Review by Ben Rothke:
Common wisdom states that Boeing is a commercial airline powerhouse, manufacturing the world’s best planes with state of the art manufacturing processes, led by a first rate management staff. On the other side is Airbus, a bit-player whose survival has only been sustained via state-supported welfare programs, whose sponsors pour endless funds into this money-losing effort. In Boeing Versus Airbus: The Inside Story of the Greatest International Competition in Business, John Newhouse shows how both perceptions are erroneous. Boeing is far from being the world-class company most perceive it to be, and Airbus in fact makes some pretty good airplanes.
The issue of Boeing vs. Airbus is one with significant consequences, and with a significant amount of interviewing and research, John Newhouse has written a fascinating and rewarding work on this most important topic.
For anyone with an interest in the aviation industry, Boeing Versus Airbus is a most enjoyable and fascinating book. In chapter after chapter, the book details what goes on behind the door or Boeing and Airbus.
Newhouse lays it on the table in chapter 1 when he notes that when Airbus outsold Boeing in 2004 and 2005, the root cause of this historic juxtaposition was that Boeing’s troubles were the result of a number of factors; from their arrogance, a tendency to rest on their laurels, taking their customers for granted, combined with a corporate culture enmeshed in politics.
Boeing then realized the depths of its problems and attempted to change its course. This, combined with bad-luck and mismanagement at Airbus, contributed to Airbus finding itself a distant number two in 2006. So much so that Airbus NA President Henri Courpron lamented that Airbus failed to manage being number one. Airbus made the same mistake Boeing made earlier; they got caught looking back, not ahead.
Newhouse notes that the success of Airbus was not that it is inherently lucky or unlucky. Rather, Airbus was building very good airplanes and doing in a less expensive manner than Boeing, and with a much smaller workforce. Airbus basically took pages from Boeing’s playbook and beat them at their own game.
Chapter 3 details what has long been a thorn in Boeing’s side – government subsidies to Airbus. For years, Boeing has complained that government subsidies gave Airbus an unfair advantage. Boeing has brought this issue up with various US government officials and has also taken this issue to the WTO. Newhouse notes that most of the arguments on either side of the subsidies question were complex, often more than a little contrived, and often unconvincing. It is Newhouse’s opinion that Boeing was mistaken in constantly bringing up the subsidy issue, especially when the situation and timing was irrelevant.
On the other side, Airbus has long contended that Boeing receives similar government support, albeit in a different manner. Airbus maintains that US technology flows back and forth between the military and civilian sectors, with Boeing as the main beneficiary.
Chapter 4 digresses someone from the direct Boeing/Airbus conflict and discusses the issue of low-cost carriers (LCC), such as Southwest Airlines and JetBlue. The deregulation of the airline industry was a double-edged sword, in that it caused huge growth, and huge orders for Boeing and Airbus. But mismanagement by the major carriers combined with the low-cost of the LCC, created numerous headaches for both Boeing and Airbus.
Newhouse also notes that legacy union rules have hurt the major carriers and directly helped the LCC. Since the LCC are not saddled with austere work rules, they are able to offer quicker turn around times on their flights, in addition to other secondary benefits.
In various parts of the book, Newhouse clarifies some longstanding notions about Boeing. First off, when most people think of Boeing, they tend to think of a world class organization. Yet this is not the case. Boeing, while it makes great airplanes, has not always been a company without production problems. Similarly, most think that the 747 is Boeing’s most profitable aircraft. But according to Newhouse, it is the 767-300 (extended-range version) which is indeed Boeing’s most profitable aircraft.
Overall, the story of Boeing vs. Airbus is a never ending and ever changing battle of pure competition, combined with good timing and good luck. This battle has been, as Newhouse aptly describes a “seesaw battle between the world’s two remaining manufacturers of big airliners; mighty Boeing and the arriviste Airbus, both massive corporations and emblems of national pride”.
One of the recurring themes in the book is the dynamic nature of the industry. As the book was going to press, Alan Mulally who was executive vice president of the Boeing Company, and president and chief executive officer of Boeing Commercial Airplanes, left the company to become President and CEO of the Ford Motor Company. Ironically, the January 1, 2007 issue of Aviation Week and Space Technology named Mulally as its 2006 Person of the Year.
This dynamic made 2006 Boeing’s year in which they sold a record 1,044 commercial airplanes worldwide, eclipsing Airbus for the first time in six years. The 2006 orders were worth approximately 4 billion at list prices. Nonetheless, Boeing’s orders fell just short of the Airbus industry record of 1,055 planes in 2005.
The story of Boeing vs. Airbus is a fascinating one and Newhouse has done an excellent job in detailing that. Anyone with an interest in the airline and aviation sectors, including aviation enthusiasts will find this book a fascinating and timely read.