Since the U.S. government deregulated air travel in 1977,
more airlines have entered the market causing fierce
price competition. As airfares continued to decline, the
total number of U.S. passengers per year has risen from
approximately 240 million to 640 million from 1977 to
1999. At the same time, U.S. commercial aircraft
manufacturers have faced major competition from
European companies. After losing market share to
Airbus (owned by EADS) in the late 1990s, Boeing was
under pressure to decide between two basic
competitive strategies: reduce the costs (and the selling
prices) of existing types of aircraft or develop a new
aircraft to raise revenues through value creation.
In 2003, Boeing decided to focus on creating additional
value for its customers (airlines) and their passengers
by developing an innovative aircraft: the 787 Dreamliner.
(Throughout this paper, we shall use the term “787
Dreamliner,” “787,” and “Dreamliner” interchangeably.)
First, Boeing's value-creation strategy for the
passengers was to improve their travel experience
through redesigning the aircraft and offering significant
improvements in comfort. For instance, relative to
other aircrafts, over 50% of the primary structure of the
787 aircraft (including the fuselage and wing) would be
made of composite materials (Hawk, 2005). As
compared to the traditional material (aluminum) used in
airplane manufacturing, the composite material allows
for increased humidity and pressure to be maintained in
the passenger cabin, offering substantial improvement
to the flying experience. Also, the lightweight composite
materials enable the Dreamliner to take long-haul flights.
Consequently, the Dreamliner allows airlines to offer
direct/nonstop flights between any pair of cities without
layovers, which is preferred by most international
travelers (Hucko, 2007). Table 1 and Figure 1 (p. 75)
compare the 787 aircraft with other popular aircrafts.
Second, Boeing's value-creation strategy for its key
immediate customers (the airlines) and its end
customers (the passengers) was to improve flight
operational efficiency by providing big-jet ranges to
midsize airplanes while flying at approximately the same
speed (Mach 0.85).3 This efficiency would allow airlines
to offer economical nonstop flights to and from more
and smaller cities. In addition, with a capacity between
210 and 330 passengers and a range of up to 8,500
nautical miles, the 787 Dreamliner is designed to use
20% less fuel for comparable missions than today's
similarly sized airplanes. The cost-per-seat mile is
expected to be 10% lower than for any other aircraft.
Also, unlike the traditional aluminum fuselages that tend
to rust and fatigue, the 787's fuselages are based on
composite materials, which reduce airlines'
maintenance and replacement costs (Murray, 2007).
Table 2 provides a summary of the Dreamliner's benefits
for both the airlines and their passengers.
Due to the unique value that the 787 provides to the
airlines and their passengers, the number of orders
exceeded expectations. The Dreamliner is the fastest-