Airbus Case

Topics: Airbus A380, Boeing 747, Competition between Airbus and Boeing Pages: 2 (673 words) Published: November 12, 2008
1.Airbus is interested in developing the A3XX because its sees a future need for super jumbo jets. Airbus reasons that as the number of passengers increase, airlines will eventually be unable to add more routes in their flight schedules and will favor planes with higher passenger capacity. Airbus predicts that the VLA market will have a demand for 1,550 planes over a 20-year period (till 2019). In addition to the demand for jets having increased passenger carrying capacity, Airbus also had the following objectives for building the A3XX: (a)With the launch of the A3XX (and 550-passenger capacity), Airbus hoped to capture the VLA market segment. Its primary objective was to eliminate Boeing’s monopolistic control over the VLA market segment and its ability to cross-subsidize smaller jets in its product line. (b)An analyst had also noted that operating margins are the highest for wide body jet planes. Airbus forecasted that if it could capture more than half of the VLA market segment, it would earn very high returns on revenue. (c)Significant growth in the air transportation industry (forecasted growth rate is 4.9%) would lead to increased frequency and new air travel routes. However, congestion at the largest hubs would require an alternative solution. Airbus believed that this created demand for super jumbo jets. (d)Highly differentiated features including more space per seat and wider aisles, and passenger amenities such as cocktail lounges and showers would make the planes attractive to long route travelers.

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3.Boeing has forecasted a demand of 330 VLA planes with a passenger carrying capacity of 550 passengers for the 20-year period through 2019. This is substantially less than Airbus’ forecast. In view of this forecast, it would be best for Boeing not to respond with a competitive offering to the new super jumbo jet launch planned by Airbus. The case says that other companies which were unsuccessful in launching a new plane,...
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