The Boeing Company
Established in 1916 in Seattle, Washington, Boeing had grown to become the U.S.’s largestexporter and the world’s largest commercial aircraft manufacturer. Commercial aircraft salesaccounted for two-thirds of Boeing’s revenues. The remaining one-third consisted of sales to the U.S.government for military aircraft and defense equipment. The company was traded principally on theNew York Stock Exchange and had secondary listings on five other worldwide stock exchanges.Stocks of Boeing were widely held by over 100,000 shareholders,
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with a market capitalization of$10.1 billion.
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Earnings from operations were $1.95 billion, and net earnings were $1.57 billion in1991.
Boeing’s Commercial Aircraft Since the 1960s, one of Boeing’s key aims was to dominate in every segment of commercialaircraft. Boeing strove to offer airlines a comprehensive fleet that would cover their requirements forrange and passenger capacity. As of 1992, Boeing had an existing fleet of 6,600 commercial aircraft.
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For the 1992 fiscal year, the company would deliver 342 commercial airplanes. Its order book added500 planes over the next five years.As of 1992, Boeing had four families of airline models: the 737, a short-range plane; the 757 and767, medium-range planes; and its flagship product, the 747 “Jumbo Jet.” (See
Exhibit 2 for a chart ofBoeing’s offerings.) In each family, several variations were available. Boeing had phased outprevious models such as its first commercial jetliner (707) and the 727. In the early 1990s, Boeingscrapped the development of a short-range 150-seat plane called the 7J7, as it could not find sufficientorders to justify its development. The company shifted its development efforts to the 777, a longer-range, medium-sized plane expected for delivery in 1995.
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The small plane: 737
The 737 was given the official go-ahead in 1965 even though Boeing hadonly one order and no official “launch” customer.
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The original 737 was to cater to the 100-passengerclass for short-range distances to compete head-to-head with Douglas’s (later McDonnell Douglas)DC-9 and -10. The 737 became known for its stubby appearance (its wingspan was almost equal tothe length of the plane). During the early 1980s, the 737 became the best-selling plane in the worldhaving captured a record customer base of 115 airlines. From 1980 through 1983, the 737 wascredited with keeping Boeing afloat even though the company’s profits eroded from $600 million in1980, to $473 million in 1981, to $292 million in 1982.
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By the end of 1991, Boeing had delivered 3,000737s, representing nearly half of all the company’s delivered planes.
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The third version of the 737(named the 737-300) was considered to be the plane that “turned the profit corner for the entire 737program.”
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Medium planes: 757 and 767
The 757 and 767 programs began in the early 1970s in responseto the 1973–1974 oil embargo crisis, which increased jet-fuel prices. Boeing wanted to pitch the twoplanes to airlines as “sister ships” using fuel efficiency and commonality as key selling attributes.
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In1978, the company released the programs simultaneously. The 757 was designed for the 150-plus-seatsegment to replace the older Boeing 727, and the 767 was intended for the 200-plus-seat segment. Thesister ships featured digital panels on the flight deck and were the first planes to be designed for twocrew members instead of three. The 767 also boasted international collaboration, since 50 Japaneseengineers were involved in the design process and Japanese companies became major subcontractors(Mitsubishi, Kawasaki, and Fuji built nearly the entire 767 fuselage).
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Technological improvementsin the 757–767 programs, such as the use of composites, were fed back into the 737 family. As of theend of 1991, Boeing had delivered 412 757s and 405 767s. As one observer wrote, “The sales totals [o