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

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Case Analysis:
Airbus A3XX: Developing the World’s Largest Jet
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 half of the order for large aircraft, Boeing was the monopoly in the very large airplane (VLA) market (seating more than 400 passengers or carrying more than 80 tons of freight. Despite early struggling of cash flow and later deliveries of Boeing 747, Boeing succeeded with high demands of Boeing 747 in later 90s. Boeing delivered 47 planes in 1999 and an order backlog for 74 planes. Analysis showed that the bigger airplane, the higher margin. The only way for Airbus to join VLA market would be to develop a jumbo jet to compete with Boeing 747. It is very risky to develop a jumbo jet with Boeing 747 as an example. Airbus management team was taking a cautious step towards jumbo jet development. Both Airbus and Boeing forecast the demand of commercial jet aircraft in the next 20 years in the terms of Global Market Forecast (GMF) and Current Market Outlook (CMO), respectively. Both two forecasts generally agreed on overall growth in the market, but had large disparity over VLA market. CMO forecast the demand for only 1010 new aircraft seating 400 passengers or more. These VLAs are composed of 410 Boeing 747-400, 270 cargo planes and 330 aircrafts seating 500 passengers or more. The disparity between the two forecasts could be...
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