Boeing and Airbus: When Good Business Practice Just Doesn't Fly
by William Pfaff

An all but perfect model of logical delirium” is how the eminent French political analyst and philosopher, Raymond Aron, once described a complex instance of 1960's nuclear deterrence theory.

The phrase came to mind while reading the argument recently made in The Wall Street Journal by Holman W. Jenkins Jr. to explain why it is a good thing rather than bad thing that Boeing, one of the great, pioneering American aircraft companies, has fallen into grave decline.

Unless I misunderstand this article - and I have carefully examined it for evidence of irony - the present condition of Boeing is the right and proper outcome of good business practice and enlightened management.

Let Airbus make huge gambles on technological progress and future markets. If it fails, governments will bail it out. If Boeing makes such gambles and loses, stockholder return will suffer.

The article concedes that in the past Boeing won its place as the world's greatest aircraft manufacturer by making and winning just such gambles. "Back in the 60's, when a director asked for future profit estimates on the proposed 747, he was told to go suck an egg." That, the author says, "doesn't fly today, nor should it."

The article is prompted by Boeing's decision to abandon its project to build a near-supersonic Sonic Cruiser to compete with the 800-passenger super-jumbo A380 that Airbus is starting to put together in Toulouse.

Boeing has chosen instead to explore the market for a new but essentially conventional aircraft, the 7E7, its first new design in a decade.

Boeing now is an ideologically correct company. Its management mandate is to produce positive quarterly earnings and annual profit increases, so as to keep Boeing's stock price high. This is incompatible with betting the company on a visionary project.

If the result of these good business practices is Boeing's eventual ruin, that's the way it is, you know. Investors will find another company to invest in.

You will understand why I quoted Aron on logical delirium. You ruin the company to save the stock price.
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I worked at Boeing for 25 years (laid off once and quite four times.) This article is so true. I started at Boeing in 1965. The corporate culture then was that we built the most technologicaly advanced and the best quality airplanes. I watched that change in the 90s to being more concerned with shareholder value. On one hand they sent us to classes about Total Quality and World Class Competiveness. They taught us about making decisions for the long haul. On the other hand, it was clear that management was only making decisions that looked as far as the next quarterly report. I bailed almost 6 years ago and avoided the rush as the Comercial Airplane Division continued it's death spiral. They are betting the farm on defense pork. When that drys up there will be no more Boeing. Sad.