Boeing is back!

The Boeing Company, one of the titans of the aerospace industry, has had to handle a lot of turbulence over the last couple of years. Ethics scandals and poor performance on big-ticket military projects that have soured relations with the US Department of Defense, on whom it depends for much of its business, have hurt the company's image and its bottom line.

So it was a big shot in the arm on April 26th, when the Chicago-based company launched its new 7E7 Dreamliner passenger jet with a hefty 50-plane order from All Nippon Airways (ANA), Japan's second biggest airline, worth up to $6 billion, the biggest initial order ever for a new-model commercial jet.

After two years of layoffs that cost thousands of jobs as the demand for passenger jets shrank alarmingly, Boeing's commercial airplanes division was back in the game. The mid-sized 200- to 300-seat Dreamliner is the first new US passenger aircraft to be built since the 777 was launched in October 1990 and will have to do battle for commercial air supremacy with the 550-seat A380 double-decker superjumbo manufactured by Boeing's main rival, Europe-based Airbus.

The ANA order was valuable in another way: the airline will phase out its older A320 Airbuses and leave Boeing its sole supplier of narrow-body jetliners. The stakes in the multibillion-dollar dogfight are high, since the two manufacturers are sinking $8-15 billion each into the new designs, which show their radically different approaches to the airline market of the next few decades.

First deliveries of the 7E7 - the 'E' stands for efficiency - are scheduled for 2008. But the A380 has the jump on its rival. The flying behemoth, which will be the world's largest passenger plane, will be making its debut in Singapore Airlines livery in 2006. The 7E7's early customers are likely to be found in the Middle East and Asia.

Japan Airlines and Emirates are among the major carriers taking a hard look at Boeing's new model. Japan Airlines has large 767 domestic and regional fleets that it will have to upgrade over the next decade, and Emirates is phasing out its Airbus A300/A310 fleet while seeking a mid-range jet to reach Europe.

Airbus pulled ahead of Boeing in passenger aircraft deliveries for the first time in 2003 while the US giant suffered a drought of new orders and had to ditch two earlier commercial jet programs because of a lack of customer interest. One of those was the Sonic Cruiser concept, an airliner with a speed of Mach 0.98, almost the speed of sound, that was shelved in favor of the 7E7.

The Sonic Cruiser would sacrifice operating efficiency for speed, but airlines were simply not interested. The 7E7, with its conventional better-safe-than-sorry design, is a central element in the new post-scandal strategy headed by Boeing's new chief, Harry Stonecipher, a blunt veteran of the industry plucked from retirement. Aviation Week & Space Technology said he had 'a track record of being decisive and scrupulous regarding accountability.'

His predecessor, Phil Condit, was axed because of the allegations of corporate skullduggery that put Boeing through the wringer. But getting back into the Pentagon's good books is the core of Stonecipher's strategy. With the global airline market still struggling to get over 9/11, the military remains Boeing's biggest customer.

Stonecipher, 67, who retired as Boeing's vice chairman in 2002 and is the former president and CEO of McDonnell Douglas, has to convince the Department of Defense that Boeing is a reliable and honest supplier. There are many defense projects in the pipeline and the company has its eyes on at least six that will be up for grabs in the coming year.

In 2003, the US Air Force found that Boeing had improperly obtained - stolen - 37,000 pages of proprietary documents from archrival Lockheed Martin Corp. to help the company win 19 of 26 contracts involved in a missile launch deal that could be worth as much as $40 billion. Most of the contracts awarded to Boeing were revoked.

On November 24th, chief financial officer Mike Sears was dismissed for unethical conduct, along with former US Air Force officer Darleen Druyun, who as deputy acquisition chief had played a key role in getting Boeing a $23.5 billion contract with the Air Force to provide 100 converted Boeing 767 passenger jets as aerial tankers, and was then hired in January 2003 to run the company's missile defense systems unit.

Boeing hoped that the Thanksgiving Day bloodletting would draw the line under the two scandals that had revealed the dark side of the sector's business ethics and once again turned the spotlight on the revolving door between the defense industry and the Pentagon. But that was not to be. A week later, Condit resigned as chairman and chief executive because of the allegations of skullduggery that put Boeing in deep trouble with the Pentagon.

And to top it all, a crucial deal initially worth $23.5 billion to provide 100 Boeing 767 aircraft to the Air Force as aerial tankers ran into heavy flak from congressmen who thought it smacked too much of impropriety. The deal was put on hold by the Pentagon on December 2nd pending investigation following the dismissal of Sears and Druyun, who pleaded guilty in April to illegally accepting an executive post with Boeing.

On May 25th, the Pentagon said it was deferring a decision for six months on the Boeing contract to consider other options. That threw Boeing's proposal to lease 20 767s and sell 80 to the Air Force even further into doubt and some Washington insiders expect the contract to be renegotiated from the ground up, if not scrapped altogether.

That would be a major setback for Boeing as it struggles to reestablish its prestige. The 767 isn't attracting many customers these days and Boeing has considered closing down that production line. Losing the tanker leasing deal would pretty much mean that's what would happen.

As it is, Boeing, the number two US military contractor after Lockheed Martin, saw its near monopoly in military refueling aircraft severely dented in January when Britain turned its back on Boeing over a $24 billion tanker contract for the Royal Air Force by selecting aircraft based on Airbus's A330 wide-body airliner proposed by a consortium headed by the European Aeronautic Defense and Space Co. NV (EADS), Airbus's parent.

Two months later, Australia followed suit with a $1.5 billion contract for five more tankers from the European group. NATO deals. The EADS-led consortium - it includes Northrop Grumman of the US, General Dynamics Canada, Thales of France, Indra of Spain and Galileo Avionica of Italy - has also won a $4.9 billion competition to supply the North Atlantic Treaty Organization with surveillance aircraft based on the A321 Airbus, unmanned drones and ground stations.

In December 2003, newspapers reported that Boeing had invested $20 million in an investment fund managed by Richard Perle, a top Pentagon adviser and the godfather of the Bush administration's neoconservative hawks, along with another $20 million in the Paladin Capital Group managed by a former Central Intelligence Agency official who sits on the Defense Policy Board, a highly influential advisory committee at the Pentagon dominated by neconservatives and until a few months ago chaired by Perle.

'How many ways can companies find to influence the government?' Ken Boehm, chairman of the National Legal and Policy Center wrote in the Wall Street Journal. 'The answer is: quite a few.'

The ethics issue has not gone away and Boeing's chiefs are going to have to convince critics in Congress, particularly Arizona Senator John McCain, a former US Navy pilot and hero of the Vietnam War, that more than a few classes in Ethics 101 for its executives is required. Boeing's problems with the Department of Defense have been deepened with the recent disclosure that the company was running more than a year behind schedule and billions of dollars over cost on a highly classified program to produce the next generation of reconnaissance satellites.

That forced the government to divert some $4 billion from other intelligence programs. The Senate Intelligence Committee blamed Boeing and the National Reconnaissance Office for the problems bedeviling the Future Imagery Architecture project.

Defense Secretary Donald Rumsfeld's cancellation of the $38 billion RAH-66 Comanche helicopter program in February, one of the biggest cancellations in army history, was another major setback to Boeing, which with United Technologies Corporation's Sikorsky unit was the lead contractor in the project.

Finally, in May, the General Accounting Office, the congressional investigating arm, reported that Boeing's program to develop an aircraft-mounted laser gun to destroy hostile missiles in flight has almost doubled in cost - to $2 billion - and its effectiveness was 'highly uncertain.'

The project, involving a laser mounted on a Boeing 747, was considered a crucial component of the Bush administration's planned multilayered defense shield. Of the scandals, Stonecipher told Aviation Week in a recent interview: 'We have to get past this. . . . We want to get all those things finished. I think we're making good progress. When I took this job I identified two priorities: restoring the reputation and integrity of the company with all of our constituents and getting the 7E7 launched . . . Now we've got to get some good hard signatures announced.'

Boeing may have stuck with the conventional in its 7E7, but its military arm seems to betting its large-aircraft future on a more unorthodox design: the all-wing ultra-long-range aircraft known as the Blended Wing Body (BDB) that is shaped like a giant boomerang. The concept itself has been kicking around for about 90 years (Aerospatiale explored the merits of a high-capacity flying wing passenger jet a decade ago), but Boeing is investing heavily in the project and is thought to be close to reaching an agreement with the US Air Force and the Defense Advanced Research Projects Agency to build a prototype.

The Air Force's Special Operations Command is particularly interested in the BDB as a replacement for its AC-130 Specter gunships - currently in action in Iraq and Afghanistan - and as an aerial tanker, a market Boeing is desperate to keep. So far, there is little interest in a passenger version of the BDB, although its delta-shaped body is far roomier than the conventional tubular bi-wing design, a configuration that derives from the B-47 nuclear bomber Boeing built 50 years ago during the Cold War, it has drawn little airline interest.

Freight carriers, which account for a sizable share of Boeing's commercial aircraft market, are likely to find the BDB attractive. But there are still those who see the super-efficient BDB as the airliner of the future. Boeing calculates that a BDB 'flying wing' seating 480 passengers - in a series of compartments more like a hotel lobby than a conventional airliner - would use 32 percent less fuel than the Airbus A380, and weigh 19 percent less, suggesting it would cost less to build.

And it would need 19 percent less thrust, saving on engine and maintenance costs. With an anticipated speed of Mach 0.9 and a potential range of 7,000 nautical miles, it holds immense potential. Boeing also has another possible ace up its sleeve: anti-gravity propulsion, which in theory generates immense energy that does not involve propellants and could be used for launching spacecraft or powering high-speed aircraft.

Such technology could overturn a century of conventional aerospace propulsion. Boeing's Phantom Works in Seattle, which handles the company's most sensitive projects, is reported to have initiated its own program, Gravity Research for Advanced Space Propulsion, known as GRASP, based on the findings of a controversial Russian scientist, Yevgeny Podkletnov, who claimed in 1992 that his experiments had broken gravity's hold.

Boeing clearly is taking Podkletnov seriously and is trying to collaborate with him. So far, the Russians have thwarted all approaches. A GRASP briefing document obtained recently by Jane's Defense Weekly concludes that 'a positive result from experiments would give Boeing a substantial advantage in the aerospace industry.'