Boeing doesn’t make civil helicopters. Why?

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At last week’s Boeing shareholders meeting gathering for Wall Street analysts, Morgan Stanley aerospaceguru Heidi Wood popped an unexpected question to Integrated Defense Systemspresident Jim Albaugh.

Why, Wood queried, is Boeing still the only US militaryhelicopter manufacturer lacking a product to offer the rapidly growingcommercial market for vertical lift?

I’ve noticed over the years that Wood likes to ask the put-you-on-the-spotquestion. Albaugh responded like any other industry executive in this situation- by evading a direct reply.

Neither the AH-64 Apache nor the CH-47 Chinook make aparticularly logical commercial product, he replied, adding: “I don’t think anyof you want us to go out there and do a fixed price development contract for acommercial product.”

But Wood didn’t let him off the hook so easily. Instead, sheboxed him into a rhetorical corner with her follow-up, finally yielding a moreintriguing reply from Boeing’s defense boss.

Remember this was Boeing’s annual shareholders meeting, an occasionwhen corporate executives stand accountable for delivering a return oninvestment. (Okay, it was actually Boeing’s annual gathering for Wall Street analysts and representatives of institutional investors, but the point about this being a moment of accountability still stands.)

So Wood told Albaugh, basically, that his first answer wasn’tgood enough. Everyone agrees the civil helicopter market is ripe for growthover the next decade. With Boeing’s decades of accumulated intellectualproperty in rotorcraft technology, Wood asked, “why not leverage and explore” commercialproduct opportunities?

At this point, Albaugh reminded Wood that Boeing signed a10-year non-compete agreement when it sold MD Helicopters in 1999. This mayhave been a reminder for Wood, but it was news to me.

I went back and read Boeing’s announcements (here and here) from the sale,and neither mentions that the terms of the deal included a 10-year non-competeagreement against the maker of the MD Explorer line of helicopters.

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On the other hand, the announcements did help remind me thatBoeing owns the famous – and controversial — no-tail-rotor (NOTAR) technology (pictured on the left) thatdistinguishes two of the MD-series helicopters.

MD Helicopters, formerly Hughes, has historic tentaclesthroughout the helicopter business. For example, a derivative of one of Hughes’earliest helicopters flies today as the Northrop Grumman MQ-8B Fire Scout,although neither MD Helicopters nor Boeing owns the rights to the designanymore.

The point is, Boeing really is sitting on a gold mine ofpotentially marketable product knowledge. So, like Wood asked, why not makesomething out of it?

Albaughreplied to Wood’s follow-up carefully, perhaps mindful that he can’t simplywrite off an entire market sector in front of his corporation’s ballot-empoweredownership (or Wall Street analysts, of course).

Thecommercial helicopter market comes up when Boeing IDS goes through its annualstrategic planning process, he said. But then he appeared to give an inch,without making an actual commitment.

“As the 10-yearnon-compete comes to end, it’s probably time to look at that hard,” he said.

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3 Responses to Boeing doesn’t make civil helicopters. Why?

  1. strbean 27 May, 2008 at 5:20 pm #

    There is a timing problem with Albaugh’s comments. Boeing made the decision to exit commercial helicopters in 1998, and it appears related to the 609 tiltrotor: http://www.boeing.com/news/releases/1998/news_release_980212d.html

    They then tried to sale the commercial business to Bell:
    http://www.boeing.com/news/releases/1998/news_release_980225b.html

    And failed:
    http://www.boeing.com/news/releases/1998/news_release_980609n.htm

    So then they made the sale of RDM in 1999, resulting in the creation of MD Helicopters.
    There probably was and is more to Boeing’s position (or lack thereof) in commercial helicopter market than just what happened in Mesa.

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