1. The Global Large Aircraft Market

3. Outline Objective Industry History Boeing Corporation Airbus Industrie Industry Competition Large Aircraft Competitive Analysis Strategic Recommendation

4. Objective Analyze and recommend a competitive strategy for Boeing within the large aircraft market (500+ passenger seats) –Boeing’s Options: Maintain current product Develop and produce an improved 747 Design a completely new aircraft

5. Industry History Wright Brothers’ first flight in 1903 First half of the century, rapid development of industry –Aeroplane Co., Bae/Aerospatiale, Bell, Boeing, Curtiss, Grumman, Lockheed, Martin, Messerschmitt, and Pratt & Whitney Second half of the century, consolidation of manufacturers –Boeing and Airbus remain

6. Boeing Corporation History –Commercial production began with 707 in 1954 –Pan Am inaugural transcontinental flight in 1958 –First 747 rolled off the production line in 1968 Current Business Units –Commercial Aviation –Military Aircraft & Missile Segment –Space and Communication

8. Boeing Corporation Largest aerospace manufacturer in the world –Over 13,000 commercial aircraft delivered –Represent 65% of world’s air transportation market –1999 Financial Performance Revenues $58 Billion Net Operating Income $4.7 Billion EPS of $2.49

10. Airbus Industrie Owned by consortium –European Aeronautic Defense and Space Company –BAE System Created an Airbus Integrated Company to manage the commercial sector Utilizes production facilities across Europe –Allows efficient use of specific skills by division

12. Industry Competition Intensity of Competition Highly Competitive (Unfavorable) Availability of Substitutes Bargaining Power of Buyers Bargaining Power of Suppliers Threat of New Entrants Limited Substitutes (Favorable) Limited Quantity/Interdependency (Neutral) Limited Quantity/Interdependency (Neutral) High Barriers (Favorable)

13. Large Aircraft Competitive Analysis Projected Demand Strengths and Weaknesses Economic Risk

14. Market Forecast 2000 through 2019 Deliveries $1.5 trillion (22,315) Large 500+ seats 400-500 seats Smaller Jets Intermediate Twin-Aisle Single-Aisle A330 757 767 A320 737 717 777 A340 747 A3XX

15. Projected Demand 20 year market forecasts vary greatly

17. Strengths & Weaknesses Maintain Product (Option 1) Strengths No capital expenditure Weaknesses Limited range Limited capacity Reduced efficiency Inferior technology

18. Strengths & Weaknesses Improved 747 (Option 2) Strengths Enhanced performance Commonality of ground crews No additional training of service crews or pilots Existing airport facilities Competitive operating efficiencies Meet noise level guidelines Seat-mile cost savings (3-5%) Weaknesses Limited range Limited capacity Inferior technology Operating Efficiencies

19. Strengths & Weaknesses New Aircraft (Option 3) Strengths Equivalent to Airbus (technology) Weaknesses High investment

20. Economic Risk Maintain Current Product –Requires no investment Develop and Produce an Improved 747 –Requires limited investment of $4 Billion –Breakeven of 170 aircraft Design a Completely New Aircraft –Requires significant investment, approximately $14 Billion –Breakeven at 528 aircraft

23. Strategy Recommendation Medium Term (Through 2005) –Commit to competing in the Large Aircraft Market –Focus on producing and selling next generation 747 –Highest projected return on investment Long Term (Beyond 2005) –Further evaluate market based on orders –Proactively monitor demand –May need to produce a new Large Aircraft to stay competitive

24. Lets Take Off…!