Airbus vs Boeing

The Boeing Company designs, develops, manufactures, sells, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide. It operates in five segments: Commercial Airplanes, Boeing Military Aircraft, Network & Space Systems, Global Services & Support, and Boeing Capital. The Commercial Airplanes segment develops, produces, and markets commercial jet aircraft for various passenger and cargo requirements; and provides related support services to the commercial airline industry. This segment also offers aviation services support, aircraft modifications, spare parts, training, maintenance documents, and technical advice to commercial and government customers. The Boeing Military Aircraft segment researches, develops, produces, and modifies manned and unmanned military aircraft, and weapons systems for global strike, vertical lift, and autonomous systems, as well as mobility, surveillance, and engagement. The Network & Space Systems segment researches, develops, produces, and modifies strategic defense and intelligence systems, satellite systems, and space exploration products.

With only a few large companies across the globe (Boeing, MD, and Airbus), the commercial aircraft industry essentially exhibits the qualities of an oligopolistic competition with intense rivalry. Here is an analysis of competition in the commercial aircraft business using Porter’s Five Forces.

Boeing pursues Product Differentiation strategy in order to create competitive advantage over Airbus. Boeing differentiates its products by increasing number of seating capacity, engine capacity, innovating new winglet designs and by manufacturing wide range of products in respect to the change in market

Given the competitive dynamics in the commercial aircraft industry, it is not likely that Airbus could have become a viable competitor without subsidies. These dynamics include investment costs in the billions for research and development of a new airliner, long break-even times, significant experience curve on the manufacturing side, and the highly volatile demand for aircraft. Due to a lack of market share, if Airbus entered the market without this support they would have suffered many years of losses resulting in a possible bankruptcy. However, Airbus credits its success to a good product and a good strategy instead of

The organization and characteristics of a specific market where a company operates is referred to as market structure. While markets can basically be classified by their degree of competitiveness and pricing, there are four types of markets i.e. perfect competition, monopolistic competition, monopoly, and oligopoly. In perfect competition markets, many firms are price takers whereas monopolistic competition markets are characterized by the ability of some firms to have market power. In contrast, oligopoly markets are those in which few firms can be price makers while monopoly market is where one firm can be a price maker.

This comprises the main reason why Airbus is interested in building the A3XX. It attempts to create a dominant design that the market for large planes may pledge allegiance to, moving from simply product innovations to process improvements for the VLA. It does intend to just replicate the 747s and achieve a jumbo jet with the same capabilities. Rather, it aims to increase the seating capacity and reduce costs for the operators by so much more than what Boeing’s alleged monopoly holds, with the objective of seizing the market

• High capital requirements to establish +huge set up+ large investments + economies of scale/scope: Boeing having advantage over Airbus in large commercial aircraft sector.

There are only 3 main competitors in the commercial jet engine-making industry which operates as an oligopoly. Historically, all of these companies have competed with each other for jet engine contracts which led to intense price wars. To avert ruinous price wars, these companies typically enter into exclusive supplier contracts with aircraft manufacturers. In such arrangements, the engine maker becomes the sole provider of jet engines for a specific aircraft model.

In 2000, Airbus Industrie’s Supervisory Board was making the biggest decision in the company history: whether Airbus should commit to develop world’s largest jumbo jet. At that time, there are only two major commercial jets manufactory companies: the younger Airbus and the bigger Boeing. Boeing had been at the forefront of civil aviation for over half century. Airbus was founded in 1970as a consortium and merged into a new company known as European Aeronautic Defense and Space Company. Airbus developed “fly-by-wire” technology and “cross crew qualification” technology to compete with Boeing in large jets (those with 70 or more seats) market. While Airbus was booked more than

Market Share Airbus will launch their new large, long distance plane A380 in 2006. This plane can be a dreadful competitive product to Boeing. If Boeing falls behind regarding innovations, fuel efficiency and other attributes of a long haul airliner, it will soon lose its market share. In order for Boeing to compete in the aviation industry, it is crucial to take on some risk and develop this new 7E7 project. This helps the company to fight against its competitors and recover from the slump in the industry.

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.

Dominating the commercial aircraft market for decades, Boeing is considered to be the most highly competitive U.S aerospace industry. “U.S. firms manufacture a wide variety of products for civil and defense purposes and, in 2010, the value of aerospace industry shipments was estimated at $171 billion, of which civil aircraft and aircraft parts accounted for over half of all U.S. aerospace shipments. The U.S. aerospace industry exported nearly $78 billion in products in 2010, of which $67 billion (or 86% of total exports) were civil aircraft, engines, equipment, and parts” (Harrison, 2011). However, its position of influence has lessened in recent years. This is due to its main competitor, Airbus, who in recent years has made significant

Airbus operates in this industry by building airplanes with seating capacities ranging from 100 to 350 seats. Over the past few years, Airbus has been extremely successful developing airplanes in this size range, increasing its industry market share to approximately 33%. However, quantifying Airbus ' past financial success is difficult because prior to its 1999 1.6 billion euro IPO, Airbus was a private partnership. As a result, very little past financial information is available.

Airbus is a consortium of European aircraft manufacturers formed in 1970; Boeing Company was founded in 1916 as the world's largest private commercial aircraft manufacturer in the USA; and finally McDonnell Douglas, considered the third major manufacturer, began operations since 1920 working essentially for the US government, manufacturing

The Boeing Corporation is one of the largest manufacturers in the world. Rivaled only by European giant Airbus in the aerospace industry, Boeing is a leader in research, design and manufacture of commercial jet airliners, for commercial, industrial and military customers. Despite enjoying immense success in its market and dominating an industry that solely recognizes engineering excellence, it is crucial for Boeing to ensure continued growth through consistent strategy formulation and execution to avoid falling behind in market share to close and coming rivals.