title here departure future of boeing timeline/ financials landing supply chain existing solution...

Title Here

DepartureFuture of Boeing

Timeline/ Financials

LandingSupply Chain

Existing Solution

Proposed Solution

SupplierBoeing supervision office

Supplier

Separate liaison of Boeing

Design & technician support

Patching and Redesigning: Our View to the Horizon

Fengshui TaskforcePatrick HoeyPamela RosalesVarun SarawagiAmy Wei

Current Situation



LandingSupply Chain

• 57 days• $1.3 billion revenue loss• 4-year contract signed

Workers on strike

• 3 times, 1.5 years in delay• Penalty $2 billion Supplier

delay

Supply chain problem of Boeing 787: the Dreamliner

Industry outlook



LandingSupply Chain

Fuel efficie

ncy

•14,000 aircraft to be replaced by eco-efficient types

•bio fuels could provide up to 30% of all commercial jet fuel by 2030

Point to

Point long

range flight

•34% more long-haul route in 20 years (from 1158 to 1546)

Demand

from Asian

•Passenger traffic in China would surge over 8.0% annually

Agenda



LandingSupply Chain

• Minimize delay in delivery

• Maximize passenger/fuel rate

• Create airplanes for the future

Goal

• Supply chain• No strike danger• Separate liaison

• Discount airlines

Patch • Supply Chain• labor

reinforcement• Competition

regime• 3 F’s (Fuel, Farther,

Faster)• Explore Asian

market

Redesign

Competitive advantage



LandingSupply Chain

Boeing:

Innovation

Strong management

Diverse product range

Relatively efficient delivery

Airbus:

Capacity

Government subsidy

Labor Relations Timeline



LandingSupply Chain

1993: 1-day strike

2000: 40-day strike

2008:57-day strike, lost $1.3 billion in

cash

- 4-year contract- 10 years without strike

Aging Workforce



LandingSupply Chain

AGING BABY BOOM

GENERATION

• Average age of Boeing employees is 46 •Eligible to retire in 10 years• We expect up to 8,000 employees to retire each year

Patching the Workforce



LandingSupply Chain

•Retaining critical skills:•Opt

ion Contract

•Mentoring the new employees

Skilled Employees

•Offer Competitive Pay and Benefits: Bonus atached to amount of production

•Retraining workers : assign new tasks

Unskilled Employees

Supply Chain



LandingSupply Chain

Problems:Not enough expertise - delay in engineering - compatibility of componentsBesides, cultivate potential competitors

Build to print Build to performance



LandingSupply Chain

Existing Solution

Proposed Solution

Supplier

Boeing supervision office

Supplier

Separate liaison of Boeing

Design & technician support

Patching the Supply Chain



LandingSupply Chain

Multiple bids from suppliers:

Delivery efficiencyQualityPrice

Engine and critical parts

Miscellaneous Parts

Redesigning the Supply Chain

What’s on the Horizon



LandingSupply Chain

Low Cost Airlines

Growing Market

share

Emphasis

on Economy

Opportunities

Why

How to deploy

Time Frame

Short-term(Patch)



LandingSupply Chain

Benefits

Target Market

Emphasis

New TechnologyComposite Materials

Economy

Fuel efficiency

Lower maintenance

cost

Low Cost & Premium Airlines

Plane lifespan

Environment

Reduced carbon

footprintComfort

Premium Airlines

Marketing the Dream(liner)




LandingSupply Chain

Low Cost Airlines

Growing Market

share

Emphasis

on Economy

Improved planes

Out-

develop competitors

Fuel Efficient,

Farther, Faster

Opportunities

Why

How to deploy

Time Frame

Short-term(Patch)

Long-term(Redesign)

The New Dream



LandingSupply Chain

•Airbus A380 (2007)• Lack of Demand (Flawed

projections)• Lack of Innovation• Congested Airports

•Last game changer Concorde (1967)• Fuel consumption• Viability

•Boeing 777 (1995)• Range of 9,380 nmi• Meet with warm demand

•Boeing 787 Dreamliner (2010)• First of its kind• 14,000+ Eco-efficient aircraft in

20 years

More Passengers

Faster

Further

Fuel efficiency

Combine the 3 F’s

Fuel efficiency

Further




LandingSupply Chain

Low Cost Airlines

Growing Market

share

Emphasis

on Economy

Improve planes

Out-

develop competitors

Fuel Efficient,

Farther, Faster

Developing Natio

ns

Fastest

grow markets

Manufacturing in these natio

ns

Opportunities

Why

How to deploy

Time Frame

Short-term(Patch)

Long-term(Redesign)

Long-term

Asian Market Enterance



LandingSupply Chain

Asia will account for 31% of orders of next 20 years

Protectionism—Government controls the purchase of most airlines

Developing suppliers will help break into Asian Market2009-2028 Airplane Deliveries by Region

AfricaEurpoeN. AmericaAsiaLatin AmericaCISMiddle East

Mitigating Risks



LandingSupply Chain

Risks

Chinese and Japanese Government Aircraft

Airbus already has JV in

China (2008)

Protect Technology

Cannot compete with our

innovation and size

Currency RiskEconomic Risk (dollar up= cost of

plane up)

Timeline



LandingSupply Chain

Supply Chain

DevelopingOur line

2010-15

2015-20

2020-25

PatchRedesign

Market to Low cost Airlines

Tap into Asian Market

Fuel efficiency, Further, Faster

Have more suppliers compete(China & India)

Retrain and Standardize

Separate Liaison offices

Financial Analysis



LandingSupply Chain

2009 2010 2011 2012 2013% increase in Revenue (LCC/ 3 F's) 0.02 0.02 0.02 0.02 % increase in Revenue (Asian sales) 0.00 0.00 0.00 0.00 Total Revenue 68,281,000 69,646,620 71,039,552 72,460,343 73,909,550 CF of Increased sales 1,365,620 1,392,932 1,420,791 1,449,207 Cost of Goods Sold (1,092,496) (1,114,346) (1,136,633) (1,159,365)Gross Margin 273,124 278,586 284,158 289,841 SG&A (72,651) (74,104) (75,586) (77,098)Savings on Supplies 696,466 710,396 724,603 739,096 R&D (3 F's) (1,200,000) (1,200,000) (1,200,000) (1,200,000)Liaison Offices (Sales, MGMT & Consulting) (100,000) (100,000) (100,000) (100,000)Marketing 3 F enhanced planes (200,000) (200,000) (200,000) (200,000)Depreciation 0 0 0 0 EBIT (603,061) (585,122) (566,824) (548,161)Taxes 199,010 193,090 187,052 180,893 Net Income (404,051) (392,032) (379,772) (367,268)Add Back Dep 0 0 0 0 Change in NWC 0 0 0 0 0 Capital Expenditures 0 0 0 0 Cash Flows 0 (404,051) (392,032) (379,772) (367,268)Terminal Value WACC 8.74% NPV 9,490,805

….2020

Financial Analysis



LandingSupply Chain

2009 2010 2011 2012 2013% increase in Revenue (LCC/ 3 F's) 0.02 0.02 0.02 0.02 % increase in Revenue (Asian sales) 0.00 0.00 0.00 0.00 Total Revenue 68,281,000 69,646,620 71,039,552 72,460,343 73,909,550 CF of Increased sales 1,365,620 1,392,932 1,420,791 1,449,207 Cost of Goods Sold (1,092,496) (1,114,346) (1,136,633) (1,159,365)Gross Margin 273,124 278,586 284,158 289,841 SG&A (72,651) (74,104) (75,586) (77,098)Savings on Supplies 696,466 710,396 724,603 739,096 R&D (3 F's) (1,200,000) (1,200,000) (1,200,000) (1,200,000)Liaison Offices (Sales, MGMT & Consulting) (100,000) (100,000) (100,000) (100,000)Marketing 3 F enhanced planes (200,000) (200,000) (200,000) (200,000)Depreciation 0 0 0 0 EBIT (603,061) (585,122) (566,824) (548,161)Taxes 199,010 193,090 187,052 180,893 Net Income (404,051) (392,032) (379,772) (367,268)Add Back Dep 0 0 0 0 Change in NWC 0 0 0 0 0 Capital Expenditures 0 0 0 0 Cash Flows 0 (404,051) (392,032) (379,772) (367,268)Terminal Value WACC 8.74% NPV 9,490,805

….2020

NPV=$9.5 billion

Sensitivity Analysis



LandingSupply Chain

Drop Rise

WACC (+/- 5%) 55% 124%

% increase in Revenue (LCC/ 3 F's) 46% 59%

% increase in Revenue (Asian sales) 40% 49%

COGS 53% 53%

SG&A 82% 53%

R&D (3 F's) 8% 8%

Mitigating Risks



LandingSupply Chain

Risks

Threat of Chinese and Japanese Government Aircraft

Airbus already has JV in

China (2008)

Protect Technology

Cannot compete with our

innovation and size

Currency Risk

Hedging

Conclusion



LandingSupply Chain

Patches

Redesigns

Future

Apendix

Appendix: Comparison between Boeing 787 Appendix: Direct non stop scheduled flights to mainland ChinaAppendix: Capacity vs. Traffic balanceAppendix: Growth vs. CapacityAppendix: Asian-Pacific marketAppendix: Latin America, Middle East & Africa marketAppendix: Fred traffic: High potential in ChinaAppendix: Commercial Air Tranport Scorecard

Appendix: Comparison between Boeign 787

Boeing 787 Airbus 350

Fuselage and wing material

Composites Composites

Fuel efficiency 20% reduction in fuel consumption

8% lower operating cost than Boeing 787(20 per cent lower cash operating costs per seat and fuel efficiency improvements of up to 25 per cent per seat)

Speed Mach .85 Mach .92

Cargo capacity 28 - 36 x ld3 28 - 36 x ld3

Engines GE / RR RR

Passenger capacity 250-300 250-350

Range 9300-9800 m 9800-10500 m

Launch date Launched 2013

Orders 850 500

Boeing 787 Airbus 350Fuselage and wing material Composites Composites





Engines GE / RR RR


Range 9300-9800 m 9800-10500 m


Orders 850 500

Appendix: Direct non stop scheduled flights to mainland

ChinaBoeing 787 Airbus 350

Fuselage and wing material

Composites Composites





Engines GE / RR RR


Range 9300-9800 m 9800-10500 m


Orders 850 500

Appendix: Direct non stop scheduled flights to mainland

China

Appendix: Capacity vs. Traffic balance

Appendix: Growth vs. Capacity

Appendix: Asian-Pacific market

Appendix: Latin America, Middle East &Africa market

Appendix: Fred traffic: High potential in China

Appendix: Freighter fleet: high potential Asia-Pacific

Appendix: Commercial Air Tranport Scorecard

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