Airbus Q&A
Question 5
Boeing and Airbus competed in the same 4 segment of the aircraft market. Both companies have been in a tight competition up to the time of the case. In 2005 Airbus sold 82 more airplanes than Boeing did (1,111-1,029), though at the same year Boeing won the orders in “terms of value”. Unfortunately for Airbus, Boeing announced a new plane that was intended to replace B767, the plane was more fuel efficient and crated a “buzz” within the public when Boeing started the naming competition for the new plane.
B787
A350
A350XWB
Planned Price
120M (448 orders)
150M (180 orders)
Actual Price
157-167M
190-250M (20 orders)
After Boeing announced, that the price at low for B787 would be 120M, it was taken as a surprise to the industry, which could mean that the airplane was underpriced, and could potentially be a failure for the company. Airbus, on the other hand, priced A350 reasonably, though compared to Boeing, 150M for an airplane of that class was not taken as great by the customers. In the end Boeing had to charge 157-167M for B787, which apparently was a market value, though the company had already managed to undercut the competition with its rival Airbus.
Pricing strategy for A350XWB was a failure, even though A350XWB included some innovation and was better than B787, apparently, not enough customers are ready to pay a premium price for the airplane of that class.
The prices of B787, A350, and A350XWB are shown on a kinked demand curve (below).
According to the Demand curve, the kink price is about $140M per an airplane. I suppose that if Boeing would have charged that price, the amount of orders would not change.
I believe that Boeing had to underprice the products to undercut the competition, they probably might face the outcomes of it later on, once the company would have to charge more for 787 than they announced in the beginning. A350 could be a success at an announced price if the company invested more time and effort in the innovation to
Boeing and Airbus competed in the same 4 segment of the aircraft market. Both companies have been in a tight competition up to the time of the case. In 2005 Airbus sold 82 more airplanes than Boeing did (1,111-1,029), though at the same year Boeing won the orders in “terms of value”. Unfortunately for Airbus, Boeing announced a new plane that was intended to replace B767, the plane was more fuel efficient and crated a “buzz” within the public when Boeing started the naming competition for the new plane.
B787
A350
A350XWB
Planned Price
120M (448 orders)
150M (180 orders)
Actual Price
157-167M
190-250M (20 orders)
After Boeing announced, that the price at low for B787 would be 120M, it was taken as a surprise to the industry, which could mean that the airplane was underpriced, and could potentially be a failure for the company. Airbus, on the other hand, priced A350 reasonably, though compared to Boeing, 150M for an airplane of that class was not taken as great by the customers. In the end Boeing had to charge 157-167M for B787, which apparently was a market value, though the company had already managed to undercut the competition with its rival Airbus.
Pricing strategy for A350XWB was a failure, even though A350XWB included some innovation and was better than B787, apparently, not enough customers are ready to pay a premium price for the airplane of that class.
The prices of B787, A350, and A350XWB are shown on a kinked demand curve (below).
According to the Demand curve, the kink price is about $140M per an airplane. I suppose that if Boeing would have charged that price, the amount of orders would not change.
I believe that Boeing had to underprice the products to undercut the competition, they probably might face the outcomes of it later on, once the company would have to charge more for 787 than they announced in the beginning. A350 could be a success at an announced price if the company invested more time and effort in the innovation to