CHICAGO -- After an excellent year, Boeing is counting its blessings, which include its competitor. They also include an anticipated doubling of the commercial aviation market in the next 20 years, which will require 27,000 new planes costing $2.6 trillion.
Americans ambivalent about globalization should note how Boeing, under CEO James McNerney, is prospering. The 9/11 attacks devastated commercial airlines, causing Boeing -- which cut its jetliner production in half -- to rapidly shed more than 40,000 of its 93,000 workers who designed and built the planes. But the revival has added back some 13,000 new jobs and raised Boeing's stock price from $25 to $88.
Even without terrorism, the commercial aircraft industry is not for the fainthearted. Companies must wager billions developing products that anticipate travelers' preferences and airline strategies a decade later. Boeing reportedly wagered $8 billion in developing the midsize widebody (up to 290 passengers) 787 Dreamliner, the first of which will be delivered in 2008. Boeing's bet is that the market favors point-to-point flights rather than a hub-and-spoke system with huge planes delivering passengers to a few large cities, from which they are dispersed to their destinations in smaller planes. With 471 orders and commitments for 787s, at up to $180 million apiece, the plane -- made largely of a light (fuel-saving) carbon composite material -- already is a huge success. Boeing's competition no longer is.
The average jetliner is struck by lightning twice a year. Boeing's competitor in the commercial aircraft duopoly, Airbus, has recently struck itself twice. The government-created European consortium decided to build the wrong aircraft, then built it badly.
The market quickly judged Airbus' A350 inferior to the 787, and costly redesigns have begun. Worse, Airbus, assuming that the world was wedded to a hub-and-spoke system, made a bad $16 billion bet on huge demand for its A380, a double-deck superjumbo (typically seating 555).
Created in 1970, Airbus prospered. From 2001 to 2005, its annual orders exceeded Boeing's, and it will deliver more planes than Boeing this year. But now Airbus has problems inherent in its role as Europe's iconic public-private collaboration. Such collaboration, called ``industrial policy,'' involves the irrationalities of economic nationalism as each of the nine countries involved in subsidizing the A380 fights for ``its'' jobs.
And there have been gross management blunders. Wiring (the A380 has 312 miles of it) made in Germany was mismatched for airframes made in France. To truck huge components to a French assembly line, more than 100 miles of highway had to be widened and straightened.