boeing miscalculation – www.savvyessaywriters.net
boeing miscalculation – www.savvyessaywriters.net
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Each group will produce a Case Study analysis report. Please refer to the Case Preparation document in the Doc Sharing area for additional information and guidance in developing this assigment.
In addition to answering the case study questions, the analysis should provide a brief background for the reader; identify what the group believes to be the key issues; describe the elements of critical thinking and decision-making that came into play; and, if necessary, include the group’s assessment of what might have been done to change the situation to a positive outcome.
In your paper, write a thorough analysis of the key issues relevant to your group’s assigned case study. Make sure to employ the key concepts from your course readings when preparing your group’s case study analysis.
Group members may choose to consider these questions in their discussion before writing their analysis:
- What happened?
- What was/were the cause(s)?
- What was the impact?
- What was the outcome?
- What concepts and theories did you notice in your examination that worked? Why did they work?
- What concepts and theories did not work or were ineffective? Why?
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The paper should be 1,000-1,200 words (3-4 pages, double spaced). The paper is to follow APA (American Psychological Association) style and format.
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Chapter 10. Boeing: Miscalculations on a Worldwide Scale
The commercial jet business had long been subject to booms and busts: major demand for new aircraft and then years of little demand. By the second half of the 1990s, demand burgeoned as never before. Boeing, the world’s leading producer of commercial airplanes, seemed in the catbird seat amid the worldwide surge of orders. This was an unexpected windfall, spurred by markets greatly expanding in Asia and Latin America at the same time as domestic demand boomed, helped by deregulation and prosperity. In the midst of these good times, Boeing in 1997 incurred its first loss in 50 years.During this same period, Airbus (Airbus Industrie), a European aerospace consortium, an underdog, began climbing toward its long-stated goal of winning 50 percent of the over-100-seat airplane market. The battle was all-out, no-holds-barred, and Boeing was vulnerable. But in this chess game of monolithic firms, Airbus stumbled with throwing all of its resources into the world’s biggest passenger jet, and Boeing seemed to emerge a winner with its Dreamliner. Then outsourcing woes afflicted them both by 2008.BOEINGBoeing’s is a fabled past. The company was a major factor in the World War II war effort, and in the late 1950s led the way in producing innovative, state-of-the-art commercial aircraft. It introduced the 707, the world’s first commercially viable jetliner. In the late 1960s, it almost bankrupted itself to build a jetliner twice the size of any other then in service, while the critics predicted it could never fly profitably. But the 747 dramatically lowered costs and airfares and brought passenger comfort previously undreamed of in flying. In the mid-1990s, Boeing introduced the high technology 777, the first commercial aircraft designed entirely with the use of computers.In efforts to reduce the feast-or-famine cycles of the commercial aircraft business, Boeing acquired Rockwell International’s defense business in 1996, and in 1997 purchased McDonnell Douglas for $16.3 billion.In 1997, Boeing’s commercial aircraft segment contributed 57 percent of total revenues. This segment ranged from 125-passenger 737s to giant 450–500-seat 747s. In 1997, Boeing delivered 374 aircraft, up from 269 in 1996. The potential seemed enormous: Over the next 20 years, air passenger traffic worldwide was projected to rise 4.9 percent a year and airlines were predicted to order 16,160 aircraft to expand their fleets and replace aging planes.[141] As the industry leader, Boeing had 60 percent of this market. At the end of 1997, its order backlog was $94 billion.Defense and space operations comprised 41 percent of 1997 revenues. This included airborne warning and control systems (AWACS), helicopters, B-2 bomber subcontract work, and the F-22 fighter, among other products and systems.PROBLEMS WITH THE COMMERCIAL AIRCRAFT BUSINESS SEGMENTProduction ProblemsBoeing proved to be poorly positioned to meet the surge in aircraft orders. Part of this resulted from its drastic layoffs of experienced workers during the industry’s last slump, in the early 1990s. Though Boeing hired 32,000 new workers over 18 months starting in 1995, the experience gap upped the risk of costly mistakes. Boeing had also cut back its suppliers in strenuous efforts to slash parts inventories and increase cost efficiency.But Boeing had other problems. Its production systems were a mess. It had somehow evolved some 400 separate computer systems, and these were not linked. Its design system was labor intensive and paper dependent, and very expensive as it tried to cater to customer choices. A $1 billion program had been launched in 1996 to modernize and computerize the production process. But this was too late: The onslaught of orders had already started. (It is something of an anomaly that a firm that had the sophistication to design the 777 entirely by computers was so antiquated in its use of computers otherwise.)Demands for increased production were further aggravated by unreasonable production goals and too many plane models, almost an impossible product line. Problems first hit with the 747 Jumbo, and then with a new version of the top-selling 737, the so-called next-generation 737NG. Before long, every program was affected: also the 757, 767, and 777. While Boeing released over 320 planes to customers in 1997 for a 50 percent increase over 1996, this was far short of the planned completion rate. For example, by early 1998 a dozen 737NGs had been delivered to airlines, but this was less than one-third of the 40 supposed to have been delivered by then. Yet, the company maintained through September 1997 that everything was going well, that there was only a month’s delay in the delivery of some planes.Soon it became apparent that problems were much greater. In October, the 747 and 737 assembly lines were shut down for nearly a month to allow workers to catch up and ease part shortages. The Wall Street Journal reported horror stories of parts being rushed in by taxicab, of executives spending weekends trying to chase down needed parts, of parts needed for new planes being shipped out to replace defective parts on an in-service plane. Overtime pay brought some assembly-line workers incomes over $100,000, while rookie workers muddled by on the line.[142]Despite its huge order backlog, Boeing took a loss for 1997, the first in over 50 years. See Table 10.1 for the trend in revenues and net income from 1988 to 1998.The loss mostly resulted from two massive write-downs. One, for $1.4 billion, arose from the McDonnell Douglas acquisition and in particular from its ailing commercial aircraft operation at Long Beach, California. The bigger write-off, $1.6 billion, reflected production problems, particularly on the new 737NG. Severe price competition with Airbus resulted in not enough profits on existing business to bring the company into the black. Production delays continued, with more write-downs on the horizon.Table 10.1. Boeing’s Trend of Revenues and Income, 1988–1998 (millions)RevenueNet IncomeSource: Boeing Annual ReportsCommentary: Note the severity of the decline in revenues and profits during the industry downturn in 1993, 1994, and 1995. It is little wonder that Boeing was so ill prepared for the deluge of orders starting in 1997. Then, in an unbelievable anomaly, the tremendous increase in revenues in 1997 to the highest ever— partly reflecting the acquisitions—was accompanied by a huge loss.1988$16,962$614198920,276675199027,5951,385199129,3141,567199230,1841,554199325,4381,244199421,924856199519,515393199622,6811,095199745,800(177)199856,1001,100As Boeing moved into 1998, analysts wondered how much longer it would take to clear up the production snafus. This would be longer than anyone had been led to believe. Unexpectedly, a new problem arose for Boeing. Disastrous economic conditions in Asia now brought major order cancellations.Customer RelationsNot surprisingly, Boeing’s production problems resulting in delayed shipments had a serious impact on customer relations. For example, Southwest Airlines had to temporarily cancel adding service to another city because the ordered planes were not ready. Boeing paid Southwest millions of dollars of compensation for the delayed deliveries. Continental also had to wait for five overdue 737s.Other customers switched to Boeing’s only major competitor, Airbus Industrie, of Toulouse, France.AIRBUS INDUSTRIESAirbus had to salivate at Boeing’s troubles. It had been a distant second in market share to the 60 percent of Boeing. Now this was changing and Airbus could see achieving a sustainable 50 percent market share. See the Information Box: Importance of Market Share for a discussion of market share.INFORMATION BOXIMPORTANCE OF MARKET SHAREThe desire to surpass a competitor is a common human tendency, whether in sports or business. A measurement of performance relative to competitors encourages this desire and can be highly motivating for management and employees alike. Furthermore, market-share performance is a key indicator in ascertaining how well a firm is doing and in spotting emerging problems, as well as sometimes allaying blame. As an example of the latter, declining sales over the preceding year, along with a constant and improving market share, can suggest that the firm is doing a good job, even though certain factors adversely affected the whole industry.Market share is usually measured by (1) share of overall sales, and/or (2) share relative to certain competitors, usually the top one or several in the industry. Of particular importance is trend data: Are things getting better or worse? If worse, why is this, and what needs to be done to improve the situation?Because Boeing and Airbus were the only real competitors in this major industry, relative market shares became critical. The perceived importance of gaining, or not losing, market share led to severe price competition that cut into the profits of both firms, as will be discussed later.How would you respond to the objection that market share data is not all that useful, because “it doesn’t tell us what the problem really is”?Can emphasizing market share be counterproductive? If so, why?Background of AirbusAirbus was founded in 1970 as a consortium that came to include four countries: British Aerospace, DaimlerChrysler Aerospace (Germany), France’s Aerospatiale, and Spain’s Casa. Each of the partners supplied components such as wings and fuselages; the partners also underwrote the consortium’s capital expenses (sometimes with government loans), and were prepared to cover its operating losses.The organizational structure seemed seriously flawed. It was politicized, with the partners voting on major issues in proportion to their country’s ownership stakes. From this fragmented leadership, public squabbles frequently arose, some very serious. For example, plans to produce a new 107-seat A318 were held up by the French, who thought they were not getting their fair share of the production. Finances were also tangled with components supplied by the various countries charged to Airbus at suspiciously high prices.The result was that in 1998, Boeing made $1.1 billion on sales of $56.1 billion, while Airbus was losing $204 million on sales of $13.3 billion. Boeing accused Airbus of selling below cost in order to steal business from Boeing, and Airbus blamed Boeing for the low bids.The competition between the two companies became increasingly bitter after 1996. In that year, Boeing and several Airbus partners discussed a joint development of a superjumbo. The talks ended when they could not agree on a single design. But Airbus suspected Boeing was not sincerely interested in this collaboration, that its main purpose in the talks was to stall Airbus’s plans.Airbus went ahead with its plans, while Boeing pooh-poohed the idea of such a huge plane.Airbus Chairman Noel ForgeardA slight Frenchman with a cheery disposition, Noel Forgeard, 52, joined the consortium in 1998 from Matra, a French aerospace manufacturer. He came with several major goals: to centralize decision making, to impose sensible bookkeeping, and to make Airbus consistently profitable. The task was not easy. For example, plans to build the world’s largest airplane, code-named A3XX, were even threatened by disagreements over where it would be assembled. Both France and Germany thought it should be produced in their country. Forgeard stated, “The need for a single corporate entity is well recognized. Everybody here is focused on it.”[143] Still, while the need for reorganizing into something like a modern corporation was evident to most executives, the major partners were divided over how to proceed.The World’s Largest PlaneThe A3XX was designed as a double-decker plane that could carry 555 passengers comfortably—137 more than a Boeing 747-400 (it could even carry 750 people on routes around Asia where people did not care as much about seating comfort). It was expected to fly by 2004, with prices starting somewhat over $200 million. Development costs could reach $15 billion, so essentially the A3XX was a bet-the-company project with an uncertain outlook, much as was Boeing’s 747 30 years before. To pay for these costs, Airbus expected to get 40 percent from suppliers such as Sweden’s Saab, 30 percent from government loans arranged by its partners, and the rest from its own resources.The huge financing needed for this venture could hardly be obtained without a corporate reorganization, one that would provide a mechanism for handling internal disputes among the various partner countries, not the least of which was where the plane would be assembled. So, Forgeard had necessity on his side for reorganizing. But the A3XX faced other issues and concerns.Should a Plane Like the A3XX Even Be Built?Boeing’s publicly expressed opinion was that such a plane would never be profitable. “Let them launch it,” said one Boeing official, with a hint of malice.[144] Boeing took the position that consumers want frequent, nonstop flights, such as Southwest Airlines had brought to prominence with its saturation of city-pair routes with frequent flights. An ultra-large aircraft would mean far less frequency.[145]Airbus, meantime, surveyed big airlines and discerned enough interest in a super-jumbo to proceed. It also consulted with more than 60 airports around the world to determine whether such a big plane would be able to take off and land easily. Weight is critical to these maneuvers, and Airbus pledged that the A3XX would be able to use the same runways as the 747 because of a new lightweight material. Instead of regular aluminum, the planes would use a product called Glare, made of aluminum alloy and glass-fiber tape.Airbus promised ambitious plans for passenger comfort in this behemoth. It built a full-size 237-foot mockup of the interior to show prospective customers, and enlisted 1,200 frequent flyers to critique the cabin mockup. To reduce claustrophobia, the designers added a wide staircase between upper and lower decks. Early plans also included exercise rooms and sleeping quarters fitted with bunk beds.Airbus claimed that the 555-seat A3XX would be 15 percent cheaper to operate per seat-mile than Boeing’s 747. Boeing maintained this was wildly optimistic. United Airlines Frederick Brace, vice president of finance, also expressed doubts: “The risk for Airbus is whether there’s a market for A3XX. The risk for an airline is: Can we fill it up? We have to be prudent in how we purchase it.”[146]Competitive Position of AirbusAirbus was well positioned to supply planes to airlines whose needs Boeing couldn’t meet near term. Some thought it was even producing better planes than Boeing.United Airlines chose Airbus’s A320 twinjets over Boeing’s 737s, saying passengers preferred the Airbus product. Several South American carriers also chose A320s over the 737, placing a $4 billion order with Airbus. For 1997, Airbus hacked out a 45 percent market share, the first time Boeing’s 60 percent market share had eroded.The situation worsened drastically for Boeing in 1998. US Air, which had previously ordered 400 Airbus jets, announced in July that it would buy 30 more. But the biggest defection came in August when British Airways announced plans to buy 59 Airbus jetliners and take options for 200 more. This broke its long record as a Boeing-loyal customer. The order, worth as much as $11 billion, would be the biggest victory of Airbus over Boeing.[147]Beyond the production delays of Boeing, Airbus had other competitive strengths. While it had less total production capability than Boeing (235 planes vs. Boeing’s 550), the Airbus production line was efficient and the company had done better in trimming its costs. This meant it could go head-to-head with Boeing on price. And price seemed to be the name of the game in the late 1990s. This contrasted with earlier days when Boeing rose to world leadership with performance, delivery, and technology being more important than cost. “They [the customers] do not care what it costs us to make the planes,” Boeing Chairman and Chief Executive Philip Condit admitted. With airline design stabilized, he saw the airlines buying planes today as chiefly interested in how much carrying capacity they could buy for a buck.[148]Increasingly passengers were grousing about the cramped interiors of planes designed for coast-to-coast trips, and the dearth of lavatories to accommodate 126 to 189 passengers on long flights. Passenger rage appeared to be cropping up more and more. Forbes magazine editorialized that “the first carrier that makes an all-out effort to treat passengers as people rather than oversized sardines will be an immense money-maker.”[149]Boeing’s new 737-700s and 737-800s were notorious for giving customer comfort low priority. Airbus differentiated itself from Boeing by designing its A320 150-seat workhorse with a fuselage 7½ inches wider than Boeing’s, thus adding an inch to every seat in a typical six-across configuration.In the first four months of 1999, Airbus won an amazing 78 percent of orders. US Airways Chairman Stephen Wolf, whose airline had ordered 430 Airbus planes since 1996, said, “Airbus aircraft offer greater flexibility for wider seats, more overhead bin space, and more aisle space—all important in a consumer-conscious business.”[150]WHO CAN WE BLAME FOR BOEING’S TROUBLES?Was it CEO Philip Condit?Philip Condit became chief executive in 1996, just in time for the emerging problems. He had hardly assumed office before he was deeply involved in the defense industry’s merger mania, first buying Rockwell’s aerospace operation and then McDonnell Douglas. Condit later admitted that he probably spent too much time on these acquisitions, and not enough time on watching the commercial part of the operation.[151]Condit’s credentials were good. His association with Boeing began in 1965 when he joined the firm as an aerodynamics engineer. The same year, he obtained a design patent for a flexible wing called the sailwing. Moving through the company’s engineering and managerial ranks, he was named CEO in 1996 and chairman in 1997. Along the way, he earned a master’s degree in management from the Massachusetts Institute of Technology in 1975, and in 1997 a doctorate in engineering from Science University of Tokyo, where he was the first Westerner to earn such a degree.Was Condit’s pursuit of the Rockwell and McDonnell Douglas mergers a major blunder? While analysts did not agree on this, prevailing opinion was more positive than negative, mostly because these businesses could smooth the cyclical nature of the commercial sector.ISSUE BOXMANAGEMENT CLIMATE DURING ADVERSITY: WHAT IS BEST FOR MAXIMUM EFFECTIVENESSManagement shake-ups during adversity can range from practically none to widespread head-rolling. In the first scenario, a cooperative board is usually necessary, and it helps if the top executive(s) controls a lot of stock. But the company’s problems will probably continue. In the second scenario, at the extreme, wielding a mean ax with excessive worker and management layoffs can wreck havoc on a company’s morale and longer-term prospects.In general, neither extreme—complacency or upheaval—is good. A sick company usually needs drastic changes, but not necessarily widespread bloodletting that leaves the entire organization cringing and sending out resumes. But we need to further define sick. At what point is a company so bad off it needs a drastic overhaul? Was Boeing such a sick company? Would a drastic overhaul have quickly changed things? Certainly Boeing management had made some miscalculations, mostly in the area of too much optimism and too much complacency, but these were finally recognized.Major competitor Airbus was finally aggressively attacking, and that certainly had something to do with Boeing’s problems. Major executive changes and resignations might not have helped.How do you personally feel about the continuity of management at Boeing during these difficult times? Should some heads have rolled? What criteria would you use in your judgment of whether to roll heads or not?Interestingly, in the face of severe adversity, no heads rolled, as they might have in other firms. See the Issue Box: Management Climate during Adversity.Were the Problems Mostly Due to Internal Factors?The airlines’ unexpected buying binge, which was brought about by worldwide prosperity fueling air travel, maybe should have been anticipated. However, even the most prescient decision maker probably would have missed the full extent of this boom. For example, orders jumped from 124 in 1994 to 754 in 1996. With hindsight, we know that Boeing made a grievous management mistake in trying to bite off too much, by promising expanded production and deliveries that were wholly unrealistic. We know what triggered such extravagant promises: trying to keep ahead of arch-rival Airbus.Huge layoffs in the early 1990s contributed to the problems of gearing up for new business. An early retirement plan had been taken up by 9,000 of 13,000 eligible people. This was twice as many as Boeing expected, and it removed a core of production-line workers and managers who had kept a dilapidated system working. New people could not be trained or assimilated quickly enough to match those lost.Boeing had begun switching to the Japanese practice of lean inventory management that delivers parts and tools to workers precisely as needed, so that production costs could be reduced. Partly due to this change, and to the early 1990s downturn, Boeing’s supplier base changed significantly. Some suppliers quit the aviation business; others had suffered so badly in the slump that their credit was affected and they were unable to boost capacity for the suddenly increased business. The result was serious parts shortages.Complicating production problems was Boeing’s long-standing practice of customizing. Because it permitted customers to choose from a host of options, Boeing was fine-tuning not only for every airline, but for every order. For example, it offered the 747’s customers 38 different pilot clipboards, and 109 shades of the color white.[152] Such tailoring added significantly to costs and production time. This perhaps was acceptable when these costs could be easily passed on to customers in a more leisurely production cycle, but it was far from maximizing efficiency. With deregulation, fare wars made extreme customizing archaic. Boeing apparently got the message with the wide-bodied 777, designed entirely by computers. Here, choices of parts were narrowed to standard options, such as carmakers offer in their transmissions, engines, and comfort packages.Cut-rate pricing between Boeing and Airbus epitomized the situation by the mid-1990s. Then, costs became critical if a firm was to be profitable. In that climate, Boeing was so obsessed with maintaining its 60 percent market share that it fought for each order with whatever price it took. Commercial airline production had somehow become a commodity business, with neither Boeing nor Airbus having products all that unique to sell. Innovation seemed disregarded, and price was the only factor in getting an order. So, every order became a battleground, and prices might be slashed 20 percent off list in order to grab all the business possible.[153] And Boeing did not have the low-cost advantage over Airbus.Such price competition worked to the advantage of the airlines, and they grew skillful at gaining big discounts from Boeing and Airbus by holding out huge contracts and negotiating hard.The cumbersome production systems of Boeing—cost inefficient—became a burden in this cost-conscious environment. While some of the problems could be attributed to computer technology not well applied to the assembly process, others involved organizational myopia regarding even such simple things as a streamlined organization and common parts. For example, before recent changes, the commercial group had five wing-design groups, one for each aircraft program. This was reduced to one. Another example cited in Forbes tells of different tools needed in the various plane models to open their wing access hatches.[154] Why not use the same tool?There is a paradox in Boeing’s dilemma. Its 777 was the epitome of high technology and computer design, as well as efficient production planning. Yet, much of the other production was mired in a morass with supplies, parts management, and production inefficiency.Harry Stonecipher, former CEO of McDonnell Douglas before the acquisition and then president and chief operating officer of Boeing, cited arrogance as the mindset behind Boeing’s problems. He saw this as coming from a belief that the company could do no wrong, that all its problems came from outside, and that business as usual would solve them.[155]The Role of External FactorsAdding to the production and cost-containment difficulties of Boeing were increased regulatory demands. These came not only from the U.S. Federal Aviation Administration, but also from the European Joint Airworthiness Authority (a loose grouping of regulators from more than 20 European countries). The first major consequence of this increased regulatory climate concerned the new 730NG. Boeing apparently thought it could use the same over-the-wings emergency exits as it had on the older 737. But the European regulators wanted a redesign. They were concerned that the older type of emergency exits would not permit passengers in the larger version of the plane to evacuate quickly enough. So Boeing had to design two new over-the-wing exits on each side. This was no simple modification because it involved rebuilding the most crucial aspect of the plane. The costly refitting accounted for a major part of the $1.6 billion write-down Boeing took in 1997.Europe’s Airbus Industrie had made no secret of its desire to achieve parity with Boeing and have 50 percent of the international market for commercial jets. This mindset led to the severe price competition of the latter 1990s as Boeing stubbornly tried to maintain its 60 percent market share even at the expense of profits. While its total production capacity was somewhat below that of Boeing, Airbus had already overhauled its manufacturing process and was better positioned to compete on price. Airbus’ competitive advantage seemed stronger with single-aisle planes, those in the 120–200 seat category, mostly 737s of Boeing and A320s of Airbus. But this accounted for 43 percent of the $40 billion expected to be spent on airliners in 1998.[156]The future was something else. Airbus placed high stakes on a superjumbo successor to the 747, with seating capacity well beyond that of the 747. Such a huge plane would operate from hub airports such as New York City’s JFK. Meantime, Boeing staked its future on its own 767s and 777s, which could connect smaller cities around the world without the need for passenger concentration at a few hubs.Have you ever heard of a firm complaining of too much business? Probably not, but then we’re confronted with Boeing’s immersion in red ink, caused by trying to cope with too many orders. However, Boeing’s feast of too much business abruptly ended. Financial problems in Asia brought cancellations and postponements of orders and deliveries.COMPETITION AT THE NEW MILLENNIUMBy 2001 the competition between Airbus and Boeing continued unabated. Airbus had gone ahead with its superjumbo, the world’s largest passenger jet, now named the A380, with delivery to start in 2006 for a list price of $239 million. In its standard configuration, it would carry 555 passengers between airport hubs. With delivery still five years away, Airbus already had orders for 72 of the jumbos, and expected to reach the 100 milestone early in 2002. It would break even with 250 of the wide bodies.In March 2001, Boeing scrapped plans for an updated but still smaller 747-X project. Instead it announced plans for a revolutionary delta-winged “Sonic Cruiser,” carrying 150 to 250 passengers higher and faster than conventional planes. The savings in time would amount to 50 minutes from New York City to London, and almost two hours between Singapore and London. Further time savings would come from the plane flying to point-to-point destinations, bypassing layovers at such congested hubs as London and Hong Kong. Delivery was expected in 2007 or 2008.Both companies had undergone major organizational changes. As of January 1, 2001, Airbus was no longer a four-nation consortium, but now a unit of European Aeronautic Defence & Space (EADS), an integrated company with centralized purchasing and management systems. Operations were streamlined toward bottom-line responsibilities.Boeing had previously diversified itself away from so much dependence on commercial aircraft through its acquisitions of Rockwell’s aerospace and defense business, McDonnell Douglas, Hughes Space & Communications, and several smaller companies. Boeing expected that within five years more than half its revenues would come from new business lines, including financing aircraft sales, providing high-speed Internet access, and managing air-traffic problems.[157]EVERYTHING CHANGED WITH 9/11The airline industry’s woes that began with 9/11 intensified in 2002. By late that year two major carriers, US Airways and United, were in bankruptcy, and other airlines— with the exception of a few discount carriers, notably Southwest and JetBlue—were experiencing horrific losses. Airlines were placing no new orders and even reneging on accepting delivery of previously ordered planes. Boeing’s jet production fell to half of what it had been a year earlier, and forecasts for 2003 and 2004 were little better.In this environment, the competition between Airbus and Boeing for winning the few customers still buying became even fiercer and was influenced almost entirely by price. The biggest prize was capturing the 120-plane order from British budget carrier, easyJet, and this customer milked its power position to the utmost, repeatedly sending Boeing and Airbus back to improve their offers.During the aviation slump in the early 1990s, Boeing had beefed up its order backlog by selling at steep discounts—only to find itself in a serious bind in 1997 when it could not keep up with the built-up demand, and production costs skyrocketed. Now, Boeing refused to follow Airbus into unprofitable terrain, and Airbus got the easyJet order. Though Airbus claimed it was not selling its plane
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