Can This Plane Save Boeing?

By Sally B. Donnelly/Everett

Ohh, you can hear me talk. I don't like that," says Mary Dowell, her voice reverberating as she walks through the world's largest manufacturing building. The quiet is not good. The 98-acre factory at Boeing's Everett, Wash., facility turns out only three large planes a month, compared with a monthly high of 16 just four years ago. Dowell, a 25-year Boeing veteran whose job it is to reshape the way the company builds its flagship plane, the 777, knows Boeing needs to revive the constant rat-a-tat-tat of riveting. "We've been humbled in the past couple of years," says Dowell. "We need to be more efficient. We get it."

Boeing might not have much time to prove it. The world's most prolific aircraft builder's commercial division is struggling in the worst aviation downturn in history and has laid off 35,560 of its 93,000 workers since Sept. 11, 2001. And although the division has remained profitable (it earned $2 billion on sales of $28 billion in 2002; Boeing had $54 billion in total revenues), this year it is expected to account for less than half the company's overall sales. Boeing makes six aircraft models, but airlines these days buy only two of them--the short-range 737 and the long-haul 777. Worse yet, this will probably be the first year that European rival Airbus delivers more airplanes than Boeing. The order book doesn't look much better: Airbus has won an estimated $26 billion worth of orders this year, in contrast to Boeing's $10 billion.

Boeing faces a fundamental question: Should it keep making commercial airplanes? And does the 87-year-old company even know what kind of plane to make? Years ago, Boeing decided not to build small regional jets--now the fastest-growing segment of the industry. The 757 production line will be closed down soon. And Boeing's aging 767 has been selling so poorly that the company is trying to persuade the Department of Defense to spend $22.4 billion to lease 100 767s and convert them to military tankers. That plan has stalled before a skeptical Congress.

Recapturing Boeing's glory, not to mention its global market share (in 1999 it held 67%; now, less than 50%), will be difficult. But the company says it has a plane design that airlines will buy, passengers will like and bean counters will love. It's a subsonic fuel-efficient jet the company rather inelegantly calls the 7E7. The 7E7, a midsize, 200-seat aircraft that is designed to fly so-called point-to-point routes nonstop, stands in stark contrast to the massive, 555-seat double-decker Airbus A380 that will probably keep to traditional hub-and-spoke networks when it starts flying commercially in 2006.

Designing a plane and building it are two very different things. Boeing's decision could make or break its business. "If Boeing does not launch the 7E7, it is putting the world on notice that it will probably never again develop a new jetliner," says Richard Aboulafia, an aerospace analyst at the Teal Group. "Even debating the issue casts doubts on its commitment to its current airplanes." Boeing's board hasn't officially given the go-ahead for the jet, which would start flying in 2008. But gung-ho Boeing executives have outlined to TIME their plans to launch the 7E7 and to build it in a revolutionary way. Rather than send parts to the final assembly site by truck and train for piecemeal manufacturing, Boeing's contractors will build complete component systems (a fully wired wing, say) to be snapped together at final assembly. To speed the process, Boeing will build three 747s to haul the components. "Instead of huge sections of the 7E7 bobbing around the ocean for a month, we can get them to the final assembly site in a day," says Mike Bair, the head of the plane's development program. "It's far more efficient and will save up to 40% in transportation and inventory costs."

The 7E7 looks fairly traditional on the outside, but it will be dramatically different on the inside. The twin-engine, twin-aisle plane will be the first commercial aircraft with large sections such as the fuselage made of composite materials like plastic and fiber glass, not aluminum. Composites, which are widely used in military planes, are lighter (a vital consideration in any commercial plane) and not vulnerable to dangerous corrosion or cracking. Boeing claims the plane will be 20% more fuel efficient than comparable current models like the Airbus 330-200 or Boeing's 20-year-old 767--a bottom-line factor that drives nearly every airline's purchasing decisions. The plane will also have more cargo space than its rivals, no small advantage given that on some flights, the cargo hold is where the only profit is. Airbus spokesman Clay McConnell counters that there already is such an economical plane flying. "By launching the 7E7, Boeing is acknowledging just how good our 330-200 plane really is," he says.

Boeing says the plane will make passengers breathe easier--literally. Because the 7E7 will mainly be flying long 7,600-mile routes (say, New York to Tokyo), Boeing intends for the 7E7 to be the first airliner with cabin pressure equal to that at 6,000 ft. instead of the current 8,000 ft. That will lessen the dehydration and fatigue many travelers experience.

For the two men who guided the development of Boeing's last plane, the stakes couldn't be higher. In the early 1990s, Phil Condit was the program manager for the 777 and Alan Mulally was the chief engineer. Now Condit runs the entire company and Mulally is head of commercial airplanes. Over the past three years, Boeing has lurched from one new design to another--only to back off ideas abruptly. One proposal, the sleek and futuristic Sonic Cruiser that Boeing promised would fly faster than other any plane except the Concorde, captured the imagination of the aviation world--but not of the airlines' accountants. Boeing shelved the design last December.

Boeing has to get back to building planes that it can move off the lot. It wants to focus on simplicity and speed for faster delivery times. Steve Westby, vice president for manufacturing, says, "Boeing wants to treat building an airplane like a pit crew treats a race car." Boeing aims to assemble the 7E7 in three days, compared with the 15 to 18 days required to build its other models.

While the board's backing seems virtually assured, the next question is the support of Boeing's powerful unions. So far, they seem to be largely amenable. The engineers' union has questioned the amount of the plane's design and engineering that will be outsourced, but acknowledges that the 7E7 is a "do or die" plane for the company. Factory workers are also clear-eyed: they spent months plastering posters with the slogan WE CAN DO IT--LAND THE 7E7 on telephone poles in Seattle and helped lobby state politicians to pony up $3 billion in tax breaks and incentives to keep the plane in Washington State. Other states are courting Boeing too. "We need to build this plane," says Connie Kelliher of the machinists' local. "We want to be part of the future, not just the ones who built the past."

The company is also keen to spread its development costs, estimated at $7 billion. Suppliers such as Vought Aircraft Industries of Dallas, which makes wings, tails, fuselages and other parts for current Boeing planes, will be taking more responsibility--and more risk--earlier in the design phase. Key suppliers will be footing their own start-up costs at the front end. But in a break with past practice, the plan is that they will get a share of the revenue for each plane sold, in addition to payment for the components themselves. "This new system would be good for me," says Vought CEO Tom Risley. "We would be more like an integral partner rather than an arm's-length contractor."

The commercial airplane unit's plan for the 7E7 comes as its parent corporation is simultaneously profiting and stumbling. While much of Boeing's defense business remains strong, and the company's stock price remains stable at $37, Boeing has suffered some ugly black eyes recently. Its space and satellite-launch unit was forced to take a $1 billion charge in July and was suspended by the U.S. Air Force from seeking military contracts because it had been caught with thousands of pages of a competitor's secret documents. That came on the heels of harsh criticism of Boeing's safety management in a report on the Columbia space-shuttle tragedy. But Boeing, the Federal Government's second-largest provider of military aircraft and aerospace products, is so big that even a ban can't stick: twice in recent months, the Air Force awarded the company two new contracts because Boeing was the only firm that could fulfill the requirements.

Mary Dowell and the rest of her unit's employees know they can't rely on such dominance in the commercial airline world. The former entry-level clerk isn't afraid of novel ideas: it was on her watch that Boeing started using modified hay balers to install seats onto finished 737s. It cut the time from six hours to 30 minutes. Dowell and her co-workers will need a lot more ideas like that one to make the 7E7 fly.