At that time, Boeing was riding high with bulging order books. It had just taken over US rival McDonnell Douglas, and it had more orders than it could cope with.

The head of the commercial aircraft division, Ron Woodward, took the unprecedented step of shutting down the production line for its best-selling planes, the 747 Jumbo, and smaller 737, for a month to catch up.

Now, a year later, Mr Woodward is gone from Boeing, and the company is planning to layoff 48,000 workers as demand has fallen because of the Asian crisis. Its shares crashed by 17% in one day as the company admitted that it would barely make a profit on its commercial aircraft for the next three years.

What had gone wrong?

Over-estimating demand

Boeing was late to realise how seriously the Asian crisis was damaging its business.

Boeing's production problems have mounted

It did reduce its forecast for the long-range growth in the aircraft market in June, but it failed to spot the trouble on its doorstep as Far Eastern airlines cancelled or delayed orders.

Asia had been the big growth for the airline business, and especially for the long-range aircraft like Boeing's 747 Jumbo, but the severe economic recession has cut into business sharply. That, in turn, pushed airlines like Cathay Pacific, Thai Airlines, and Korean Air into losses, making them unwilling to purchase new aircraft.

With smaller airlines like Philippine Airlines actually threatening to shut down, it became clear by this summer that the Asian market was no longer strong enough to maintain demand.

But it has also meant that Boeing, which planned to make five 747s each month at the end of 1997, has now said it will only produce one a month by the end of l999.

And the 747, which sells for $150m, is by far Boeing's most profitable plane.

Production problems

Adding to Boeing's woes has been its failure to manage its production. Boeing has always been used to boom and bust, expanding production to suit and laying off workers when necessary.

But last year it appeared to have offered to make far too many planes - at too small a profit - in a drive to maintain its market share at all costs. The company planned to triple production from 18 planes a month in 1996 to 50 per month by the end of 1998.

It found it difficult to expand its production base at Seattle, and even more difficult to integrate its newly acquired McDonnell Douglas plants in southern California - which it only started to do this summer.

It was slow to integrate its computer systems and has been unable to lower production costs, as the new workers took time to train. Crucial parts went missing as the paper tracking system broke down.

"They are still building these aircraft the primitive way they did 40 years ago," said E. Han Kim, a business school professor from Michigan.

Boeing president Harry Stonecipher admitted that it still took the company 20-30% more manhours to produce a plane than it did five years ago.

The result is that even its best-selling New Generation 737, where production expanded the most, is being produced at a loss.

Rivalry with Airbus

The difficulties at Boeing have alllowed arch-rival Airbus Industrie to steal a march with other airlines.

In the summer, Airbus persuaded British Airways, a long-time Boeing customer, to switch to Airbus for its next generation of short-range planes.

And at the industry's annual trade show, held in Farnborough, Hamphire, Airbus was able to announce further billions of dollars of orders - including to US air freight company UPS - while Boeing was apologising to its customers for its poor delivery record.

Boeing has been forced to adopt Airbus's plan for a common cockpit for all its planes, converting the 757, 767, and 777 to the same pattern.

And its plan to stretch its long-range, two-engine 777 has so far failed to find a launch customer.

Airbus, which is still a consortium that is planning to form itself into a limited company, decided to ramp up production slowly - building 234 planes this year, 293 in 1999, and 317 in 2000. As a result, it only has a handful of finished jets awaiting buyers - while Boeing has 24 planes in storage, down from 36 at the end of June.