Financial Times Editorial Comment: Aircraft-makers must think ahead, so should politicians

Financial Times Editorial Comment: Aircraft-makers must think ahead, so should politicians
Copyright The Financial Times Limited 2007
Published: July 9 2007 19:33 | Last updated: July 9 2007 19:33


It seems a straightforward story: Boeing is flying high, Airbus has lost altitude. The US manufacturer unveiled its 787 Dreamliner in a ceremony in Seattle on Sunday and its main problem is meeting the demands of so many eager customers. Meanwhile the Airbus parent, EADS, is trying to cope with two chairmen, two chief executives and repeated delays to the huge A380. The reality is a little more complex – and as instructive for politicians as it is for business strategists.

To give Boeing credit where it is due, the company has done well by being agile despite the vast investments and long lead times inherent to the industry. Boeing’s initial strategy was to produce a sort of poor-man’s Concorde, the Sonic Cruiser, which would do exactly what today’s medium-sized aircraft do, only faster. A combination of high oil prices and the stuttering demand after the terrorist attacks of 2001 changed the game: Boeing’s customers wanted a more efficient aircraft instead.

Boeing managed to adapt the Sonic Cruiser technology to produce the 787. A composite hull will make the aircraft lighter, saving fuel, and stronger, allowing higher cabin pressure and so more comfortable journeys. It is smaller than a jumbo jet but has a long range, promising to extend the reach of the point-to-point airline model. Airbus is perhaps five years behind with its rival A350 design.

Yet it is too simplistic to say that Airbus’s A380, which depends on traditional hub-and-spoke airline routes, is the wrong bet. Airbus has never had a jumbo jet to rival the Boeing 747, so it was reasonable that Airbus would try to compete at that end of the market. The weak dollar is helping Boeing and squeezing Airbus’s margins, but that is just good luck for Boeing.

Most fundamentally, this industry requires huge bets and huge lead times: Boeing’s 747 first flew in 1969, a revamped version is due in 2009, and those aircraft may still be flying in 2040. Once an aircraft is successful, it is natural – and not necessarily bad business strategy – to milk the profits that result, even while a rival is trying to go one better. It is no surprise to see Boeing and Airbus alternate as top dog.

But politicians should take note, too. It is fashionable for them to fuss over the pollution caused by air travel and to float implausible policy responses. For an industry with such long lead times, that will not do. Governments can and should use the tax system to tilt the market in favour of greener aircraft. They will succeed only if their policies look likely to last as long as these remarkable flying machines.