What's Next for Boeing?
Whether we are No. 1 … Well, it causes a lot of soul-searching when you read "No. 1," and it doesn't say "Boeing". Or after "Boeing," it says "No. 2." Part of the soul-searching is, can you live with that?
Can you? Here's what's important to us: customer satisfaction, stockholder satisfaction, employee satisfaction, communities. So, we're not so fixated on market share.
What's your target for stockholder satisfaction? Our target is the top quartile of growth for the S&P 500.
Is Boeing interested in building regional jets? Not at this time. It's difficult to be in every market sector. We have studied regional jets for years and decided it wasn't a good idea for us. There was an initial surge of RJs in the late '90s and in this decade, but we thought the growth would subside. We thought it would peak in 2004 or 2005. And some of that has happened. Now there are only a couple of players, Bombardier and Embraer.
How big a factor is Asia when you're considering what kind of plane to build next?
Asia is about a third of the overall world market for new planes. Because they're growing, they're still developing networks, not just replacing existing aircraft. In Europe and the U.S., the market is mainly replacement aircraft. But you can't ignore any market.
Do airlines in Asia care about fuel efficiency as much as the cash-strapped carriers in the U.S. do? They care as much in Asia about fuel efficiency, but they don't put as much emphasis on the environment. Their environmental laws aren't as tough.
A lot of analysts think there will be mergers or other consolidation among the U.S. airlines. What do you foresee? We've said for many years that the U.S. and European industries will need to consolidate. Probably down to three or four global carriers in each market. In Europe, the big one so far has been KLM and Air France. But other countries, they haven't gotten over the emotional tie of having their flag on the tail.
In the United States, the US Airways‑America West merger didn't really change the market, because they aren't big players in the global network. Among the other big five or six airlines, one big issue is the three alliances—OneWorld, StarAlliance, Skyteam. We used to think that one of the objectives of the alliances was to buy airplanes in giant blocks. So far, that hasn't materialized. Airline priorities still outweigh a lot of alliance priorities. The airlines agree on costs, but they disagree on some of the branding—how to set up first class, frequent-flier programs. They still want their own identities.
In the past, when airlines have cut capacity, they've usually added it back to protect market share, which sends their margins down. Will that happen again? U.S. capacity has been cut so far this year. And I hope it's more sustainable than before. The business model of the past was, let's serve all markets. That's not sustainable today. The big network carriers must be global and let the low-cost carriers serve the smaller markets. You must decide what you're going to be, because you can't be everything anymore.
All of the network carriers are expanding in the international market. That's where you must have a heavy infrastructure to operate. And the U.S. cost structure is very competitive with the international cost structure.
Now that the 787 Dreamliner is underway, what's the next airplane you have to think about? We're thinking now about the follow-on to the 737. We need a lot more market knowledge about that. How many flights can you add between city pairs like New York to San Francisco, San Francisco to Los Angeles, until you have to drive up the size of the aircraft? Also, what is the value premise we have to bring forward for this airplane? Is it lower fuel costs, lower maintenance costs, lower price? I don't know what the airlines will want. And on the technology side, we're looking at the 787 and how to scale down some of that technology, and working with the engine guys because we need smaller, more efficient engines.
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