Not Afraid To Tell Customers "No"

Boeing has learned from its past, and to not try to please everyone all the time. Just ask Southwest Airlines, which earlier this year received an atypical answer to its request for two more 737s: "no."

"No one is more important to Boeing than Southwest," said Edmund S. Greenslet, publisher of Airline Monitor, to the New York Times. "If Boeing is not willing to raise production and build for Southwest, you can be sure they won’t accommodate anyone else."

Boeing instead suggested Southwest look at two used 737s being sold by the Ford Motor Company.

To date, Southwest has taken delivery of 477 new 737s -- the only type in its fleet. So why would Boeing turn away their business? Because Boeing hopes to avoid a repeat of its fortunes during the last aviation boom at the end of the 1990s.

Back then, the manufacturer took all the orders it could... orders it couldn't fill in the end, forcing shutdowns in production lines.

Despite those shutdowns, the market still ended up flooded with Boeing planes -- forcing the company to sell airliners at cut-rate prices, which further taxed the American manufacturer. Some 20,000 workers lost their jobs... and, combined with the events of 9/11, it has taken this long for Boeing to recover.

To paraphrase "The Who"... Boeing won't be fooled again.

"In this hot market, it would be easy to be consumed with the desire to sell anything to people walking through the door who want to buy and push our production system to the point where you could break it," said Boeing Commercial Aviation CEO Scott E. Carson back in September. "It’s much harder to say, 'I’m sorry, we’re sold out.'"

Southwest isn't the only customer who's hearing that message, either. New customers for Boeing's upcoming 787 Dreamliner are being told, essentially, to get in line -- as there's a four-year waiting list for the plane. Other airliners have a two-year waiting list.

"Frankly, we are much more disciplined than in 1997 and 1998," Carson said in a recent interview. "The message is, Don’t get ahead of yourself; don’t go crazy about how we ramp up."

There's another factor helping Boeing stick to its guns this time around -- the troubles at its main competitor, Airbus. The European planemaker is suffering delays and production problems for its two upcoming airliners: the A380 superjumbo, and the Dreamliner-competitor A350. Even with its current "waiting list" strategy, Boeing is still able to tell customers they will get their Boeings sooner than they would either Airbus plane.

That's a 180 degree turn from 1997-1998, when Airbus was an up-and-coming competitor. One reason Boeing committed to so many orders back then, was its hope it could flood the market with planes -- and take Airbus out of the game.

"It was the Khrushchev approach," Greenslet said. "Remember when he was at the United Nations and was banging his shoe and saying, ‘We will bury you.’ It was the bury-you strategy and it did more damage to Boeing than the competition."

That is no longer an option... as both Airbus and Boeing appear to now agree a two-manufacturer duopoly is best for the commercial airliner market. Of course, neither would mind having a larger chunk of the market than the other.

For the moment, that chunk appears to be Boeing's to gain... or lose.

FMI: www.boeing.com