Boeing Versus Airbus: Flight Risk, Outsourcing Challenges

In Boeing's high-stakes rivalry with Airbus—what the author calls the "greatest international competition in business" — outsourcing to Asia helps Boeing sell more airplanes. But at what cost?

By John Newhouse
Thu, March 01, 2007

CIOOver the past five decades, Boeing has been the country’s largest exporter and earner of foreign capital; a major innovator of high-end technologies and a major user of them; the custodian of knowledge about designing and integrating the numberless systems and parts of which a modern airliner is made. No other American company has that knowledge. Elsewhere in the world only Airbus and Russian industry have it.

For now, many would say. Boeing has elected to outsource a sizable body of knowledge. The greater part of its new airplane, the 787, is being built elsewhere, with Japan’s three major aircraft companies in the lead role.

Boeing’s close and productive ties with them have at times raised questions, although never to the same extent as now. Could these companies use what they have learned from Boeing to build and market their own large commercial aircraft? Has Boeing, in effect, ceased to be a maker of large commercial aircraft? And if so, why?

The 787 program is stretching technology to its outer edge, starting with the wing, the smart part of any airframe. In the art of making wings for commercial aircraft, Boeing has had few peers. Now it has outsourced the wing of the 787, the first to be made partly of composite material, to the Japanese “heavies”—Mitsubishi Heavy Industries, Fuji Heavy Industries and Kawasaki Heavy Industries. They are also responsible for a section of the all-composite fuselage. And Boeing has licensed the design and manufacturing technologies involved in composite materials to the Japanese. Alenia of Italy and Vought Aircraft are producing the center and aft fuselage sections, along with the airplane’s horizontal stabilizer—in all, 26 percent of the structure. Boeing itself is supplying roughly 35 percent of it, including the vertical fin, the fixed and movable leading and trailing edges of the wing.

Boeing and Airbus have always outsourced subcomponents and systems to suppliers. In the case of the 787, however, Japanese suppliers are acquiring so-called core competences, starting with wing technology and the new lightweight materials. Hence, critics say, Boeing is giving up its competitive edge by outsourcing the major parts of the 787 with the new materials.

“The 787 composite wing and fuselage structure are new technologies—untried on this scale even by Boeing,” says Stan Sorscher, a Boeing engineer. “Boeing developed much of the materials, manufacturing processes, tooling, tolerances and allowances, and other design features, which are then transferred to suppliers in Japan, Italy and elsewhere. Over time, institutional learning and forgetting will put the suppliers in control of the critical body of knowledge, and Boeing will steadily lose touch with key technical expertise.”

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