FLUG REVUE March 2006: Mullaly outlines Boeing plans

March 2006

VIP Interview

ALLAN R. MULALLY

Executive Vice President, The Boeing Company, President and Chief Executive Officer, Boeing Commercial Airplanes.

Instead of competing directly with the giant A380, Boeing is backing smaller, ultra-efficient aircraft for point-to-point long-distance flights.

FLUG REVUE: What will the year 2006 bring for for Boeing?

Alan Mulally: We just had an incredible 2005. The year 2006 will be a very good order year also and we will actually increase our backlog but I would be surprised if it is as high as 2005. Airlines worldwide are profitable and they need new airplanes to grow and replace older airplanes.

FR: Boeing recently rationalised its production processes to save on costs and reduce customer prices. Could you repeat the same in the future again?

Mulally: Our plan is continuous improvement in our productivity. Every good business tries to make an improvement of 3 to 5 percent a year. It is our fundamental strategy to improve the value of the airplanes. We differentiate our products to have features and capabilities the customers cannot get elsewhere. So we chose the cross section, bigger cabin or more comfort like a little bit of humidity and lowered the pressure altitude the fuel burn and the maintenance cost on the 787.

FR: Do you see the 787 as the role model for a 737 successor? Will your strategy be carbon fibre, all electric and twin engines?

Mulally: Yes, yes and yes. The very best material to design aircraft from are composites. They don't corrode and they don't fatigue. We can reduce the parts by 60 to 70 percent. We can take this advancement and replace whatever. This could be a new generation of the 737. We feel the critical piece is a state of the line engine that could be available by 2010 or 2011. So an airplane could be ready for entry into service by 2013 maybe 2015. The market is very big. It is probably above 40 percent of the total dollars in the next 20 years. So it's gonna be a very important decision.

FR: You have just decided to launch the 747-8 as a new version. Does Boeing need to develop a direct competitor to the A380 or something even bigger, with 900 or 1,000 seats?

Mulally: Not at all. We continue to see the world move to smaller and more capable longer range and more efficient aircraft. Wait till you see all the new liberalization and new bilaterals between countries. What made the 747-8 viable was that we have the engines of the 787. The 747-8 is 20 percent bigger than the 777 and 20 percent smaller than the A380. It's sitting right in the sweet spot. The 777-300ER has lower seat-mile-cost than the A380. Why would you go on a big airplane?

FR: What is the perfect speed for a civil aircraft?

Mulally: Today's Mach 0.84 or 0.85 is about right. The real value in time saving is connecting city pairs and avoiding hubs. If you use technology and go long range efficiently than you save considerable more time than by stopping twice.

FR: Oil prices are up again. Would we be better off using hydrogen?

Mulally: When you think about kryogenic fuels what it takes to store them on the airplane and the weight to carry it goes up so much that you can't make it efficient. We continue to look at everything but in the near future it will be fossil fuels.

FR: The military world-wide are flying unmanned air vehicles and using them to deliver weapons. Do you expect civil aircraft to lose their human pilots one day?

Mulally: Not in the near term and that's because of the complextiy and sophisitication needed if you carry 300 to 400 people. It's like the reliability of an intrument landing system extended over 12, 13, 14 hours. It's very complex and very costly. The big step was three to two. The next step will be two to one. But even that is ways out because the current two crew system served well efficiency wise and safety wise.

FR: Both Airbus and Boeing seem to be ignoring the regional jet market. Why don't you compete in that segment?

Mulally: Although it is a lot of airplane units it's a very small market. It's less than 5 percent of the total dollars. And they are really like different airplanes. We have chosen not to be in that market.

FR: Your competitor is thinking about moving some assembly line to China. Could you imagine doing something similar?

Mulally: It has never made sense to us. I would just not see the value preposition of just putting a plant somewhere else where you don't have all the capability that you need for the final assembly. It is our approach to envolve everybody around the world but to develop their capabilies.

Sebastian Steinke was asking the questions.

From page 19 of FLUG REVUE 3/2006

Last updated 10 February 2006

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