boeing chose the latter, and the 787, while being a struggle in the beginning, has started to pay
off. The Airframe has worked through many if not all of its introduction shortcomings and it
11. 10
proven to be viable. It is also of equally important that Boeing was able to be the first to market
this new airframe, catching Airbus off guard. Boeing did have issues with its outsourcing of
parts. A strong case could be made that Boeing needs to be more involved with the both design
and quality of these outsourced parts. A costly delay was the fasteners were both manufactured
incorrectly, and then installed incorrectly, this was obviously a costly mistake. In the end, Boeing
looks to have made a great investment choice, and product. The only question going forward
will be if they can manage to successfully keep their customers happy with the timeframes of
completing and delivering the planes to the required airline companies.
12. 11
Works Cited
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Boeing:What Really Happened.(2003, Dec 14). RetrievedfromBussinessweek.com:
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OutsourcingDisadvantages
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590631.xml
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