Booming airplane demand makes Boeing turn away most coveted customer

Boeing has turned away Southwest Airlines, Boeing’s best customer to date having sold a whopping 477 Boeing 737s to the company alone. Southwest Airlines that flies only Boeing 737s wanted to add two more places on its recent order of 80. However, Boeing said no to them, offering them two slightly used Ford-owed Boeings that the company plans to shed. Edmund S. Greenslet, publisher of Airline Monitor, which is an airways publication says; No one is more important to Boeing than Southwest. If Boeing is not willing to raise production and build for Southwest, you can be sure they won’t accommodate anyone else. So why is Boeing doing this? Actually there is a very good reason behind Boeings seemingly crazy decision to turn away Southwest Airlines. In the last aviation boom in 1997-98 Boeing accepted all the orders that it got. However, its production line collapsed under the sheer weight of the orders. Also, by taking so many orders, the company flooded the aviation market with too many planes that forced it to sell them at discounted rates that resulted Boeing laying off some 20,000 of its workforce after its write-offs came to $4 billion. The aftermath of this huge loss sent Boeing’s stocks and profits plummeting that raised serious doubts about if Boeing is ever going to be the same company again. So in order to avoid the 1997-98 situation again the company is taking this approach in business. Scott E. Carson, CEO, Boeing Commercial Aviation sums it like this; 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. It’s much harder to say, ‘I’m sorry, we’re sold out.’ Though it may seem like a case of once bitten, twice shy, I would reckon that this is a very good move by Boeing.