Analyst lauds 7E7 plan

Published 9:00 pm Monday, February 9, 2004

LYNNWOOD — The 7E7 Dreamliner will become a reality, and the Boeing Co. should be able to use the new technology to regain the ground it has lost to Airbus, an aerospace analyst said Monday.

But to do that, Boeing will have to reinvent itself, said Richard Aboulafia, who said he harbors some concern that the company will forsake long-term investment for short-term profit.

"It’s the most hugely important issue in aerospace," said Aboulafia, a vice president for the Teal Group in Virginia.

Aboulafia spoke Monday at the annual meeting of the Pacific Northwest Aerospace Association.

He said he’s "80 to 85 percent" confident that Boeing will continue to develop the 7E7, launch the program, and then use that technology to reinvigorate the 747 and the rest of its product line.

If that happens, Boeing will achieve "absolute market dominance" over Airbus, Aboulafia said.

But to do that, Boeing will have to increase its research and development spending, he said. The 7E7 is "being done on the cheap," he said. "It makes me wonder how serious they are."

If Boeing’s focus is simply on the near-term bottom line, the company probably would be more profitable if it dropped everything but the 737 and 777 lines — even if it meant giving more than 60 percent of the commercial jet market to Airbus, Aboulafia said.

That’s the kind of cold logic that new Boeing chief executive Harry Stonecipher used when he headed McDonnell-Douglas, he said. That company’s stock quadrupled in value under Stonecipher. McDonnell-Douglas is no more, "but the shareholders did great."

Aboulafia said he’s a fan of the 7E7.

"I love it, love the plane," he said. "I’m loving the idea that for once Boeing is seizing the technological initiative."

Boeing is likely to find a launch customer soon, although it’s hard to say who that will be, Aboulafia said. The 7E7 is the perfect plane for the type of airline that doesn’t exist, he said — a low-fare international carrier, operating a Southwest Airlines-style business across oceans.

It’s only a matter of time until an airline fills that niche, he said. Until then, Boeing will have to deal with the fact that Airbus has been aggressively selling the similarly sized A330 to airlines, making them less interested in the 7E7.

Dubai-based Emirates and the major Japanese airlines are potential 7E7 launch customers, Aboulafia said. But "I don’t care who launches it because the long-term numbers are really good."

Aboulafia predicted that Boeing’s 767 tanker deal will eventually get approval, which will keep the Everett assembly line going.

"I don’t think the Air Force has a lot of alternatives," he said.

Airbus has been picked to be a tanker supplier for Britain’s Royal Air Force, but is not likely to capture any U.S. orders with its converted A330s, he said.

The Air Force will use the Airbus tanker option as a bargaining chip with Boeing, but "I don’t think it’s a major threat to the KC-767."

Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.