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Airbus Vs Boeing Essay

2727 words - 11 pages

Airbus and Boeing compete in manufacturing large commercial airliners. Airbus' product line includes the A330, A340, and the mammoth A380 which first flew in April 2005. In 2005, Airbus received orders for 1111 aircraft and earned revenue of €22.3 billion. Boeing's product line includes the 737, 777, and 747. In 2005, Boeing received orders for 1031 aircraft and earned revenue of $22.7 billion from sale of commercial aircraft.Until 2001, Airbus was a marketing consortium established under Frenchlaw as a "Groupe d'Intérêt Economique". The four shareholders - Aerospatiale- Matra (37.9%), British Aerospace (20%), Construcciones Aeronauticas (4.2%) and Daimler Aerospace (37.9%) - performed dual roles as owners and industrial contractors.Most major decisions required unanimous approval of the shareholders.Airbus was obliged to distribute production work among its shareholdersaccording to political as well as economic considerations.Then, Airbus was re-organized into a single fully integrated limitedcompany. The objective was to streamline operations across nationalboundaries, reduce costs, and speed production.The re-organization coincided with a consolidation of Airbus marketposition. As Figure 1 shows, from 31% in 1996, Airbus had steadily increased its share of the market to 57% in 1999, but then dipped sharply to 47% in 2000. Following the re-organization, Airbus recovered and maintained its share in the mid- to high 50s until 2005.Figure 1: Market share, 1996-2005In April 2004, Boeing launched the new 787 Dreamliner with 50 firm orders from All Nippon Airways of Japan. The deal was worth about $6 billion at list prices, with deliveries scheduled to begin in 2008. With domestic and international capacity of 70.0 billion and 25.4 billion available seat kilometres respectively, All Nippon Airways is a major Japanese and international carrier.Boeing had earlier denoted the 787 Dreamliner as the 7E7, and targetedthe new plane at the market segment of twin-engine medium to long-range jets with capacity of 200-300 passengers. The 787 is a completely new design with a development cost estimated at $8-10 billion.In December 2004, following considerable speculation, Airbus announcedthat it would develop the A350 to compete with Boeing's 787. The A350 wasplanned to be a derivative of the existing A330, enhanced with a new wing, more fuel-efficient engines, and other new technologies. The development cost was estimated to be just €4 billion (equivalent to $5.3 billion).At that time, Boeing had secured just 52 firm orders, far below its target of200 orders by the end of 2004. Richard Aboulafia of industry consultants TealGroup remarked that Airbus had succeeded in its goal of "disrupt[ing] thebusiness case for the 7E7".1 Airbus Chief Commercial Officer John Leahypredicted that the A350 would attract a substantial number of Boeing customers and "put a hole in Boeing's Christmas stocking".2Besides the cost of development, aircraft...

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