The boom-bust cycle of airliner production is raising its ugly head again in Seattle, but this time it's not the industry cycle that is ringing the alarm bells around Puget Sound. For although Boeing is set to slash rates by at least 20%, it cannot take solace in the fact that its transatlantic rival is following suit.
By the end of this year, Boeing will have delivered 620 aircraft over a 12-month period, representing the highest ever jet production rates in recent history. Just under 300 Airbuses will be delivered this year, and a further increase in output is expected next year.
Given the slowdown in orders from Asia in the last two years and the weeding out of the former McDonnell Douglas types, Boeing's incredibly high rates could clearly not be sustained, and production will fall to no more than 480 aircraft next year. Both Boeing and its rival Airbus have boosted output rapidly since the years of the mid-1990s. Both companies have made the most of the post recession boom, but in terms of raw numbers, the Europeans never managed to outsell Boeing on an annual basis.
Airbus, without the physical wherewithal to match Boeing's "pile 'em high and keep 'em cheap" approach, has, instead, increased output steadily in line with order intake to bring itself just a whisker away from its long-stated aim of holding 50% of the backlog. Even Toulouse may be a little surprised at how quickly it has caught its rival, but the US company's relatively poor sales so far in 1999 - just 170 orders compared to Airbus' 400 - has accelerated the process. Boeing's problems began when its strategy of keeping production costs and prices low and delivery rates high backfired horribly in 1997/98. As costs spiralled sky-high and delivery schedule promises were broken, Boeing faced up to a loss of $178 million for 1997.
After giving its shareholders such a rough ride in recent times, Boeing is on the road to financial recovery but has had to change its approach to "strategic" deals. This has seen the company walk away from some recent campaigns, publicly claiming that it could not match Airbus offers.
The result is that this year Boeing is facing the prospect of one of its worst ever sales performances, with almost every model, except the 737, in dire need of new orders.
And Boeing's crisis may not be all good news for Toulouse, threatening as it does to destroy Airbus' much played-on "David versus Goliath" image. With so much to lose now and so little to gain, the powers-that-be in Europe may choose to adopt a more conservative strategy and this could directly affect any early decision to launch the A3XX.
Source: Flight International
