Double First Flights of BBJ and 717 Could Signal Beginning of Turnaround for Boeing

It's not everyday, or even year for that matter, that an airframer celebrates the first flight of a new aircraft. Boeing's cup runneth over last month with the first flights within days of not one, but two aircraft-the Boeing Business Jet (BBJ) and the 100-seat 717. The successful flights were welcome news after the preceding dismissal of Boeing Commercial Airplanes president Ron Woodard and the loss of more than 220 passengers and crew aboard a Swissair Boeing/MD-11 in early September.

Boeing Business Jets president Borge Boeskov celebrated the first flight at a pre-Farnborough air show dinner in London where he received the news by telephone from Capt. Mike Hewett.

The BBJ has 34 confirmed orders since its mid-1996 launch, and Boeing may announce new orders here at NBAA. Eight aircraft are scheduled for delivery by the end of the year, and Boeskov said 27 are scheduled for production in 1999 and 24 in 2000. Boeing pegs the market for ultra-long-range business jets--which include the BBJ, Airbus A319CJ, Gulfstream V and Bombardier Global Express-at 600 units. It believes it can capture 40 percent of that market, or 240 planes.

Boeskov said the BBJ has widely outperformed Boeing's initial predictions for the aircraft. Six to eight a year was the maximum it thought it could sell in a year for six to 10 years. As surprising has been the profile of typical BBJ buyer. Boeskov expected fully half of all sales to come from large businesses with global interests; that segment has instead accounted for only 25 percent of sales, though Boeskov believes the share will eventually climb to 50 percent as executives beginning seeing the aircraft on the tarmac and the narrowbody's "perception problems" are overcome.

"Quite often there are only a couple people flying in these things (business aircraft)," said Boeskov. "A couple of people stepping off an airliner can cause a perception problem" when arriving on a business trip.

Just as surprising is the largest segment of BBJ buyers--"high net worth" individuals such as athletes and Hollywood stars. Boeskov expected that market to account only for about 30 percent of sales, but it's been more like half. The third segment, the head-of-state market for smaller countries like Poland and Romania, has accounted for about 20 percent of sales--less than the 25 percent Boeskov and Boeing had been expecting.

It was the turn of Boeing's 717 to make its first flight two days before that of the BBJ. The 717-200 took off from the Long Beach Municipal Airport slightly less than three months after its rollout. The 106-seat aircraft, designed by McDonnell Douglas as the MD-95, is built for short-hop service, short-field operations, and the ability to sustain eight to 12 one-hour flights every day of the week.

With the first flights of the BBJ and 717, Boeing hopes it is now moving beyond its production hold-ups on the 737, 747 and 757 lines. As president, Woodard headed those programs for about five years.

"(Boeing CEO and chairman) Phil (Condit) said a fundamental change was needed to get in front of shareholder value issues," said Boeing vice president for investor relations Larry Bishop. "We were making strides with our production problems but had a little trouble getting our arms around the financial side.

The problems were not getting solved; it was impacting the profit recovery of the company. It was unfortunate you have--by implication--winners and losers, but it was time to make a change."

That change was in the form of Alan Mulally, most recently president of Boeing's Information, Space and Defense Systems Group, who has already made several changes in the senior management team of the commercial group.

By Barry Rosenberg