Boeing 777X is an aircraft currently under development. The aircraft is based in part on technology that was developed for the 787 Dreamliner. The company intends this project to be the "largest and most efficient twin-engine jet in the world," and also expects it to have enhanced cabin features that will improve upon the in-flight experience. The jet is intended as a competitor for the Airbus A350, which entered service at the beginning of 2015. Boeing hopes that the 777X will be ready for production in 2017. This paper will outline the process by which Boeing determined to proceed with this project.
Problem Identification
The commercial jet business is global in nature. The market for long-haul jets is basically a duopoly, with Boeing and France-based Airbus. The market for smaller jets is dominated by Bombardier (Canada) and Embraer (Brazil). The only other player in the long-haul jet market is Moscow-based Tupolev, which mainly sells in ex-USSR countries. In a duopoly, firms respond to each other's moves, and this is the case with Airbus and Boeing, who are perpetually trying to leapfrog one another in terms of technology. The fixed costs associated with manufacturing long-haul jets are tremendous, and as such both of these companies seek to ensure capacity maximization by developing jets that appeal to the world's leading airlines. Leading airlines are the key market, because they buy new jets. These airlines are predominantly flag carriers in the developed world, major developing nations and the Gulf States.
The airline industry is in a growth trajectory, and is characterized by intense competition. The best margins are at the high end, so many airlines specifically compete to attract first-class and business-class customers. The competition in the industry has constrained price growth for economy class seats. What this means for airlines is that they want modern planes that help them attract customers, but they also want fuel efficiency to help them control costs. Fuel costs fluctuate wildly, and airlines can only partially hedge their exposure. Combine this with carbon taxes -- or the threat thereof -- and airlines are seeking to reduce their fuel usage to help them manage their margins better.
For Boeing and Airbus, this has meant a move towards lighter aircraft. The 787 Dreamliner was a technological leap for Boeing, being significantly lighter and more fuel efficient than previous aircraft, and offering a quieter cabin as an added bonus. The Dreamliner allows airlines to run intercontinental routes with fewer seats, giving airlines greater flexibility to build out intercontinental route networks. As an example, United has used the Dreamliner to upgrade its Houston-Sao Paulo service, and add a new route from LAX to Melbourne and several routes to Asia (Mutzabaugh, 2015). ANA added a Haneda-Vancouver route because of the 787, and there are many other examples of new possibilities created by the new aircraft. Airbus's response, the A350, is providing similar opportunities, evidence that this model is the future for the aircraft industry. For Boeing, the problem was how to follow up the Dreamliner and create the next generation of lightweight, quiet jets for long-haul travel, to maintain its competitive edge and ensure that it operates at 100% capacity for the next decade or more.
Analyze Situation
The 777X builds on the 787 ideas, but with improvements. There are different classes of aircraft, based on both the range and the number of seats. The Dreamliner does intercontinental travel with a relatively small number of seats, compared with more classic intercontinental jets like the 747 and A380. For Boeing, as soon as it identified that the Dreamliner technology filled specific needs for its major customers, it knew that it needed to follow-up, building on those technologies to deliver jets in other range and capacity classes. The only real decision was to determine what class was best to target. The 777-series jets have a capacity, depending on layout, from 314 to 451 passengers and have intercontinental range. This is a higher passenger count than the 787, as the 777 series was designed to replace the 747s. Thus, the choice was made to pursue a class of aircraft that is slightly larger than the Dreamliner, and continue with the focus on intercontinental jets.
This was likely the right choice. The Dreamliner is among the smaller of Boeing's products. While the 777 series has been successful, its technology is now outdated, as the 787 made many of the features of the original 777s obsolete. The 777 series was a commercial success, but would struggle to remain so with obsolete technology. Thus, updating the 777 series...
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