Page 1 of
2 BOOK
REVIEW The ultimate global
battle Boeing Versus
Airbus by John
Newhouse
Reviewed by Benjamin A Shobert
Great business dramas entice us with some
combination of foul play found out, new
technologies exploited that create unfathomable
wealth, or the grounding of grandiose dreams by
the gravity of reality. John Newhouse's book
Boeing Versus Airbus: The Inside Story of the
Greatest International Competition in
Business manages to
draw together a bit from each of these themes, and
the result is an insightful and probing analysis
of two companies that remain to this day
bellwethers of the global economy and the impact
of globalization.
Like the automobile
before it, affordable and safe air travel has
become such a ubiquitous element of society that
we can easily forget how much it exemplifies and
enables the world we live in. Newhouse manages to
capture the sheer size and weight of the issues
facing both Boeing and Airbus while giving the
reader a clear picture of the more mundane issues
- customer satisfaction and sensitivity to
competitors with shifting strategies as two
examples - that he believes must be appreciated if
anyone is to grasp fully the nature of what both
companies must do to thrive in the next decade.
According to Newhouse, the
Boeing of the 1980s was complacent
and lethargic, a toxic
combination that he is apt to remind us must never
be forgotten when contextualizing the company's
recent difficulties.
The 737, a 1960s-era
design, had become the most widely accepted and
best-selling commercial airliner in the world, and
the 747 held a dominant position in the attractive
trans-Atlantic and trans-Pacific flights. Between
these two bookends stood a family of other Boeing
aircraft, each offering the safety and stability
airlines had come to expect.
But Boeing's
success also led it to become "more hierarchal and
less flexible ... Boeing, they say, is more
bureaucracy-laden that other companies - according
to some former [US] Defense Department officials
who now observe Boeing from the private sector,
even more so than the Pentagon" (p 13).
Understandably, most companies managing a
gravity-defying transport vehicle with, to use the
737 as an example, more than 367,000 moving parts
are prone to layering decision-making, in the
hopes that the results will be improved safety and
reliability. However, as different and uniquely
risk-prone as the airplane-maker business may be,
it is still an enterprise, and its operation is
subject to the same management principles as any
other. Boeing's perspective, that its position in
the market, which was protected by its delivery
and safety record, led it to develop a tin ear as
markets changed, in particular the introduction of
economy airlines around the world.
One
example of the global wave of low-cost airlines,
easyJet, was taken aback at the arrogance with
which Boeing dealt with it. Confident that the 737
was the only real choice easyJet had, Boeing
missed the pivotal role the easyJet deal was going
to play in Airbus's attempt to consolidate the
economy-airline market into its A320 platform.
Christopher Walton, the carrier's finance director
told Newhouse: "We put out a blind tender. Boeing
didn't seem serious until it realized that Airbus
was a contender ... At that point, it was all
about price, price, and price."
An Airbus
executive, now retired, confirmed that version.
"This easyJet sale was very important to us," he
said. "We had to get over that hurdle - a low-cost
operator that wanted to succeed like Southwest and
fly Boeing 737s. So Airbus did whatever it took to
make certain that its price would be lower than
Boeing's" (p 37).
The diminutive view
Boeing historically took of Airbus, best
illustrated by Newhouse's presentation of the
easyJet deal, was partly the result of Boeing's
historical success and partly the patchwork nature
of Airbus's structure. Certainly no one doubted
that Airbus would field a capable aircraft, but
Boeing's executives were not the only ones to
believe that the number of governments and
business interests involved would ultimately pull
Airbus into too many directions to be a real
threat.
This was a strategic
misinterpretation, born perhaps as much of hubris
as of an underestimation of how important the jobs
pregnant within a thriving aviation industry could
be to struggling western European economies. It
also underestimated the market's implicit need to
have a counterbalance against Boeing's dominance
and stasis.
Airbus quickly became a threat
to Boeing's bread and butter, putting forward its
A319 and A320 single-aisle products as capable,
dependable and easy-to-train-on platforms that air
carriers quickly fell in love with. Airbus also
benefited from the market space Boeing had already
created. The need to innovate further, to explore
options Boeing was unwilling to explore, became an
important driving force behind Airbus's
introduction of its super-jumbo A380 platform.
On the heels of its own new-product
introduction with the 777, Boeing had come to feel
that the high end of the market, best exemplified
with its 747 and now the 777, was at worst
saturated, or simply lacking the potential to
justify the multiple billions of US dollars of
funding for a next-generation super-jumbo
aircraft. Consequently, Boeing and Airbus have
embarked on fundamentally different paths, for
Boeing the 787 (originally christened the 7E7 for
Efficiency), for Airbus the A380.
The
Boeing 787 was designed with two primary
efficiencies in mind: fuel consumption and time of
travel. Efficiency on the former would be
accomplished through an expanded use of composite
materials, something Airbus had always more
broadly embraced than the cautious Boeing, but
whose weight savings could no longer be
overlooked.
The latter efficiency, travel
time, was addressed not by embracing the old
mantra of "higher, faster, further", but by making
it cost-effective for the airline to reduce
hub-based flight patterns, and introduce more
city-to-city flights: Denver direct to Tokyo
instead of Denver to San Francisco to Tokyo, as
one example.
Boeing believed this would
resolve some of the airlines major headaches: by
streamlining flights through elimination of
intermediate hub cities, congestion around such
airports as Chicago's O'Hare and Atlanta's
Hartsfield-Jackson would decrease, and passengers
would experience reduced transit times (not to
mention dramatically fewer opportunities for lost
luggage).
But for Newhouse, the most
important development with the 787 is not any of
these features, but how Boeing has reshaped its
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and lethargic, a toxic
combination that he is apt to remind us must never
be forgotten when contextualizing the company's
recent difficulties. 
