...Term Paper on Airbus INTRODUCTION In December 2000, Airbus formally committed to develop and launch a super jumbo plane known as the A380 at a launch cost of $13 billion. Prior to and after Airbus’ commitment, Boeing started and canceled several initiatives aimed at developing a “stretch jumbo” with capacity in between its existing jumbo (the 747) and Airbus’ planned super jumbo. 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 amount before it delivers the first plane. History has shown that many firms including General Dynamics, and, more recently, Lockheed, have failed as a result of attempting such bet-the-company product development efforts. If, however, the launch effort does succeed, Airbus is expected to dislodge Boeing as the market leader in commercial aircraft after more than 50 years of market dominance by the latter. We can write a custom term paper on Airbus for you! This term paper presents an analysis of this new product commitment and, more generally, of competition in very large aircraft (VLA is defined as planes capable of seating more than 400 passengers). CASE BACKGROUND In the early 1990s, Airbus and Boeing independently began to study...
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...the marketing of the A380 in terms of the 4 Ps of marketing. Product : The Airbus A380 is the largest passenger plane with 73 meters of length, 7 stories of height and eqipped with four Rolls-Royce engines very secure and high performance. It can accommodate 550 passengers with two floors of large seatings devided in Economy, Business, First Class, and has the most sophisticated computer flight control system. It is made of super lighter materials and less polluting than other plane. Several facilities are available such as waterfall, lounge and shops inside. The design is well groomed. Price : The price is about 300 million dollars each plane. Promotion : The public and professional relationship is an important part of the Airbus strategy. It is why they made a show of the first flight of the plane with more tha 40000 spectators. It was a historic test flight which took place on April 27 at 2005 in Toulouse airport . Place : The size constraints of the aircraft were set by Airbus in consultation with the major airlines, official and representatives of sixty international airports in order to use the facilities of existing airports without causing radical changes in infrastructure. Moreover, regarding the Airbus travel strategy, the main airports are the only used by this aircraft. 2. Is the supply chain agile, adaptable and well aligned? Explain. The several elements of the Airbus A380 are built mainly in France, Germany, Spain, and the United Kingdom, the final...
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...revamp its production process and come up with new and innovative products. In contrast, Airbus emerged as a major competitor of Boeing within two decades of its inception. As a new company, Airbus did not suffer from inertia, but rather introduced a flurry of innovations in its planes. The manufacturing system was also very lean as Airbus setup its product plant relatively recently (compared to Boeing). It seems that in the head-to-head competition, Airbus presently has the upper hand over Boeing. Boeing must find a way to reinvent itself to regain its position as a global aerospace leader. Case Questions 1. Conduct a five forces analysis for Airbus. What industry forces pose the most serious challenges to airbus? One of the five forces that poses the most serious challenge of rivalry. Airbus and Boeing are competing against each other for customers and best prices. Airbus found a niche in the US market for smaller aircrafts. The company was innovative in its design and introduced new products to market. Boeing was not successful in developing as many products as Airbus. Another challenge would be the bargaining power of the buyers. Buyers will choose the product that is more cost effective. Airbus is also in a position to charge lower prices than does Boeing because of its comparatively leaner manufacturing system (Newmyer, 1998). 2. What preemptive activities have Airbus taken to neutralize the industry forces that challenge its profitability? -Airbus’s...
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...Airbus Abandons Plan to Use Controversial Batteries in New Jet By NICOLA CLARK Published: February 15, 2013 * FACEBOOK * TWITTER * GOOGLE+ * SAVE * E-MAIL * SHARE * PRINT * SINGLE PAGE * REPRINTS * PARIS — Faced with the potential of a prolonged investigation into what caused batteries on two Boeing 787 Dreamliner jets to catch fire or emit smoke last month, Boeing’s European rival, Airbus, said Friday that it had abandoned plans to use the same battery technology on its forthcoming wide-body jet, the A350-XWB. Add to Portfolio * Boeing Company Go to your Portfolio » Airbus said it started informing airline customers on Thursday that it would not move ahead with an original plan to use the lightweight lithium-ion batteries to power a number of the A350’s onboard systems, and would revert instead to a conventional battery, made of nickel-cadmium, that is already used extensively on existing Airbus models. “Airbus considers this to be the most appropriate way forward in the interest of program execution and reliability,” said Marcella Muratore, an Airbus spokeswoman. Airbus completed the assembly of its first test version of the A350 late last year and initial ground tests of that plane using the lithium-ion batteries had already begun at its factory in Toulouse, France. By switching batteries now, the company said it hoped to be able to stick to its schedule of delivering the first...
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...Boeing versus Airbus: The ‘endless’ crusade for continuation of subsidy! (A case study) Case reviewer: Angelica Sharma* Brought up in a family in which my parents were always ready to help anyone, closely or even remotely related to them, but not without being duly satisfied about the urgency, righteousness / desirability of assistance (mostly financial) that was asked for, I have, overtime, come to view non-market incentives like subsidies, grants and tariffs from a mind-set that I have found moulded in their company. I look upon my parents as really great protagonists of market-economy without undermining their sense of sympathy and concern for the hapless lot around them in that country, they proudly refer to as India. They always made a distinction between who deserved and who did not deserve the favour that has been asked for. And also, they were particular to find out when, in what form, how much and for how long the assistance, if any, was to be there. Strangely, even to day, they remorsefully recall the few instances of having wasted their scarce productive resources on individuals who, they later-on found, never wanted to be on their own. But they did learn a lesson from these experiences. I have grown in such family environment of respect for merit, hard work and self-pride. It is endowed with this sense that I intend to ponder over the Boeing-Airbus subsidy-related trade-rift and comment on the perceptions, policies, arguments and counter-arguments of the two...
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...Boeing versus Airbus: The End Results becomes an Air Force Debacle Jason Bourne Park University November 17, 2009 Abstract This paper explores the highly controversial bid process and subsequently protest for the Air Force’s KC-X refueling tanker. The main participants for the new refueling tanker contract were Boeing and Northrop Grumman (NGC) as prime contractor through a joint venture with the European Aeronautic Defense and Space Company (EADS). The Boeing Corporation has been the standard in the aerial defense industry. Their challengers, NGC and EADS, the owner of the Airbus, comprised of two very formable entities capable of taking on the aerospace giant Boeing. There were a lot at stake. Boeing has considered in being the “pride of American aerospace” unseated from the top perch of the aerospace industry by losing military contract potentially worth about $100 billion dollars. (Herszenhorn and Bailey, 2008) Overall, Boeing was a heavy favorite to win the contract being that it has manufactured tankers in the past for the Air Force. Two weeks later after the announcement, Boeing filed an appeal through the General Accountability Office (GAO) to protest the Air Force’s decision. This paper will discuss the Boeing’s basis of appeal and contrast them with the GAO’s findings in their protest. The source selection of the aerial refueling tanker contract became one of the most controversial procurement process in the history of the United States. Boeing versus...
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...| | |How does Airbus Business Compare with Boeing? | |Jennifer Rose Prague | | | |Airbus has emerged as Boeing’s major competitor in the commercial jetliner industry. The company was a latecomer to the industry | |being formed in the 1960’s, and its initial business structure proved to be a hindrance in many ways. The company has prevailed | |through its challenges so that today Airbus and Boeing are the two largest plane manufacturers in the world. Airbus and Boeing are | |close to even in their market share, although Boeing maintains a strong edge in the sales of military aircraft. Airbus has a few | |stark differences when compared to Boeing. Airbus today has been plagued with front landing gear failures, on one of their planes | |and fails to have a good market share in the jumbo jet market like Boeing has. | | | | ...
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...wrecks Airbus Consortium Airbus Industry is a consortium of European aircraft-manufacturing companies formed in 1970 to meet the demand for short- to medium-range, high-capacity jetliners. Members include the German, French and Spanish-owned European Aeronautic Defense and Space Company EADS (80% stake) and the British owned BAE Systems (20%). Since its inception, Airbus has become a case study for how a multi-lateral consortium can be a disaster in a market-sensitive industry like Aviation. Technical and cultural issues • Socio-cultural differences: It is well known throughout Europe that Germans prefer consensus and involving others in decision making, while the French like to have a centralized committee making all major decisions. The Spanish are known to be flexible but not very communicative. All these differences have hugely impacted productivity and working efficiency within Airbus. • Governmental interference: It’s hard to enforce economic efficiency where subsidies are involved. Every time there was a crisis in investment or Opex, the governments of the countries involved jumped in to help out their respective players in the consortium. This led to huge overheads and repeated delays. • Technical oversight: Incompatibility in the versions of CATIA software used by plants in Toulouse, France and Hamburg, Germany resulted in 530 kms of cable wiring throughout the aircraft having to be completely redesigned. This delayed the launch of Airbus A380 for...
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...Airbus vs. Boeing Airbus and Boeing both compete in the highly competitive industry of manufacturing commercial aircraft. Over the years they have each controlled the market at differing times due to competitive advantages – an ability to create value through a company’s strategies and operations that its competitors cannot (ref – Strategic Management textbook , pg 22) Boeing, formed in 1916 by William Boeing and George Westervelt, dominated the industry until the 1970’s, when Airbus was organized through a collaboration between Britain, France and West Germany. Airbus began manufacturing the A-300 series which enabled them to capture 10% of the market share by 1975 (ref article), no small feat considering they were competing against the giant Boeing. Airbus’s ability to compete with Boeing and gain market share will be analyzed using the following business models: PESTEL Analysis, SWOT Analysis, Porter’s Five Forces, VRINE Analysis and Porter’s Model of Competitive Advantage. PESTEL ANALYSIS Political – Airbus was a product of a merger between three European countries; Britain, France and West Germany. In the 1970’s the political climates of all three were relatively stable. The three countries worked together in order to compete with the US. They did have to adhere to international trading policies and agreements (NAFTA, GATT). Economic – As they were competing largely in the US market, Airbus needed to constantly...
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...Page |1 INTERIM REPORT ON COMMERCIAL AIRCRAFT MANUFACTURING INDUSTRY The world aircraft industry can be divided into 2 major segments: 1. Military and space aero-structure 2. Commercial Aircraft 1. Passenger aircraft – a. LCA (Large Civil Aircraft) and b. Small & medium sized aircraft 2. Cargo aircraft COMMERCIAL AIRCRAFT INDUSTRY Commercial aircraft manufacturing industry consists of very few players dominated by two big players namely Boeing and Airbus, yet it is very complex because of a number of suppliers at various levels (Tiers) creating the differences in the supply chain management of different players. The industry has undergone a steady growth and it is set to increase in the coming future due to strong demand forecast especially from emerging economies and huge backlog of orders from the major Airlines. Hence the industry continues to be profitable. But at the same time, being a capital and technology intensive industry, it poses severe challenges in front of potential players. INDUSTRY ANALYSIS- (PORTER’S FIVE FORCES) Threat of New Entrants-Low There are high entry barriers due to high R&D investment, sophisticated technology and difficulty in financing because of very high capital intensiveness. But positive economic growth and long range forecast in emerging economies are attracting new players to enter despite huge entry barriers. Cost efficient carriers from China and other economies like Mexico and Russia are trying to sabotage the duopoly. Threat of Substitutes-Low...
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...for the aircraft manufacturers to switch suppliers. However, some parts require a high degree of specialized knowledge and are differentiated from others (like the engine), thus increasing bargaining power of this group. 4. Bargaining Power of Customers: High. There are relatively few buyers of large commercial aircraft. In addition, the airlines that purchase aircraft earn low profits thus making them more price sensitive. Also, each customer represents a large portion of the manufacturer’s orders. 5. Competitive Rivalry: High. Boeing and Airbus compete intensely in the large passenger jet aircraft market. Boeing was the market leader for many decades, but recently Airbus has challenged its position. Since industry growth is slow, both companies fight for market share. Issues the 787 will address: Bargaining power of the airlines that place huge orders and the competitive rivalry between Boeing and Airbus have the largest...
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...CASE 2-4 Ethics and Airbus One September, a fraud squad, led by Jean-Claude Van Espen, a Belgian magistrate, raided Airbus’s headquarters in Toulouse. “They wanted to check whether there was possible falsification of documents, bribery or other infractions as part of the sale of Airbus aircraft to Sabena,” says Van Espen’s spokesman. The team of 20 Belgian and French investigators interviewed several Airbus employees during its three-day stay in Toulouse and carted away boxes of documents. In November 1997, Sabena had approved an order for 17 Airbus A320s (narrow-bodied aircraft), which it did not need. Even more oddly, it had doubled the order at the last minute to 34, a move that helped trigger the airline’s collapse four years later. Although nominally controlled by the Belgian government, Sabena was run by the parent company of Swissair, SAirGroup, which had owned a stake of 49.5 percent since 1995 and which also went bust in 2001. A former Sabena manager, who arrived after the Airbus order was placed, says that the planes were not needed: “It was a fatal business decision.” A Belgian parliamentary commission’s recent report confirms that the Airbus order was a big cause of Sabena’s collapse. Van Espen’s separate criminal investigation is continuing. According to the report, it started in October 2001 after Philippe Doyen, then a Sabena employee, lodged a complaint. Among other things, he suggested to Van Espen that he interview Peter Gysel, a former...
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...A1. Airbus is interested in building the A3XX because it did not have any large aircraft to compete with 747-XXX airplanes of Boing. Boing with its 747-xxx aircraft had the monopoly position in very large aircraft market; therefore, Airbus with the building of A3XX wanted to enter the very karge aircraft market. From the other side Airbus was of the beleif that very growing economies would play major role in creating high demand for the VLA in future. One of the other reason of Airbus interest in building A3XX was the effective revenue which could be acheived through A3XX. VLA had a better operating economy over long distanations. The operating cost for the VLA was only 12% higher in compare to 747-xxx airplane but it provided 35% more space. A3XX new design and its 4 engines provides saver flights over long distances. Q2. How many aircraft does Airbus need to sell in order to break even on the investment? Hint: consider all capital providers as a single entity and calculate the break even return to them collectively. To calculate the break-even number of planes calculate the present value of a growing perpetuity if cash flows from plane sales beginning in 2008. Please assume an equity risk premium of 6% in your analysis. A2. Q3. What is the total demand for VLA aircraft. Analyze the sensitivity of demand to small changes in assumptions regarding growth, conversion rates and market share. A3. Q4. How should Boeing respond to...
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...Airbus vs. Boeing Stuart Taylor Chris Tillmanns November 13, 2002 The airline manufacturing industry consists of only two firms, Airbus in Toulouse, France and the Chicago-based Boeing. Two recent research and development moves at the two firms offer an insight into the positioning strategy that each is taking in the future market place. It seems the two firms are accenting two niche markets with a pair of flagship products, neither of which are in direct competition with each other. This will allow for the firms to stave off price competition in the short term by differentiating product lines, which is desirable given the recent increase in buyer power gained by lowcost airlines. Current Market Position Airbus Airbus controls 46% of the market. 1 It was formed in the 1970’s as a consortium of European aerospace firms, and was integrated into a single company in 2001. It was designed by European nations to compete with the large American manufacturers and received subsidies from the various European governments. Their product line extends from the single aisle A320 to the larger, twin aisle A340. Boeing Boeing, naturally, currently controls the other 54% of the market for commercial aircraft in terms of value delivered, and its commercial unit took in $30.1 billion in 2001.2 It introduced the 747 Jumbo Jet in 1966 which revolutionized the concept of air travel due to its large size, and ushered in the era of mass air travel. In addition, it produces a wide range...
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...affect the financial bottom line. The last three decade we have seen such imponderables make in the battle between Airbus and Boeing even more fascinating. For Taylor (2003), the fight for supremacy between these two manufacturers puts such titanic confrontations as Ford versus Chevy and Nokia versus Motorola in the shade. This paper takes an empirical approach to examining international competition and marketing strategy adaptation in the wide-body aircraft market. The discussion topic will be organized into three sections, beginning with failure start of Airbus Industry GIC. Explaining in deep analysis of the reason behind the difficulties that Airbus faced when entering upon the civil aviation industry. While we continue on to the second part where Airbus have broken ground with a leading market share in the late 90s, what marketing strategy did Airbus initiate in order to achieve this enormous success when going against its sole competitor the mighty Boeing. Last but not least, the current market condition. The difference in strategy that each of the duopoly has apply, Airbus going for the large airliner in hub-and-spoke system and Boeing targeting at manageable size and fuel efficient in a point-to-point configuration. Airbus has come far and long, with a sizable success in gaining market share from its monopolistic competitor. But our supposition is whether Airbus marketing strategy is sustainable in the turbulence future of global airliner manufacturer domination. Aviation...
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