In early 2003, Boeing announced plans to design and sell a new “super-efficient” jet
dubbed the 7E7 and subsequently called the “Dreamliner.” But news over the next six months
depressed a market for aircraft that was already in sharp contraction: the U.S. had gone to war
against Iraq, spasms of global terrorism offered shocking headlines, and a deadly illness called
SARS had resulted in global travel warnings—for these and other reasons, airline profitability
was the worst seen in a generation. This seemed like an incredible environment in which to
launch a major new airframe project. But on June 16, 2003, Michael Bair the leader of the 7E7
project, announced at the prestigious Paris Air Show that Boeing was making “excellent progress
on the development of the 7E7 and continues to be on track to seek authority to offer the
airplane.”2
Bair aimed to seek from Boeing’s Board of Directors early in 2004 a firm
commitment to proceed with the project. If the Board approved the plan, he could start collecting
orders from airlines and expect passengers to start flying the new jets in 2008. Between now and
his recommendation to the Board he would need to complete a valuation of the 7E7 project and
gain the support of Boeing’s CEO, Philip Condit and other senior managers. Would the financial
analysis show that this project would be profitable for Boeing’s shareholders?