Boeing's Dreamliner: 52 Sold, 3,448 to Go
(Business 2.0) – When they unveiled the 7E7 Dreamliner this spring, Boeing executives touted it as the "airplane that will set the standard for every one that follows it." What they didn't say was that Boeing's first commercial jet launch in nearly 13 years also represents a last-ditch effort to restore the reputation of one of America's highest-profile companies.
Boeing used to be the world's undisputed leader in commercial aviation. But the 7E7's launch comes on the heels of an unsettling rough patch in the company's history. Stung by a string of ethical lapses in Boeing's satellite and missile defense units last year, several high-ranking company execs, including longtime chief Phil Condit, resigned from their posts. Adding to the embarrassment, 2003 also marked the first time that Airbus, Boeing's chief rival for control of the $44 billion commercial airline market, delivered more planes than Boeing--305 vs. 281.
That puts John Feren, head of sales and marketing for the 7E7, in the hot seat. It's up to the 49-year-old former economist to persuade air carriers to buy Boeing's new jetliner amid one of the most wrenching downturns the industry has ever seen. "Boeing has its work cut out for it," says John Douglass, president of the Aerospace Industries Association.
Feren says the midsize 7E7 is ideal for a world in which airlines will need planes that can fly 200 to 300 passengers directly to a final destination--think JetBlue, AirTran, or EasyJet operating intercontinentally. Airbus has staked its future on a very different scenario by launching production of the A380, a twin-deck behemoth that will carry as many as 800 passengers between major hub airports like Chicago's O'Hare and Tokyo's Narita. "There's a clear dichotomy in our views of what the world will need," Feren admits.
Ultimately, Boeing hopes to sell as many as 3,500 7E7s, with an estimated total value of $400 billion. But for now, Feren's sales pitch is tailored to today's tough economic realities. Touted as a cost-saving machine, the 7E7 (the E stands for "efficient") will use lightweight composites that enable the plane to fly 2,000 miles farther while burning 20 percent less fuel than its closest competitor, the Airbus A330-200.
Given the grim finances of U.S. carriers, however, Feren's sales efforts are focused overseas. "We'd like to order a bunch of 7E7s," says Continental chief executive Gordon Bethune. "We're just not ready to pay." Other execs point out that at $120 million per plane, the 7E7 isn't cheap. Dubai-based Emirates cited the 7E7's cost in a recent decision to pass on the plane, while another potential purchaser has joked that the E in the name stands for "expensive." Making things even tougher, Airbus uses aggressive purchase incentives, such as steep discounts and guaranteed resale prices, to win orders. To compete, Boeing offers many of the same incentives to potential customers while also citing the 7E7's operating efficiencies as a key selling point.
Japan's second-largest carrier, All Nippon Airways, stepped forward as the 7E7's first customer in April, committing to buy 50 planes in a deal valued at $6 billion. The largest order ever placed for an all-new Boeing jetliner, the deal still left some analysts underwhelmed. Pointing to the fact that Boeing outsourced roughly 35 percent of the 7E7's airframe assembly to Japan, many discount the ANA order and are waiting for Feren to land another big sale. (In June, Air New Zealand placed a modest order for two 7E7s.) "The ANA deal is a strong start, but additional orders will really validate its attractiveness," says Merrill Lynch analyst Byron Callan.
Such skepticism underscores the difficulty of Feren's job. His pitch is built around the idea that the 7E7 can help cost-conscious airlines save lots of money. But first he must persuade them to spend it. -- MATTHEW MAIER