The airline business runs in such long cycles, a bad or short-sighted decision can affect a business 20 or 25 years later.
For Airbus that bad decision was the move to build the A380, which gave Boeing an opening to attack them with the 787 and 777. That has set up Boeing for continued dominance of the widebody business.
But Airbus has stayed a step ahead of Boeing in the narrowbody business, largely due to a decision Boeing made in the mid-1990s.
When it was time, in the early 1990s, to refresh the 737 to compete with the Airbus A320, Boeing decided to make an incremental change. They kept the old 737 fuselage shape and basic wing position/alignment.
This was what Boeing’s existing 737 customers wanted because it produced a plane that would behaved the same as the older 737s and did not require additional pilot training.
But it handed Airbus an advantage because the A320 was a newer design. When more efficient engines were developed in the early 2000s, offering 15% better fuel efficiency, Airbus was able to put them on the A320 without a major rework of the airframe. The resulting A320neo, announced in 2010, was a huge hit with airlines.
Boeing’s plan was to design an all new plane for the narrowbody market; that would take several years longer than simply re-engining the 737, but Boeing would have ended up with a superior plane in the end.
The problem for Boeing was twofold. Airbus sold a spectacular number of A320neos, so Boeing’s investors weren’t happy about the prospect of losing market share.
And more importantly, Boeing’s biggest customers, Southwest and American, didn’t want to wait for the 15% improvement in fuel efficiency. The fuel costs were so different, they didn’t think they could compete against airlines flying the A320neo while they were waiting for Boeing’s new model.
So Boeing followed what is normally supposed to be good business practice — they listened to their customers and decided to re-engine the 737 even though the airframe wasn’t ideal for the larger engines. The all-new design plane was shelved.
But as a result Boeing has a 737 that has a higher risk of certain kind of stalls than previous 737 models because the engines had to be mounted farther forward in order to maintain ground clearance. To prevent those stalls Boeing turned to software. And that probably was a major factor in two crashes, undoubtedly the worst safety crisis in Boeing’s history.
If Boeing had updated the 737 airframe in the early ‘90s, or 10 years ago, they might have lost some sales campaigns, they might have lost some airline customers, but they’d be in a better place. Airbus’s production capacity is limited; if airlines needed 12,000 of this class of jet, Airbus could build about half of them and Boeing would eventually build the other half. Boeing could have bit the bullet and done a clean-sheet 737 and not lost that many sales in the long run — plus, they’d have a more modern plane today than the A320.
But on the other hand, in both instances, Boeing was doing what its most important customers demanded. So I’m not sure I can fault them on strategy. Listening to airline customers has been one of Boeing’s great strengths throughout its history.
SOURCE: QUORA
