Case Analysis: Airbus A3Xx: Developing the World’s Largest Jet

Many would say that the idea of building the Airbus was thought of by a French transport minister named Jean Chamant and a German economics minister, named Karl Schiller in 1969, but in all actuality, the idea was originated in in 1967 by ministers in France, Germany and Britain. They all agreed “for the purpose of strengthening European co-operation in the field of aviation technology and thereby promoting economic and technological progress in Europe, to take appropriate measures for the joint development and production of an airbus” (Early Days, 1967-1969). They knew that if they did not come up with a new concept for air flight, that the Americans would always be the leaders in the aircraft industry.

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

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

In 2013 Airbus announced a contract to deliver 50 A380 airplanes to Emirates for $20 billion to be delivered between 2016 and 2018.

In the market for large aircraft demand the emerging niche for very large aircraft (VLCT aircraft seating more than 400 passengers) saw only two competitors: Boeing and Airbus. Even though both competitors’ moves were clearly marked by technology enhancements, and different target markets but both exhibited strategic interdependence.

Boeing adopts a very thorough, well planned out process to manage the project. The stages are defined clearly and tasks involved in each stage are carried out sequentially. The first stage of their approach is the project definition phase during which Boeing identified holes in the market not met by existing planes, assessed future airline needs, considered alternative plane configurations, explored feasibility of possible technologies and performed preliminary estimation of costs. During the market assessment, analysts gathered information regarding future needs of airlines by speaking directly to

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.

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

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

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

The first strategic imperatives are to expand domestic destinations. One way to accomplish this is by increasing Virgin America’s fleet size to 60 new airbuses A320 by 2013. The 60 Airbus A320 new planes will be delivered from 2013 through 2019 with 18 on order, four being from Jazzier Airways, a Kuwaiti airline. Four will be on the property by end of 2011, with 10 in 2011 and the last four on grounds beginning of 2012, with a potential total of 111 planes by 2019.

4Would Boeing’s transition into services prove to be the silver bullet – the solution to the airlines’ financial woes and to Boeing’s aggressive competition with Airbus?Boeing should keep innovating and producing new ideas to provide more efficient aircrafts to the airline industry. Boeing should also focus on its core competence which would be making better and newer airplanes (boeing.com, 2012). Integration is also a key contributor to a successfully company and a possible solution to better the organization. An integrated aerospace company and a global enterprise including designing, producing, and supporting commercial airplanes, defense systems, and defense & civil space systems (boeing.com, 2012). Airline companies like Boeing and Airbus should equally focus on both commercial aviation sector and the defense sector to help the financial troubles these firms may be involved in. Boeing has been able to transition nicely into the services industry while maintaining a strong hold in manufacturing sector as well. Boeing has been able to provide the customers what they what and need when flying today. They have been able to

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).

As the largest aerospace company in the world, the Boeing Company employees more than 153,000 people in some 67 countries. The great dominance of Boeing is due to its 1997 merger with McDonnell Douglas Corporation, an aerospace manufacturer, and its 1996 purchase of the defense and space units of Rockwell International Corporation, an aerospace contractor. The corporation is the world’s number one maker of commercial jetliners and military aircraft with more than 9,000 commercial planes in service worldwide, including the 717 through 777 families of jets