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Boeing 7 e 7 project
Composite materials beneficial for aircraft designers or manufacturers
Composite materials beneficial for aircraft designers or manufacturers
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Recommended: Boeing 7 e 7 project
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In early 2003, Boeing announced its plans to develop a new airplane (7E7 & 7E7 Stretch) in a market that was facing a tight squeeze on profits. The decline in the airline industry was attributed in large part to the war in Iraq, international terrorism, and fear of spreading SARS. The development of this new aircraft could possibly bring Boeing out of their innovation slump and potentially give them an advantage in the mid-sized aircraft market.
Since 1994, Boeing had not put a new airplane into production and had failed to follow through on two commercial aircraft programs. The company was in desperate need of an aircraft that would set them apart from Airbus, their main competitor and market leader. Boeing’s vision for the 7E7 was a cost efficient plane that used less fuel, had cheaper operating costs, and flexibility for short or long haul routes. The new plane would be made with cheaper composite parts which would reduce the production time from 20 days to 3 days.
The new project faced some concerns. The cost efficiency relied on the use of composite materials that had not gained regulators’ confidence. Also, Boeing would have to design completely new production methods for this new plane. Unfortunately, Boeing has a track record of problems with their production methods and delivering planes on time. The board of directors also expected development cost estimates to be substantially reduced prior to approving such a product. The demand in the market was for cheaper and more efficient planes, and that ideology needed to be part of Boeing’s development strategy.
Airbus, the market leader, produced planes to serve the short, medium and...
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...R and was determined to be favorable. Assuming that the numbers used to calculate WACC and IRR are accurate or conservative, the 7E7 project should be successful if the risk factors are effectively controlled by Boeing. However, the most important factor in determining if a project should go forward or not is the NPV of the project. If the project has a positive NPV, then the project generally should go forward. For the Boeing 7E7 project, the NPV is $5,266,550,000 using the cash flow data provided through 2037. The NPV is based on the premise that the forecasted cash flow for the 7E7 project is accurate. According to the NPV, Boeing should go forward with the project as it will add value to the stock based on the data collected, with no indication that the 7E7 project will interfere with other projects already in progress or potential projects up for consideration.
T’was the eve of Tuesday, January 28, 2014, where at 8pm, I attended the performance, Boeing, Boeing at the Venice Theater Main stage with my younger sister. After reading a quick preview of this play, I decided to see this as one of my required three because I was very intrigued in twisted love stories such as this one.
The Airline Industry is a fascinating market. It has been one of the few industries to reach astounding milestones. For example, over 200 airlines have gone out of business since deregulation occurred in 1978. Currently, more than 50% of the airlines in the industry are operating under Chapter 11 regulations. Since 9/11, four of the six large carriers have filed for and are currently under bankruptcy court protection. Since 9/11 the industry has lost over $30 billion dollars, and this loss continues to increase. Despite the fact that the airline industry is in a state of despair, JetBlue has become the golden example, a glimpse of what the industry could be.
Despite the uncertainty and inherent risks, however, even if WACC exceeds IRR, the board may be well advised to accept the project. It's expected that in the first few years, Boeing will incur more expenses that income. The revenues will come at a later date when the 7E7 planes are delivered. The project will have to be evaluated periodically and management will have to make changes to ensure that the company is profitable based on current and future conditions. The board's prerogative is not to give Airbus a profit sanctuary' by not accepting the project but rather to maintain or increase its market in the industry even if it's not profitable in the shot-run. Boeing has deep pockets' and should be willing to challenge its competitors.
This analysis shows that the projects NPV as 13.37 million dollar. Our result is slightly different than the presenting team because of rounding. But both of our teams had positive NPV which suggest that the project should be accepted.
As airline industry is a competitive marketplace, the airline companies use new technologies to improve their efficiency and decrease the overhead costs, including ‘advanced aircraft engine technology, IT solutions, and mobile technology’ (Cederholm 2014). The technology changes including technology improvement, new innovation and disruptive technology. The disruptive technology need to meet the characteristics of ‘simplicity, convenience, accessibility and affordability’ (Christensen 1995). The technology changes would bring both opportunities and threats to airline companies. Since Labour cost and fuel costs occupy 50% of most airlines operating cost (Groot 2014). Therefore, if new technologies could be disruptive in the two aspects, there will be important changes to current airline
Overall the Boeing Company has stayed strong in the aircraft field and with record profits for the past two years it looks like they are achieving their goals. Boeing has had to change their business direction over the past 100 years in order to stay a top of the aircraft industry. To maintain a good successful business they must have used a system similar to this SWOT analysis to see where Boeing needed to be to capitalize the market. Before Boeing decided that outsourcing was the way to go, a group of Boeing peers got around a table and weighed out the pros and cons. In their business analysis they saw a way to change one of their weaknesses, in-house work overload, into a potential strength. Major business decisions like this are much easier to commit too, with the use of a SWOT analysis.
JetBlue Airways Corporation has been a rapidly growing discount airline and biggest success story in the industry by using its strong customer service considerations and low fares to build a solid, growing customer base.
This paper analyzes the goals and actions of Boeing by analyzing its critical success factors as well as its strategic roadmap.
The future of the aerospace industry will involve gradual changes in the near term, with the prospect of more radical shifts in the decades t...
Boeing 787 Dreamliner was first announced to the public in January 2003 with approximated costs of five billion dollars , since the sales of the aircraft were high it was supposed to enter commercial service during 2008 but the building up of aircraft seemed more anticipated than expected , since the management decided to use composite materials as an alternative for traditional metals as composite materials are lighter , stronger , cheaper and also resistance to wild variety of chemical agents including acid rain and salt spray as these are the conditions under which metals suffer , Boeing also shared their views in development of air craft with suppliers which effected in a project significantly more anticipated than expected . More than three years later after the project exceeded the estimated budget at last 787 entered commercial service in September 2011.
The engineering section of aircraft manufacturing is quite old. It is characterized by a few firms that keep Rolls-Royce on its toes in terms of competition, like General Electric. The small number of firms can be justified by the high cost of starting of...
Boeing has looked at everything from the design of the anti-collision lights, to the reduction of small gaps in the airfoil. This has created an aircraft that is extremely aerodynamic and efficient at any task it performs. The 737 was originally created on May 11, 1964, however it wasn’t until November 9, 1964 that production was officially approved. On February 19th 1965 Lufthansa placed its first order for the 737-100, and on the 9th of April 1967 the 737 flew for the first time. In 1970, Boeing had less than 35 orders for the 737 and considered canceling the program.
Technology Innovation: - Boeing should carefully analyze the market to evaluate the trends in the airline industry and aggressively invest in a new product line (top dog strategy) that could counter Airbus’s A380.
The 777 would be manufactured differently than previous Boeing aircraft. Various efforts would be undertaken to increase demand and reduce manufacturing costs of the 777 in an attempt to create positive cash flows sooner. To increase demand, the 777 would be the first fly-by-wire Boeing aircraft, a feature Boeing’s competitors already added to their aircraft. Boeing also made an effort to get their large customers involved in the design process from the beginning in an effort to increase its competitive advantage and long-term demand for the 777. As a cost saving measure, the design and manufacturing teams would work together to create a detailed simulation of the manufacturing process that would reduce the cost of “improvements” that were often made during manufacturing thereby reducing the overall manufacturing cost. Furthermore, Boeing would invest in more training for its engineers on the new CAD system. This new manufacturing process would lead to large capital outflows in the short-run. The challenge for Mr. Shrontz is determining whether these capital investments will lead to an increased return on equity for Boeing.
It is my recommendation that Barra Airways goes ahead with the project. I believe this is the case because the project is predicted to a high NPV coupled with strong cash flows. The method of financing I am recommending that Barra Airways uses is to issue more equity. This is primarily due to the confidence the market currently has in low-cost airlines. This will not only achieve the best value for the company but will also maximise the shareholder value of the project. The secondary reason behind the decision to use equity as the source of the projects finance is protecting the company against future debt repayments. If the cash flows prove to be unreliable then the company could find itself paying a higher than expected proportion of operating profit on paying its debts.