Boeing - Open Your Eyes


Aug 20, 2002
Posted on a Financial Board.
One Persons Opinion Of Boeing:
To Everyone at Boeing I address this to you: Right now you have the opportunity to sign a deal for 100 airplanes at a time when aircraft sales are depressed.
As an AirTran Airways Employee I can appreciate the support we have received from the B717 program to date. And I also understand that AirTran is not the only customer you have, but you need to understand that we are your only profitable customer based in North America taking B717 aircraft. We are also one of a number of customers requesting more range and capacity from the B717 program. Though dispatch numbers far exceed any recent launch of a new aircraft type from either Seattle or Long Beach. This aircraft is performing better than some of your mature programs, we all know this road has not been perfect. As with any launch customer for a new aircraft type there are growing pains some are clearly avoidable some require the full attention of your engineering staff. Some of those issues today may seem minor in nature but at the time were of concern to AirTran, there was a point early on in the program AirTran was forced to take new aircraft even though, there were not enough trained crews to fly them. You may say that was the airlines responsibility, and many at your company said that too. We have to keep in mind when this program was conceived both sides were different companies, the airline side wanted a turn key aircraft, one that everything was taken care of by the manufacturer. And the manufacturer was facing closing its doors for good, so promised everything under the sun to secure the order including things like training flight crews, guaranteed operating costs, and total commitment from the Long Beach staff. Prior to selecting the MD95 now called the B717 in 1995, a banner showed up in our corporate office in Atlanta that was signed by just about every one in Long Beach it promised total commitment. As an airline that was about to take a risk to launch the program, something no startup carrier has ever done, that banner helped seal the deal.
We launched the B717 program in 1995, at a time when the industry was still regrouping from the shut down of numerous major airlines and others that were exiting bankruptcy. The industry was also trying to absorb a plethora of used aircraft that were competing with new aircraft sales. We stayed committed to the program even in the darkest days of this airlines history in 1996, if you have to ask what were the those days, then you haven''t paid much attention to aviation history in the last ten years. We stayed committed even during the merger of Boeing and McDonnell Douglas, when you were not sure what you were going to do with the program. We stayed committed even when your second biggest B717 customer parked the whole fleet, and we committed to 22 of the 30 aircraft parked, ensuring that the production line does not have to compete with used aircraft and helping keep values high. We stayed committed and shared information about our aircraft even with our competitors to help your sales staff try and secure more orders.
Where is our industry today, almost in the same place it was in 1995, there are thousands of aircraft parked competing with new aircraft sales. We may see the failure of a Major airline or possibly more than one soon. Either way the airlines exiting bankruptcy will not go on a buying binge, at least not for aircraft bigger than a B717, they are looking at RJs and the B717 beats them hands down on costs. I have to admit even Southwest Airlines alone cannot keep the lights on in Seattle.
Why the comments, we have asked you on different occasions from different departments what about B717 derivatives so far your indifference leaves most people thinking. Is Boeing committed to Boeing? You restate every time you lose a large aircraft order to that other company, that you will not lower your prices below costs.
Who is AirTran, Boeing Tradings biggest customer AirTran agreed to 22 out of about 50 aircraft Boeing Trading accomplished to place in 2002, AirTran is one out of two profitable Boeing customers, AirTran bought more new aircraft in 2002 than any other single customer who bought B747, B757, B767 or B777 aircraft.
How important is the B717, in 2002 you booked orders for:
162 B737
32 B717
32 B777
17 B747
8 B767
0 B757
Wake up Seattle the B717 is tied for your second best selling aircraft in 2002.
Here is a simple course in Yield Management when times are tough what do you charge?
Lets say you want to price a product, a 100 seat airplane that costs 3000 an hour to operate so you have a one hour flight you want to price, we are in business to make money so we will price every seat at 49 dollars cool the old price was 99 everyone will love us, at the new price we should make 1900 dollars profit, wow this airline stuff is great (if we fill the plane).
Wait your competition prices his seats at 29 dollars. Your answer is, he is crazy he will lose money we do not price our product less than what it is worth. Two days before departure time he sold 90, seats you sold 10, your competition raises his price to 48, you lower yours to match after all, now it is fair you are both priced at a profitable level, he easily sells nine seats and the last one the day of departure for 99 dollars, you only sold 40 at the sale price and 2 the day of departure for 99 dollars.
Your airline always held its fares at a profitable level and you brought in 2608 whoops that is below the cost to run the flight
Your competition sold almost every seat at break-even and brought in 3141, he must be government subsidized for sure that is the only answer.
This can be applied to aircraft assembly lines though an airline seat is a perishable that expires at a specific date and time so is an aircraft delivery slot, but the line has to be running for that to happen, manufactures normally place large orders at near break-even during tough times to keep the line open and just a few units a year at list prices is where the profit is. Not to mention that even after the aircraft delivers your customer will probably buy more in spares and other support in the next twenty years than he originally paid for the aircraft.
Take my advice on yield management.
Aug 20, 2002
Thanks for this post Bonanza. Could the lack of Boeing support for the 717 be attributed to the fact that this aircraft has a McDonnell heritage? Is the 717 very different from other Boeing-engineered products and thus more costly to manufacture and support?

Remember that the bean counters rule the day.


Aug 22, 2002
Now there are rumors comming from outside of AirTran about a 50-60 aircraft order for Airbus A320's. I would hope to stay with the 717 program, but how long would it be to get a type approval and begin construction? at least two years I would think. Now with new service to LAX and LAS being launched by a wet lease with Ryan International A320's The handwriting seams to be on the wall. Boeing might be able to offer an order for 737-700'800's or 757's that could begin deliveries a lot sooner.