|
|
|
 |
|
Home / Washington Business - April 2006 / Q&A with Alan R. Mullaly: Leading Boeing to Record Sales |
|
|
|
 |
|
|
|
Q&A with Alan R. Mullaly: Leading Boeing to Record Sales |
|
|
|
Written On: April 2006 |
|
|
|
Alan R. Mullaly is executive vice president of The Boeing Company, and president and chief executive officer of Boeing Commercial Airplanes. He is responsible for all of the company's commercial airplane programs and related services, with sales of $22.7 billion in 2005. Additionally, Mullaly is the senior executive for The Boeing Company in the Pacific Northwest, and a member of the Boeing Executive Council. Mullaly became president of Commercial Airplanes in September 1998; the responsibility of chief executive officer for the business unit was added in March 2001.
Q: Boeing set a record for commercial airplane sales in 2005, logging 1,029 orders. To what factors do you attribute to your sales success, especially in light of persistent high fuel costs and airlines struggling with large debt loads?
A: Last year was definitely a tremendous year for our airline customers and for Boeing. What many people are starting to realize is that our success in 2005 was a validation of a strategy we began several years ago. That strategy has three key points: transforming and simplifying our product offerings, transforming and streamlining our production systems, and transforming our customer relationships to ensure that we are responsive to their requirements and that we are delivering innovative solutions to help them succeed. Today, we offer airlines the most efficient, comfortable and capable airplanes ranging from 100 to 450 seats and the most complete line of cargo freighters in the world. So, 2005 wasn't really just about 2005. It was the result of several years of very hard work implementing a strategy that focused on bringing greater value to our customers.
Q: Given the rollercoaster-like sales graph over the last three decades, do you believe Boeing commercial orders will continue on the upside or will they level off or decline in the next decade?
A: It is hard to predict cycles over a 10-year span, but you're right, we certainly operate in a cyclical business. We are just now emerging from the worst and most prolonged downturn ever in the history of commercial aviation. However, we believe we are well positioned for the future with our products and services. While 2006 may not reach the record levels of orders set last year, we expect another strong year for the industry. And we believe we're in a great position for the longer term as well. We're going to stay focused on our customers and our strategy, and make sure we meet our commitments.
Q: As you look at the orders Boeing is receiving, are those orders for new fuel-efficient aircraft to replace older less fuel-efficient jets or are those orders for an expanding market? Where are those markets?
A: Our current estimate is that of 25,700 airplanes that will be required over the next 20 years, about 28 percent will be needed to replace older airplanes. The remaining 72 percent will be required for passenger and cargo traffic growth. We expect about one-third of our airplanes to go into service in the Americas; one-third into Europe, the Middle East, and Africa; and one-third to Asia. While much gets written about the relative financial weakness of the traditional U.S. network carriers, airlines around the world are healthy and growing right now, including the low-cost carriers in the United States.
Q: Looking at your head-to-head competition with Airbus, what do you see as advantages for Boeing? How about disadvantages? What needs to change?
A: I wouldn't trade our position with anybody. To go back to something I said earlier, we strongly believe that the market is validating our strategy and point of view about air travel. We believe that the commercial airplane market is increasingly relying on efficient airplanes that enable airlines to provide passengers with more frequencies, point-to-point service and a better flight experience. Boeing airplanes are lighter by design, more efficient by design, more durable by design and consequently deliver more value to the customer over time and are less costly to operate. For example, during 2005 we won a record 154 orders for our twin-engine 777 airplane, as compared to Airbus winning only 15 orders for their competing product, the A340. A major factor cited by airlines for choosing the 777 over the A340 was the fuel efficiency of the 777 airplane.
Looking at the 787, the fact that the 787 is an all-new design that takes advantage of the latest technological improvements in airplane construction, engine efficiency and aerodynamics is another competitive advantage for us. Overall, we feel very good about our airplanes, our services and our competitive position. We also believe another competitive advantage we have is our people. Boeing employees continue to be vital to our success. They design, build and support our airplanes and maintain thousands of relationships with customers.
Q: How is the new 787 Dreamliner coming along? Is it competing well with the A350?
A: The 787 Dreamliner is a clear winner, and the team is doing great. The market response to this airplane has been nothing short of astounding. To date, we have received 298 firm orders for the airplane from 28 customers, only 22 months after officially launching the program. The airplane reached a firm configuration last year, right on schedule. Now, Boeing engineers and our partners are engaged in bringing everything together. By every measure fuel efficiency, cargo capacity, maintainability, reliability, passenger comfort and the cabin environment, among others the all-new 787 design has a competitive advantage over the A350. We are very confident about the 787, and we are now working hard to deliver on our commitments. The first airplane will roll from the factory next year and enter flight testing, and were looking forward to a first delivery in 2008.
Q: Boeing's 737 has been a good product line for Boeing. Is it holding its own against the A320? What is its future?
A: The 737 is more than holding its own in the marketplace. It's the best-selling jet in the history of commercial aviation and is still going strong. The next-generation 737 family the 737-600,-700,-800, and -900ER was developed and introduced in the late 1990s. The models are on average a decade younger than the competing models from Airbus. We have been continually investing in this airplane as well and recently launched two new models. Late last year, we had our 6,000th order for the 737. In February of this year, we delivered our 5,000th 737. And last year we had a record year with 569 orders, breaking a previous record of 438. It is a great selling airplane, and we will be producing 737s for many years to come.
Q: Airbus just introduced the largest commercial jet ever built in the A380. Is it cutting into sales of 747 or 777 aircraft?
A: From our point of view, the A380 is certainly an engineering achievement but it is a very big airplane for a very small market. And we think the new 747-8 family is a wonderful addition to our product line. Last year the 747, including the current model, the 747-400, and the 747-8, had 43 orders, compared to 20 for the A380. The 747-8 will incorporate technological innovations from the 787 Dreamliner, such as the highly efficient engines and enhanced wing design. The 747-8 will significantly increase the passenger and freight capabilities of the 747 and offer greater fuel efficiency and improved operating economics. And it will be friendlier to the environment.
As for the 777, it competes in a different market segment than either the 747 or A380. And it is really in a sweet spot in the marketplace. The 777 received 154 orders last year alone, which was a record for the 777. Airlines love it, passengers love it it's a great airplane.
Q: On the military side, the Air Force will soon have to replace its aging KC-135 tanker fleet. There has been Congressional activity around either leasing or lease/buy 767s as replacements. What is the status of that proposal?
A: The Air Force is in the process of defining the requirements for a potential tanker replacement program. Fortunately, we have a complete family of aircraft from which to choose to ensure we can meet the requirements defined by the U.S. Air Force. We may know more about a potential program later this year.
Q: Aerospace employment has declined by 700,000 jobs in the last decade. Many of those layoffs were in Washington. Has aerospace employment stabilized or will it grow or decline? What skills are Boeing looking for in new employees?
A: For the past 20 months, Boeing has been adding employees in Washington. In fact, during 2005 alone, we added 7,300 new employees, including recalls and new hires. Boeing will continue to add additional employees this year at a measured rate to support the ramp-up of commercial airplane production and to support a variety of developmental programs in commercial airplanes and in integrated defense systems in Puget Sound. Our goal is to structure Boeing in a way that minimizes the large cyclical swings in employment that have characterized our industry in the past. A more stable employment picture is better for our employees, our customers and our communities.
Q: You challenged the Legislature to make Washington a more competitive state. That challenge led governors Gary Locke and Christine Gregoire to create the competitiveness councils which you have co-chaired. Has our state stepped up to the challenge and become more competitive? What needs to improve?
A: I've said many times that Washington has made great strides toward becoming more competitive. Progress thus far is good, but there is more that we can do to improve the business climate in this state. As a result of the first competitiveness council, we know what needs to be done, such as continually improving and investing in our transportation infrastructure. The list of issues that the first competitiveness council identified and that we are continuing to focus on under Gov. Gregoire's leadership hasn't changed. We are focused on improving public education from early learning on through higher-education systems. We are focused on improving the systems that contribute to the costs of doing business in the state. In all, our aim is to keep our state a great place to live, work and do business. The hard part now is finding the will to make more changes. We have to stay focused and committed to ensuring our state and our communities are competitive.
|
|
|
|
|
 |
|
