The Battle between Airbus and Boeing At the commercial aircraft industry, there are three main segments: large commercial airplanes (LCA); regional jets; Private jets. At this moment only Boeing and Airbus belong to segment of large commercial airplanes (LCA), with firms such as Embraer of Brazil and Bombardier of Canada taking up positions within the segment of regional jets in North America, firms such as Gulfstream and LearJet round out the market of private jets (Heppenheimer 2001:135). There are striking differences between the LCA and regional jet segments. The LCA market is truly global, which will be discussed later, while the regional jet market remains localized generally to one hemisphere – Bombardier and Embraer typically do …show more content…
Boeing): Figure 2. Yearly Total Orders b) Yearly total deliveries (Airbus vs. Boeing): Figure 3. Yearly Total Deliveries As we can see from the pictures above, the Boeing was the leader of the LCA for more than 10 years until 2003. It was happened because in early 2000s Airbus has taken some important decisions that affect the company 's financial position at the moment. The strategy includes next two points: 1. First, it was made the risky decision to initiate the development and production of A380. Even after four years from the start of the production of A380 it has not come to a profitable level. 2. The second important factor was the decision to sell the aircraft at a loss or with minimal profit in order to increase market share. And this strategy was right! For example, as we see from the chart Airbus delivered 311 aircraft to customers, Boeing – 491 in 2000. In year 2003, the ratio changed in favor of Airbus (at first time!) - 305 against Boeing - 281. Airbus’ orders grew up from 132 billion euros in 2000 to 541 billion euros in 2011 (from 124 to 700 billion
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The industry environment was also in Boeings favor at the time. Boeing had a history of dedicated customers. The company had been making commercially successful jet aircraft since it first developed the “707”. Boeing was so successful at manufacturing the jet aircraft, that it was one of two companies left making them. This advantage gave them the ability to be a powerful supplier. The expense of the development process also made it extremely difficult for new companies to even enter the market. Boeing faced only one competitor at this point; Airbus (Pearce, Robinson, 2003).
As the two largest producers in the commercial aircraft industry, Boeing and Airbus have been in a long rivalry for over two decades. Because of its huge research and development cost and a volatile market demand situation, the large commercial aircraft industry has only a few viable producers that can successfully operate in this industry. At the end of 1996, there were three competitors in the industry – Airbus, Boeing, and McDonnell Douglas (MDC). When Boeing announced in December 1996 the merger between Boeing and McDonnell Douglas, the dispute has again started between Boeing and Airbus. The merger was expected to go under
In the technological risk was that is the customers were involved in design and development of the Boeing 767, they would gain from much greater involution and feedback from users of the aircraft. In the very new airplanes they are first to tested then to implement the designed. These tested approved the safety test in the laboratories and too much used of computer they are useful in techniques. For the last project they learnt many of lessons which are not used in the 767 product airline. This airline is much better than the competition promotes.
Our original sales expectations were based on the assumption that we would capture 35% to 40% of the large body market. We further projected air travel growth of 10%. This would result in a
Airbus had a reputation for innovative design and technology. All Airbus planes employed “fly-by-wire” technology that substituted computerized control for mechanical linkages between the pilot and the aircraft’s control surfaces. This technology combined with a common cockpit design permitted “cross crew qualification” (CCQ) whereby pilots were certified to fly similar aircrafts, thus offering flexible scheduling in flight crews on various models, leading to better pilot utilization and lower training costs. These features helped explain why Airbus had received over half of the total large aircraft orders for the first time in 1999. However, despite the gains in market share, Airbus still did not have a product to compete with the monopoly of Boeing’s 747 in the VLA market.
Strategy #1 The aircraft market is extremely competitive, even though there are less than five major players globally. Between Boeing and Airbus, most of the market share for the next generation aircraft has already been solidified. For Bombardier to effectively gain orders it must make the aircraft are more appealing to purchasers in two major ways: cost and performance. In the final cost of an aircraft, a great deal of money is spent on research and development. Boeing has millions invested in new aircraft and wing design, and piggy-backs off its other divisions and aircraft offerings. Airbus receives a great deal of benefit from its govermnet contracts
• High capital requirements to establish +huge set up+ large investments + economies of scale/scope: Boeing having advantage over Airbus in large commercial aircraft sector.
In its published Current Market Outlook (CMO), Boeing forecast a much smaller VLA market despite general agreement on overall growth with GMF. Boeing predicts the total market demand for VLA aircraft is 330 over the next 20 years. In addition, the most of the demand for the lager planes would not materialize for at least ten years. If the predicted market demand is true, there is no way for Airbus to reach the breakeven point. It is most likely Airbus will run out of the business if it commits build A3XX. In this case, Boeing could ignore the A3XX and concentrate on its existing product line. That is to say, Boeing had an opportunity to enhance profitability on its existing products while Airbus was tied up developing the A3XX.
Second, Airbus, McDonnell Douglas, and Boeing are multi-product firms that are selling several products during most time periods. When Boeing considers lowering a price of one of its products, this will not only reduce the market share of Airbus’s products, but it might also undercut the sales of Boeing’s other products. Boeing may then lower its prices by less than in a situation when it only sells one product.
The following analysis discusses the suppliers, buyers, industry competition, threats to entry, and substitutes that exist within the large commercial aircraft industry. Additionally, the analysis identifies the pressure that each of these groups applies on the industry and estimates the impact this pressure has on potential industry profits. Each group is identified using a high, medium, or low-pressure classification. A high-pressure classification indicates the group reduces industry profit potential and vice versa.
THE BOEING COMPANY: STRATEGIC AUDIT I. CURRENT SITUATION A. Current Performance Boeing performance has been outstanding for the past few years. Their Return on investment rose from three percent to 6 percent from 1998 to 1999, but it did drop to five percent in 2000. In 1996 Airbus claimed 42% of the market share, while Boeing had 64%. Boeing is looking at falling below the 50% mark. Boeing's profits have been doing quite well. They have risen drastically in the past few years, which can be seen in the profitability ratios. Boeing is doing fine when it comes to profitability, even though they have dropped slightly since 1999.
The Boeing corporation had been a very successful company in the mid-1990s. At the time, it dominanted the market in commercial aviation with an additional thriving sideline in the military and space contracts market. Boeing faced and then overcame a huge number of challenges but also took advantage of many opportunities that were offered up by the aerospace market in the late 1990s. The company faced a number of challenges. In wake of he the first Gulf War, the incumbent economic slowdown severely decreased the market demand. Also, the Boeing encountered stiff competition from the company Airbus which many experts have attributed to heavy subsidies by European government that gave the company an unfair advantage market advantage. For instance, in 1999, Airbus outsold Boeing for the first time in the company's history and delivered to the market more airplanes than the Boeing company did in
Developing the World's Largest Commercial Jet In this case, we will be analyzing strategic interaction between Airbus and Boeing, the two leading producers in the global commercial aircraft industry. In particular, we will be considering Airbus' proposed launch of the A3XX, their entry into the intercontinental jumbo jet segment, and Boeing's potential competitive responses to this entry. We will attempt to answer the questions: Should Airbus enter the jumbo jet segment? If so, how?
Weaknesses that Airbus has, is that due to their structure, and having a multi country consortium, they were slow to make decisions. In the 1980’s Airbus experienced difficulties in financing the A-320 project, since all the Airbus partner governments had not approved the program (Carpenter, M. A., & Sanders pg. 613). Airbus was slow in its decision making process because the partners of the consortium tried to safeguard its own interests rather than make decisions that would benefit them as a whole (Carpenter, M. A., & Sanders pg. 613).