:: December 2006 Letter ::
I haven’t written a book review since fourth grade (I think the last one I reviewed involved space aliens). It’s time I returned to this lost prose form; John Newhouse’s Boeing Versus Airbus (Knopf, 2007) is about to arrive. It’s got no monsters or rockets, but it’s the best thing you’ll read in 2007.
First some background. Newhouse wrote the most important book yet produced about the jetliner industry. The Sporty Game (Knopf, 1982), written when Newhouse was at The New Yorker, was the first book to intelligently explain the business of building jets to a broad readership. As a young and callow defense industry analyst, I read it in the late 1980s and quickly realized Newhouse was on to something: the jetliner industry is more dynamic and fast changing than the defense side of aerospace. Thus began my parallel career as a jetliner industry analyst.
For years, well-read folks wondered who will be the next John Newhouse. Turns out Newhouse is the new Newhouse. His return visit to the industry has resulted in the sequel with its rather anodyne title (I would prefer The Sporty Game Part Deux, or something snappy like The Game That Has Not Gotten Any Less Sporty Over The Past 25 Years). It was timed to arrive with the A380. Unlike the A380, it’s arriving on time. (Like the A380, technical problems will limit production to 13 books in 2008 and 25 in 2009. Kidding.)
Much has changed since 1982. Back then, the L-1011 was in production, Airbus was a long way from jumping the shark, I was in college, and Billy Idol was regarded as pretty cool. With the industry speeding along at its usual pace, timing this book sounds impossible. Yet it’s arriving at an opportune moment. The competition is at an inflection point. While Airbus faces very difficult years ahead and its recovery is far from assured, it’s finally on the right path. Its market share and revenue will take a few body blows in the coming years, but in terms of strategic direction, they’re rebounding after hitting rock bottom. The new leadership is resisting state control and is trying hard to reform government-influenced manufacturing decisions. It’s not happening at the speed 99-day CEO Christian Streiff wanted, but it beats winding up as a ward of the state. It’s a great time for an industry snapshot.
The new book adroitly assesses what brought Airbus to this point, and what can bring it back. The A380, naturally, gets a richly deserved chapter of its own. While the tone of The Very Large Airplane chapter could have been harsher, he makes it clear that the A380 is best regarded as a serious misstep. It’s a fine chapter that fully explores airline plans, airport expansion concerns, and large aircraft technology. While written before the Lufthansa 747-8 passenger launch order, the chapter presciently concludes that the reinvented Boeing jumbo is a serious threat to A380 demand.
I believe Airbus can recover from its A380-induced near-death crisis; the A350 (Version 6.0) seems a sound roadmap (although finding the resources will be difficult). But this recovery will be very different from Boeing’s return to leadership over the past two years (adeptly described by Newhouse in the new book’s Trading Places chapter). In 1997-2003 Boeing failed to invest, but they had plenty of money. All they needed in 2004 was a new idea and a board decision to turn the cash spigot back on. Airbus, by contrast, misinvested on a colossal level and is now in a deep fiscal hole.
Yet Newhouse reminds us that a few years ago Boeing could have gone either way. He got Harry Stonecipher to admit that he considered firing Alan Mulally (page 39 in my uncorrected proof copy). The guy who stifled new product development funding at two companies almost canned a key architect of BCA’s renaissance. This revelation makes Stonecipher even more of a Rumsfeldian character than Noel Forgeard (I was wrong—this book does have monsters).
Interestingly, Newhouse opines that Stonecipher deserves much credit for getting Boeing back in shape. And the book’s Meltdown and Merger chapter provides an excellent treatment of how McDonnell Douglas used Boeing’s money to buy Boeing, at the very moment Boeing’s jetliner production lines discombobulated.
A long time political writer, Newhouse is at his best when writing about the role of government in this industry. The WTO complaint, the tanker imbroglio, and government technology development cash all get superb exploration in the well-titled Folly and Hypocrisy chapter. Those appalled by government interference in airline jet purchasing decisions will find much to loathe. These are sordid tales, but someone’s gotta tell ‘em, and Newhouse puts them in proper context.
What’s not to like? Just one or two quibbles. Newhouse gives a bit too much credence to folks who regard industrial cooperation with Asia as a way to create a new competitor. The book’s A Challenge From Asia chapter sounds a somewhat overcautious note about outsourcing. Yet consider these words: “For Boeing…the idea of a partnership with Japan is double-edged…Accepting it could involve helping Japan to learn all of the skills required to compete against Boeing on the next airplane.”
Agree? Well, that’s from The Sporty Game (pages 218-219). In the quarter century since Newhouse wrote those words, Japan’s military aircraft industry has imploded, China has done almost nothing of note, and all of the other Asian aviation wannabes have either collapsed like IPTN or gradually scaled back their ambitions. Boeing has done a fine job co-opting Japanese ambitions and taking advantage of their funding. Airbus is trying to emulate Boeing, albeit in China, which offers less experience and money. In short, Asian countries will always be the next big aviation power.
Also, retired Airbus forecaster Adam Brown gets fingered as the biggest “prophet” behind the A380 launch decision (page 157). As a market analyst, I’m reluctant to blame the market analyst, and blaming anyone in particular misses the broader point. Brown may have eagerly poured the Kool-Aid, but many people espouse bad ideas. The A380 was launched by an insular group of decision makers enabled by hubristic politicians and a corporate structure immune from the checks and balances of equities and capital markets. It takes a village to burn a city, or something like that.
These minor disagreements aside, this book offers a remarkably balanced and superbly readable discussion of key industry issues. It offers the right blend of technology, politics, and economics and provides historic depth for the industry’s recent important events. Most of all, it reminds us that fascinating people populate and shape our industry. If you’re in the jetliner business, you need to read this book. If you aren’t in the business, reading this book will make you want to get into it. That’s what happened to me after reading The Sporty Game 20 years ago.
But now and then we all need a break from this fascinating business. I’ll be on vacation December 26 through January 14. If you need anything industry related please contact Phil Finnegan at email@example.com. If you need anything logistical contact Tim Storey at firstname.lastname@example.org. Meanwhile, this month’s updated reports include the F/A-18, AH-64, Falcon, Su-27/30, E-3/E-737, B-2, E-8/E-10, K-MAX, A.109, BA 609, and the World Aircraft Overview. Have a great new year.
Yours, ‘Til The Movie Version Opens,
© Richard Aboulafia 1997-2006, All rights reserved.