Airbus A3Xx: Developing the World's Largest
Commercial Jet (A)
Embry-Riddle Aeronautical University
On June 23, 2000, Airbus Industries’ Supervisory Board approved an Authorization to Offer (ATO) the A3XX, a proposed super jumbo jet that would seat from 550 to 990 passengers, have a list price of $216 million, and cost $13 billion to develop hauls larger shipments. This paper compares Boeing and Airbus in very large aircraft.
Introduction In December 2000, Airbus committed to spend $11.9 billion to develop and launch a 555-seat superjumbo plane known as the A380. Prior to Airbus’ commitment, Boeing started an initiative to develop a “stretch jumbo” with capacity in between its existing jumbo (the 747) and Airbus’ planned superjumbo, had stopped the effort, and then had restarted it. After Airbus’ formal commitment, Boeing cancelled the stretch jumbo. The superjumbo represents one of the largest product launch decisions in corporate history given Airbus’ projected launch cost of $11.9 billion. A risky expense of this extent is exaggerated by the fact that Airbus has to spend basically the entire amount before it makes its first delivery, in an industry in which many firms for example, Glenn Martin, General Dynamics, and, more recently, Lockheed has failed as a result of bet-the-company product development efforts. It seemed clear that if each competitor developed a brand new VLA, both would incur very large losses and that intense competition in the pricing of VLA would increase pricing pressures on Boeing’s 747 as well. Boeing, would earn higher operating profits if they could prevent Airbus, from developing a superjumbo. Airbus was committed to the super jumbo due to their large financial subsidies.
With total sales of $45.6 billion in 2000, the manufacture and sale of jet aircraft is the biggest