1. Why is Airbus interested in building the A3XX? What are its objectives?
Airbus predicts that there would be demand for more than 1500 super jumbos over the next 20 years that would generate sales in excess of $350 billion. And they could sell as many as 750 over jumbos over the next 20 years with a break even on undiscounted cash flow basis with the sales of only 250 planes. There is a huge profit in this business if Airbus succeeds in the industrial launch of A3XX jumbo jets.
In addition, Airbus has received over half of the total large aircraft orders for the first time in 1999 thanks to the “cross crew qualification” feature. Capturing more than half of the very large aircraft (VLA) market with the A3XX would constitute an
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The annual demand from 2009 to 2019 would be 62.
So the breakeven point is much less than the total demands. 3. As Boeing, how would you respond to this situation? How does your answer depend on what you think Airbus is likely to do? Please provide some calculations to support your answers.
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.
4. Should Airbus commit to build the A3XX? How many orders should Airbus have before committing to develop the plane? Again, provide some numerical support for your answers. Because the analysis above gives a positive NPV, it is in airbus best interest to build the A3XX. But since Airbus needs to sell at least 39 annually aircrafts
In 2013 Airbus announced a contract to deliver 50 A380 airplanes to Emirates for $20 billion to be delivered between 2016 and 2018.
Of considerable concern is that Boeing and McDonnel Douglas have a significant head start in the market. In a shrinking market, the Tri Star, though far superior to the competition, may have missed the window of opportunity. Airline revenues are down while labor and fuel costs are rising. This will drive down demand for all producers of wide-body aircraft.
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
Nevertheless, as Boeing gears up for its all-new 7E7 airliner, arch rival Airbus may already be putting 7E7 orders at risk by talking to airlines about a similar plane. Airbus is viewed a having advanced technologies coupled with a conglomerate backing and Boeing has not come up with any new innovative ideas in the last ten
In addition to making the super jumbo one of the largest product launch decisions in corporate history, this figure represented 26% of total industry revenues in 2000 ($45.6 billion) and more than 70% of Airbus’ total revenues in 2000. The inherent risk associated with this major strategic commitment is magnified by the fact that Airbus must spend the entire
Airbus has been making headlines in the past few months for all the wrong reasons. This iconic European corporation has undergone a turbulent period due to the problems surrounding the Airbus A380 project. A new flagship product that should have curved out an unassailable advantage for Airbus over Boeing went completely wrong. The
‘superjumbo’ jet, isn't new to the United States” (Mutzabaugh, 2014, para. 3). Airbus currently has more than 2,600 aircraft flying the sky—airlines being the majority (e.g., United, Delta, US Airways, Jet Blue, Frontier, etc.). The figure below lists the airline aircraft that Airbus currently manufactures.
In fierce competition with Boeing, venture into VLA segment – as a rather neglected segment by Boeing – could pose as a strategic opportunity for Airbus which it could utilize to build a competitive advantage combined with its technological resources and capabilities. However, its assumptions of a drastic increase in VLAs demanded in next 20 years along with its ability to satisfy most of this are too optimistic. Provided that these assumptions (inc. breakeven points, initial order requirements) are normalized, A3XX is a project worthy to pursue for Airbus in order to exploit a neglected spot on the perceptional map – long-haul + big capacity. When we hold the market itself continues to grow as proposed in the case, this
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 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
getting new aircraf. Newer aircraft are essential for several reasons; they are lighter and better built, they are more fuel-efficient, require less maintenance and repairs, provide more amenities to passengers and are deemed to be safer in the eyes of the consumer. American Airlines replaced approximately 10% of their fleet in 2013
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).
New Large Aircraft (NLA) or New Generation Large Aircraft (NGLA) are the future of long distance air travel. With current air craft size reaching unknown proportions to humankind, airports that are interested in attracting future business as well as the revenue the large amount of passengers per flight may generate, will have to adapt their installations to the demanding needs of these supersized vehicles. The following paper will focus on the new Airbus A380 and the requirements that airports inviting this magnificent work of engineering to use their installations will need to meet.
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
According to Boeing’s latest commercial report, from a global perspective, “Boeing is forecasting a need for over 39,600 airplanes valued at more than $5.9 trillion.