Boeing aimed for the 7E7 to be more fuel-efficient, carry between 200 and 250 passengers, able to accomplish both domestic and international flights, as well as be 10% cheaper to operate than Airbus’s A330-200 aircraft. This approach has historically been known as a “bet the company strategy.” As each new generation of wide-body jet aircraft has placed enormous financial pressure on Boeing (including, but not limited to up-and-down earnings results, increased debt burden and a cyclical stock price) thereby significantly increasing the risk of corporate financial failure. It was William Boeing and George Westervelt who bring this company in to existence. Yet despite a few close calls, Boeing has emerged successfully from each cycle, enabling it to maintain industry leadership and generate satisfactory long-term financial returns. As the company launched its later generations of jet aircraft, military/defense business remained a key contributor to overall corporate success for the same reasons noted for the 707 and 747. From 1950-53, average net income increased to $12 million as the company benefitted from its military aircraft business, led by its signature B-52 jet bomber. In early 2003, Boeing announced plans to design and sell an airliner named the 7E7. Shannahan, MeglynAnne Price. In 1955, Boeing secured an order for production of 400 military units from the US Air Force for its 707 model, equal to the projected (and eventual) installed base of B-52s for US Strategic Air Command. We will write a custom Case Study on The Case – Boeing Commercial Aircraft: Comeback specifically for you for only $16.05 $11/page. Boeing believed that the scheme would be able to deliver a flexible and fast carrier platform with global reach, particularly where other bases were not available. While Boeing achieved breakeven with the 707 in late 1956, the long-term nature and large capital investment for the aircraft business meant that it took 10 years for the 707 to reach peak-production while simultaneously helping the company achieve peak-earnings in 1967-68. An iconic aircraft, loved by many, it is sadly now being retied by many airlines. Existing prop aircraft flew too slow and too low for efficient refueling. By 1997, McDonnell Douglas was acquired by Boeing, thereby eliminating it as a competitor. By the mid-1960s, Boeing had firmly established itself as a leader in commercial jet aircraft with the 707 as its flagship product worldwide. However, Net Income dropped 88% to $10.2 million in 1969 as economic slowdown, declining air travel and financial retrenchment by the airline industry caused 707 unit shipments to fall by nearly 50%. The Airbus A380 usually holds around 500 passengers, but has room for as many as 853. The 747 helped Boeing surpass the 1967-68 peak by a factor of 7-times by 1980, with the 767 and 777 programs leading to an eventual 7-fold improvement in Net Income by 2011 versus 1980. Federal funding of the SST was cancelled in 1971, forcing Boeing to take a loss on this project. Frederick Warne & Co. (London and New York). Boeing has been the premier manufacturer of commercial jetliners for over 40 years. The company is composed of multiple business units: Boeing Commercial Airplanes (BCA); Boeing Defense, Space & Security (BDS); Engineering, Operations & Technology; Boeing Capital; and Boeing Shared Services Group. In 1967 and 1968, Boeing achieved commercial success with the production of the 737 and 747. Here is a link to the classic video clip of the Boeing 707 barrel roll over Lake Washington (Seattle, WA) which forever affirmed this iconic aircraft with the company’s “bet it all” strategy. The company has nearly 12,000 commercial jetliners in service worldwide, which is roughly 75 percent of the world fleet. As noted earlier, the success of Boeing’s 707 and 747 programs can be partly attributed to the company’s core competency in military and defense sectors. Specifically, Boeing was able to widen its cabin space by four inches with minor engineering and tooling costs plus retain the core features incorporated into its military prototype. OMEGA Company, based in San Antonio, TX (owned & operated by former military aviation personnel) refurbish 707 aircraft and convert them into tankers so that these private aircraft can refuel both the USAF and USMC aircraft in midair while these branches of the US armed forces conduct their practice maneuvers here in the continental United States. The Boeing 777 Case. “367-80(707 Prototype)” – N.P., N.D. Boeing Company. - The Travel Insider, History Funnel: How Athenian Democracy Made People Stretch Beyond Their Comfort Zones, Job Prospects In Southeast Michigan Keep Growing – Unemployment At 16-Year Low, National Fiscal Flexibility: EU Parliament Plans A Big Step Backwards, Terrified of AI? Thompson, R. G. “Dash 80.” Air and Space Magazine. In this case study we are trying to evaluate the 777 project. The San Diego Union [San Diego, CA], “Boeing Jet’s First Flight Called ‘A-ok.'” September 27, 1981: Page A-4. The firm was adopting a project which would see it part with roughly 6.2 billion dollars and for in fact manufacturing the product it required a minimum of 9,500 employees. George A. Haloulakos, CFA DBA Spartan Research and Consulting, Core Adjunct Finance Faculty – National University, Co-authored with: Farhang Mossavar-Rahmani, DBA, Professor of Finance – National University. The 707 was launched on the basis of potentially, and ultimately serving two very large markets, commercial and military. Thus, the company’s missile business was able to sustain Boeing’s overall financial viability while the company weathered the industry downturn in the early 1970s. At that time airlines were reluctant themselves to commit their financial stake entirely on reliance or use of jet aircraft alone. The Observer’s Book of Aircraft. The Boeing 747 changed the aviation industry in many ways. This lower degree of vertical and horizontal integration versus the approaches taken in its 707 and 747 models has enabled the company to more efficiently utilize all its resources while still taking the necessary risks to maintain its leadership. The BOEING 777 CASE SUMMARY In October 1990 Boeing officially announced the launch of the latest addition to the Boeing family: The Boeing 777. 301 certified writers online. This process is called Project Homework and took three years to produce a long list of “lessons learned”, as well as a reasonable idea of the … As top U.S. exporter, the company supports airlines and U.S. and allied government customers in 150 countries. The video runs less than 2-minutes. After the 707: SST, Wide Body Jet Aircraft, Bigger Bets and Bigger Risk. Introduction. 1968: Page 1027. With the new 747-8, though, the 747 is not going anywhere soon. Figure 1: Porter’s Five Forces Applied … Initial deliveries of the aircraft took place in May of 2017, and the plane entered commercial service shortly thereafter. The Boeing 707 continues to be remain on active duty. Boeing was able to differentiate itself from both foreign and domestic competitors by maintaining flexibility with its own customers. Synopsis of Case. The 747-8I is more than 250 feet long, the A380 measures 238 feet. The numbers implied such a project would put the entire company at grave financial risk. Total 707 commercial deliveries were 1011 (from 1958-94). Among the first passenger carriers to run the 737 MAX commercially were Lion Air, of Indonesia, and Norwegian Air, of Norway. By comparison, during1950-53, average Total Liabilities exceeded average annual Net Income by a factor of 12. In sum, Boeing did “risk the company,” as measured by the cost to develop the program ($185 million) versus its net worth ($149 million) with the prototype exceeding its average annual Net Income ($16 million versus $12 million) over the same period. Given the aforementioned sharp increase in average net income, Boeing determined that the $15 million+ cost to develop a prototype 707 would be less risky because it would be designed to serve two (instead of one) potentially very large global markets, thereby lowering risk and increasing expected returns. 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