Airbus from Challenger to Leader

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CARPCS11_013145353x.QXD

Case

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“In prior years we found customers somewhat cautious about supporting Airbus. This year it has become acceptable and, frankly, even stylish to laud Airbus and to chastise Boeing.”
–Excerpt from Bear Stearns Analyst Report as reported in Fortune in August 1999 “We are not here to buy market share.”
–Noel Forgeard, Chairman, Airbus Industrie, in August 1999

Airbus—From Challenger to Leader
BSTR/046
BOEING’S NIGHTMARE
In October 2002, The Seattle Times, a local newspaper published from Seattle, USA, where Boeing is headquartered, carried a headline story, Boeing Is Slipping to No. 2. According to the newspaper report, Boeing’s sole competitor, Airbus Industrie (Airbus) had bagged an order from easyJet1

for 120 A-319 jets. easyJet was one of Boeing’s most loyal customers (Refer [to] Exhibit 1 for a profile of Boeing).
Analysts felt that after easyJet’s shift away from Boeing, other low-cost airlines would follow suit in opting for Airbus. Airbus seemed all set to take market leadership in the low
cost segment from Boeing for the first time. From the mid1990s onwards, Airbus had steadily increased its market

share. By the late 1990s, Boeing and Airbus had an equal
share in the market.
Rival Boeing accused Airbus of resorting to heavy
price cutting in order to beat off the competition. It also
accused Airbus of producing aircraft for which it had not
received orders and creating a glut in the market. But Airbus rejected the allegations, saying that it was in the market to make money and not to buy market share. Some analysts
were of the opinion that Airbus was able to increase its
marketshare because of the financial support it received
from its consortium partners. However, others attributed
Airbus’ success to its fuel-efficient jets, which were economical to run.

THE TAKEOFF
This case was written by K. Subhadra, under the direction of Sanjib Dutta, ICFAI Center for Management Research (ICMR). It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from published sources.

© 2003, ICFAI Center for Management Research. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means– electronic or mechanical, without permission.

To order copies, call 0091-40-2343-0462/63 or write to ICFAI Center for Management Research, Plot # 49, Nagarjuna Hills, Hyderabad 500 082, India or email icmr@icfai.org. Website: www.icmrindia.org. 1 Europe’s

biggest low-cost airliner.

The history of Airbus dates back to the late 1960s, when
Britain, France and West Germany launched the Airbus
Project. Airbus was a desperate attempt by the European
governments to end the monopoly of American manufacturers in the aerospace industry. At that time, American manufacturers dominated the global aerospace industry and
European aircraft manufacturers were unable to compete
with American players.
The big three of Europe—Britain, France and West
Germany—came together to salvage European pride and
industry. Due to differences with the other partners, Britain quit the project in July 1967, and in 1970 the Airbus Project was reorganized and named Airbus Industrie, a FrancoGerman company under French law. In 1971, Spain joined the consortium with [a] 4.2% stake

through state-owned Construccciones Aeronautics S.A (CASA).

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Case 11: Airbus—From Challenger to Leader

Exhibit 1

Profile of Boeing

The leading airplane manufacturer in the U.S., Boeing Airplane Company (Boeing), was formed in 1916 by William Boeing (W. Boeing) and George Westervelt (Westervelt). At the time, it was called the Pacific Aero Products Company. The company’s name was changed to Boeing in 1917....
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