Magazine

The Battle For Air Supremacy


BOEING VERSUS AIRBUS

The Inside Story of the Greatest International Competition in Business

By John Newhouse

Knopf -- 254pp -- $26.95

(Readers'

Reviews below)

Editor's Review

The Good An instructive look at the commercial airplane industry by a knowledgeable observer.

The Bad The author takes on too much, causing the reporting to seem thin at times.

The Bottom Line A valuable overview of one of the most fascinating and complex stories in business.

It looked bleak for Boeing (BA) at the end of 2004. In a stunning reversal, Air Berlin, a longtime Boeing customer, announced a deal to buy more than 100 jets from chief rival Airbus. The German order was one of many that favored Airbus that year. Worse, sales of Boeing's new fuel-sipping jet, the 787 Dreamliner, were tepid. Boeing CEO Harry Stonecipher was furious. He ordered the top sales chief fired and even threatened to oust Alan Mulally, then head of Boeing's commercial airplane division. Airline execs complained that Boeing was taking them for granted.

In mid-January of 2005, Airbus turned up the pressure, rolling out its gleaming new A380 superjumbo jet and securing its first order for the plane from an airline in China, the world's most important commercial aircraft market. But just as it seemed the handwriting was on the wall for the U.S. company, "fortune pivoted abruptly in Boeing's direction," writes John Newhouse. Boeing started winning some "bitterly hard-fought campaigns" pitting the 787 against the new Airbus A350. Thus began a Boeing revival that continues to this day.

In Boeing Versus Airbus: The Inside Story of the Greatest International Competition in Business, Newhouse offers an instructive look at the two airplane companies during the latter half of the 1990s and into the new century--a period when the momentum in their rivalry was swinging to Airbus and then swiftly turned back to Boeing. The author, a former writer at The New Yorker and author of an influential 1982 volume on the commercial airplane industry, The Sporty Game, depicts the U.S. company as struggling with a variety of issues in the late 1990s, particularly that of absorbing new acquisitions and managing a much enlarged company. But he also captures the more recent decline of Airbus and the story behind the troubles plaguing its A380. Although the book suffers somewhat from thin reporting and occasional generalizations, it represents a valuable overview of one of the most fascinating and complex stories in business.

The rivalry intensified in 1999, when Airbus passed Boeing in total sales and, with much fanfare, announced the launch of the A380. Boeing, meanwhile, was making a rather tepid effort to protect its eroding market share. It was struggling with self-inflicted production meltdowns and had become conservative and unwilling to launch new models. Boeing's 220-passenger 787 Dreamliner, the first large carbon-fiber-based commercial jet, was no more than a glint in an engineer's eye. Meanwhile, Boeing's senior execs were preoccupied with absorbing the defense and space acquisitions of Rockwell Aerospace, McDonnell Douglas, and Hughes Space & Communications. The ensuing culture clash was bitterly dividing the company.

Newhouse offers an engrossing behind-the-scenes look at the 1997 merger talks between Boeing and McDonnell Douglas. He provides considerable detail on how McDonnell outfoxed Boeing. For example, both boards authorized Boeing's then-CEO Philip M. Condit and then-McDonnell Douglas CEO Harry Stonecipher to meet and narrow their key differences at a plush Seattle hotel. After forty-five minutes, the two agreed on everything, including the merger price. But Boeing execs criticized Condit for not having a lawyer present, rightly fearing that Stonecipher had won more concessions. Newhouse quotes former senior Boeing exec C. Gerald King, one of the architects of the merger, as saying that "the Boeing side wanted to have as little to do as possible with Stonecipher," who was viewed as prone to milk assets and overly reluctant to invest in new products. The deal had the unforeseen consequence of making Stonecipher the second-most-powerful exec at the new Boeing, positioning him to assume the No. 1 spot when Condit resigned in 2003.

Another absorbing chapter focuses on Jean Pierson, the legendary former CEO of Airbus during its most successful growth spurt. The section draws upon one of the few extensive interviews the Frenchman has granted since his 1998 retirement, in which, among other things, Pierson recounts various sales battles. In 1997, for example, he was engaged in negotiations with Steve Wolfe, then the CEO of us Airways (LLC), over the purchase of 130 A320 aircraft. At the very end, Wolfe demanded an additional 5% discount. In response, Pierson recalls, he began slowly lowering his trousers, saying: "I have nothing more to give."

Such fly-on-the-wall stories are among the strengths of Boeing Versus Airbus. Newhouse also is particularly good in describing the role of government in the aircraft industry. On the other hand, he tries to cover too much ground. All the same, Boeing Versus Airbus is a must-read for anyone looking for a glimpse into the white-knuckled world of the commercial airplane business.

By Stanley Holmes


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