Boeing 777 Finance Case Study

Airbus was planning to introduce the A380 in direct competition to Boeing 747 to compete in the large aircraft sector. The rivalry between Airbus and Boeing was already intense. Boeing’s market share reduced from 70% in 1974 to 45% in 1990 while Airbus’s market share had increased from 1% to 34% during the same time (Exhibit 5). Encouraged by this increase in market share, Airbus was contemplating the introduction of A380. Development of new product line is extremely expensive in the Aircraft sector. Following is a quantitative analysis of the project to calculate the risks involved in introducing a new line of Aircrafts.

Our financial reporting analysis consists of Lockheed, the largest defense company in the world and Boeing, the largest commercial aircraft producer.  Both companies rely heavily on government funding, contracts, and regulation.  Future growth for the two companies relies on sales of Lockheed and Boeing’s aircrafts such as the Fighter Jet F-35 and the Dreamliner 787.  Although these companies have many similarities, their core business varies.  Furthermore, to properly compare these two companies, financial analysts have to make adjustments to their quarterly and yearly filings.

The 787 is the first new airplane that Boeing has introduced to the market in a decade. This case study examines how the 787 is strategically transforming Boeing’s approach to aircraft

Market Share Airbus will launch their new large, long distance plane A380 in 2006. This plane can be a dreadful competitive product to Boeing. If Boeing falls behind regarding innovations, fuel efficiency and other attributes of a long haul airliner, it will soon lose its market share. In order for Boeing to compete in the aviation industry, it is crucial to take on some risk and develop this new 7E7 project. This helps the company to fight against its competitors and recover from the slump in the industry.

Network and Space Systems (NSS) designs satellites, launch vehicles, and defense systems. The division is also the world’s largest supplier of both commercial and military satellites. The most famous satellite system from Boeing is the GPS system we all use every day. Commercial customers include many well-known businesses like DirecTV and SIRIUS XM Radio. Boeing manufactures launch vehicles via a joint venture with Lockheed Martin known as United Launch Services. This group designs and manufactures the Delta II as well as three launch vehicles. NSS is currently the largest contractor for NASA being the main for supply of the International Space Station.

It found that is 707 did three times the work of a single piston DC-6 at only double the operating cost. (Bright, 1978) Because of the governments withdraw of subsides, Boeing found a way for indirect government funds for the development and tooling costs of its jet airliner. The president of Boeing saw the US Air Forces need for a tanker, and thought the 707 would be the prefect design. He was able to persuade the Air Force that the 707 could be turned into KC 135 and produce on the same line and would save money. Revenue from passenger miles grew in the early to mid ‘50’s at a rapid rate.

1.) In early 2003, Boeing announced plans to design and sell an airliner named the 7E7. Boeing aimed for the 7E7 to be more fuel efficient, carry between 200 and 250 passengers, able to accomplish both domestic and international flights, as well as be 10% cheaper to operate than Airbus’s A330-200 aircraft. All of these attributes were attractive to Boeing but would come at significant costs. To accomplish these attributes, Boeing proposed to construct the aircraft

It is suggested that the travel industry and the aerospace and defense industry as a whole will continue to grow on the basis of the strong demand emanating from domestic demand as well as globalization. This may give a major boost to the demand for 7E7s as the airlines are already concerned about high fuel costs intensifying out of increased demands from emerging economies like India and China and reduced production. Better design modifications is going to be a major strength for the 7E7 as Boeing is betting on the future of small-mid size airplanes which can fly short as well as long distances with its fuel efficient engines. From an investment perspective, with interest rates at it's lowest in decades, with 911 behind us, and barring a major pandemic such as SARS, the timing seems right for Boeing to pursue this endeavor.

However, in addition to dual usage and their process change, the 7E7 also has to get approved by the Board of Directors. The board, already concerned about the estimated cost of the development of the 7E7, when informed of the risks that are also involved with the plan, will become hesitant to vote yes to the plan. In regards to the external risk Boeing faces, all three are out of their hands. As a partial integrated defense company, Boeing benefited from the war in Iraq, but there is the risk the war could end which would end that portion of Boeing’s government benefits. Terrorism, is a certain uncertainty, meaning it will happen, but that no one knows when it will happen. This is out of the hands of Boeing, as seen in the recent September 11th attacks, planes are a viable option for terrorism. The final external risk is the spreading of the SARS disease. Having reached both China and Canada, and recent global travel restrictions that is cutting into Boeing’s profits. All three of the external risk, are out Boeing’s control must be taking into consideration in looking at the plan for the

Boeing being the market leader for almost a decade as a manufacturer of large commercial aircraft and had also reached economies of scale, the need to sustain its market share it presumed that “customers might demand for new”. Any potential growth was only through taking super leap and making VLCT jumbo aircraft which needed huge

government laws, regulations and policies can have significant impact on company. Boeing has deep relationship and agreement with U.S government. And European government’s regulations can be main driving force for the purchase of new aircraft in future. There may be high level of political intervention which can have impact on sales of aircraft. the situation of country’s economy is major factor that affects operation of Boeing. Economic factors such as; interest rate inflation rate and currency exchange rate, positively affect the purchasing power of potential customer. in addition, financial crisis and economic recession have forced people to reduce their spending on travel. this may lead reduction in aircraft order. similarly, fluctuation in fuel prices and higher security cost and insurance cost may positively impact on company. as a company is operating in multinational environment Boeing needs to consider social factor which may affect demand and sale of aircraft. likewise, changing needs and wants of consumer with increasing population. analyzing technological factor in the manufacturing of Boeing aircraft usage of more carbon composites and equipment (light weight material) will make aircraft more fuel efficiency and weight less which enable the aircraft to fly longer distance (Hill, et.all,2017, pp.C-52). using hi tech

In assessing the current situation for the Boeing 747-8, there are many things that we need to look at. There is a passenger version and a freight version of the aircraft and this analysis will mainly focus on the passenger plane. We will first look at the current performance, which is going to show us some concerns we can address at a later time. Next we will look at the overall market demand and the specific decreased demand for this product. No analysis would be complete without looking at the competition and the planes that are more likely to be direct competition for the 747-8. Lastly, we will look at the customer needs, and how Boeing may create a competitive position and increase value for their customers and themselves in the future.

From the case information, we can see the various internal rates of return estimated for the Boeing 777 project. In addition to the expected, mid-range estimate, we analyzed the high and low estimates as well for price, volume, and GS&A and R&D.

Boeing Company has been and is still at the forefront of the aviation industry. The late 1990s were a time of trial and transition where the company encountered and overcame a number of

Boeing (NYSE: BA) is a global leader in the research and development of aerospace and defense systems, subassemblies, military, commercial and aerospace vehicles and systems. The company today operates from its headquarters in Chicago, Illinois, having relocated there from Seattle, Washington earlier in the decade. As of October, 2012 the company has 171,000 employees and operates in 70 nations globally. As of the close of its latest fiscal year (FY2011) the company had attained a 6.9% in revenue, reaching $68.7B in revenues. The company also earned an operating profit of $5.6B, up an impressive 16.7% from their previous fiscal year.