Business Strategy
CASE STUDY
Boeing’s new $442.2 million flagship plane is drawing interest from across the aviation industry. But delays are preventing it from realizing its potential.
Thomas Pallini
• The Boeing 777X is primed to be a popular seller in the private jet and cargo realms in addition to commercial airlines.
• Cargo carriers are looking to grow their fleets amid a boom in demand while a 777X private jet can be sold to governments and heads of state.
• Delays in the aircraft’s certification mean that cargo airlines and private jet buyers will be waiting years for their planes.
Boeing’s new flagship aircraft has the potential to be a jack of all trades. But right now, it’s a master of none.
The Boeing 777X is on track to be certified in late 2023 and there’s growing demand for the world’s largest twin-engine passenger jet to fly more than just airline passengers. Boeing’s commercial derivatives program is tasked with developing alternative uses for the manufacturer’s commercial aircraft, and the largest contender outside of the airline realm may be in air cargo.
Cargo carriers are already aware of Boeing’s strengths in developing freighter aircraft as nearly every one of the manufacturer’s commercial aircraft has a freighter variant. And a Boeing 777X Freighter would be the natural next step for cargo carriers flying the Boeing 777 Freighter.
An Emirates SkyCargo Boeing 777-200 Freighter. Carlos Yudica / Shutterstock.com Airbus, however, has secured momentum in the cargo realm by launching the A350 Freighter at the Dubai Airshow in November. Global airlines including Air France and Singapore Airlines have already placed orders and made commitments for the aircraft, which may fly as early as 2025.
“[Airbus] in particular, in my view, have done incredible work … in terms of coming up with an incredibly unique aircraft,” Nabil Sultan, Emirates SkyCargo’s divisional senior vice president, told Insider.
But Emirates faces the same problem as its counterparts in that there’s a desire to expand their fleets now amid a booming period for the air cargo industry. Tiding Emirates over until the Boeing 777X Freighter and Airbus A350F are certified and ready for deliveries is a purchase of two current-generation Boeing 777 Freighters and conversion plans for four Boeing 777-300ER passenger aircraft to be turned into cargo planes by Israel Aerospace Industries.
Boeing’s backlog with certifying its commercial aircraft like the 777X, 737 Max 7, and 737 Max 10 is preventing the manufacturer from launching the 777X Freighter, according to Mike Fleming, Boeing’s senior vice president in charge of commercial customer support and commercial derivative programs.
Qatar Airways plans to grow its cargo fleet and may be among the first to place an order for the 777X Freighter once the program finally does launch. Akbar Al Baker, chief executive officer of Qatar Airways, told Reuters that Boeing has offered the 777X Freighter for his cargo division. When it comes to moving large goods, bulk container ships provide substitute a to the air freight section for users. However, there are certain goods, especially the perishable type that will always require shorter travel times, and this is where the 777X-freighter and the A350-freighter have a niche hold.
The Boeing 777X at Dubai Airshow 2021.
Boeing is already a natural choice to refresh the Qatar Airways Cargo fleet considering that the majority of its aircraft are Boeing 777 Freighters. But a dispute with Airbus over the paint quality on the A350 XWB aircraft delivered to Qatar Airways may make Boeing an even more likely partner.
A lesser-known division of Boeing is also preparing to launch the 777X as a private jet. Boeing Business Jets caters to the top tier of travelers even beyond ultra-high- net-worth individuals and is expecting customers for the 777X airliner-turned-private- jet to be the likes of national governments, royal families, and heads of state.
“That will be really the flagship for [Boeing Business Jets and] hopefully in the next couple of years, we’ll get our first sale,” JD Detwiler, president of Boeing Business Jets, said of the 777X in Dubai. “That aircraft has the ability to link any two cities on the planet, it has an effective range approaching 12,000 nautical miles.”
Onboard a Boeing Business Jet 737 at Dubai Airshow 2021.Thomas Pallini/Insider And its $442.2 million price tag is just the tipping point as interior completions can cost millions and take more than two years to finish.
“You’re probably looking at five years if you sign a contract for a 777X right now because it takes longer to build it and then it takes much longer to do the interior,” Detwiler told Insider, noting that only a handful of firms are licensed by Boeing to complete aircraft interiors.
But before any 777X Freighter or Boeing Business Jet is delivered, passengers airlines will have to get their overdue deliveries first.
As of now, Boeing is still undergoing flight testing and certification trials to ensure that its new flagship will meet the revised delivery timeline of late 2023. The only passengers that get to fly on the aircraft are a team of flight test engineers and pilots that are putting the aircraft through its paces.
Question 1
Q1: Analyse the organisation using these factors as found in Porters 5 forces.
Complete the following table.
1. Competitive Rivalry
2. Suppliers
3. Customers
4. New Entrants
5. Substitute Products
Question 2
Q2: Discuss the Strategy Clock (Heads up, the answer will be: moving from 3 to 5)
Question 3
Q3: Discuss where in the industry life cycle is the Boeing
Question 4
Q4: applying Strategic Lock-in, discuss:
1. What is the size or market dominance
2. The First mover dominance
3. Self-reinforcing commitment