AIRBUS AND BOEING
A COMPARISON OF TWO AIRLINE AND AEROSPACE RIVALS
PREPARED FOR:
BUSINESS COMMUNICATION CLASS
PREPARED BY:
JOSEPH D’AMATO
BUSINESS INSTRUCTOR
MARCH 24, 2010
CONTENTS
AIRBUS AND BOEING
A COMPARISON OF TWO AIRLINE AND AEROSPACE RIVALS
EXECUTIVE SUMMARY…………………………………………………………….III
INTRODUCTION……………………………………………………………………....1
DIFFERING APPROACHES TO MANUFACTURING…………………………….1
COMPETITIVE TACTICS BACKFIRE FOR BOEING…………………………….2
OPPOSING VIEWS OF THE FUTURE……………………………………………..3
MARKET GAMBLES—BOTH FIRMS “BET THE COMPANY”…………………4
REFERENCE LIST
II
EXECUTIVE SUMMARY
Boeing has been defined by its sheer technical bravado—and at times by its almost
willful disregard for financial realities. The Seattle company designed the B-52 in a single
weekend and launched the 747 jumbo jet in spite of the many observers who declared it
financial suicide. Boeing is the world’s largest aerospace company and the largest exporter in
the United States. It has built some 85 percent of the world’s jetliners and has dominated
commercial aviation since the 1950s. But in 1999, the once unthinkable happened: rival
Airbus sold twice as many planes as Boeing. This report is a comparison of these two
competitors.
III
AIRBUS AND BOEING
A COMPARISON OF TWO AIRLINE AND AEROSPACE RIVALS
INTRODUCTION
Boeing has been defined by its sheer technical bravado—and at times by its almost
willful disregard for financial realities. The Seattle company designed the B-52 in a single
weekend and launched the 747 jumbo jet in spite of the many observers who declared it
financial suicide. Boeing is the world’s largest aerospace company and the largest exporter in
the United States. It has built some 85 percent of the world’s jetliners and has dominated
commercial aviation since the 1950s. But in 1999, the once unthinkable happened: rival
Airbus sold twice as many planes as Boeing.
Airbus was founded in 1970 as a consortium of four European partners with homes in
Great Britain, Germany, France, and Spain. Airbus would never have gotten off the ground
without subsidies from the partners’ governments. In 2001, confident that Airbus could
finally stand on its own, the partners turned it into a single private company. Like Boeing,
Airbus manufactures a full fleet of planes. Unlike Boeing, it has no jumbo jet. As a result,
when it approaches an airline with a package deal, it has no big plane to clinch the sale.
DIFFERING APPROACHES TO MANUFACTURING
Airbus and Boeing build their planes differently. At Airbus, large airplane components,
such as wings, cockpits, engines, and landing gear, are produced by suppliers all over the world
and flown in giant cargo jets to a final assembly building in Toulouse, France. There, a handful
of employees operating giant machines snap the large plane sections together. The finished
aircraft are sold by Airbus Industry, a sales and marketing joint venture owned by the partners.
Many once-loyal Boeing customers now find innovative Airbus designs to be technologically
superior and more comfortable for passengers.
1
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Besides offering wider planes that accommodate wider passenger seats, more overhead bin
space, and more aisle space, all Airbus jets share the same cockpit design. This uniformity
allows pilots to easily shift from flying one model to the next, which can slash pilot training
from 30 days to less than 8 and save airlines millions of dollars annually.
Until recently, Boeing customized a cockpit for every model and built airplanes like
customized houses: Airlines could select from 109 shades of white paint or 20,000 galley and
lavatory configurations. Worse yet, Boeing relied on a manual numbering system to track the
4 million parts and 170 miles of wiring needed for any one airplane. Compared to Airbus,
Boeing’s assembly lines were a beehive of activity, and its systems were woefully inefficient.
Boeing is now rebuilding its operations and systems, but only after learning its lesson the
hard way.
COMPETITIVE TACTICS BACKFIRE FOR BOEING
With Airbus gaining ground in the mid 1990s, Boeing decided to deal this challenger a
crippling blow. Banking on its ability to overhaul operations, cut production costs by 25
percent, and double production of its profitable 747 line, Boeing offered customers deep
discounts on smaller jets to win multi-aircraft orders. But its plan backfired. The company
was besieged with more orders than it could deliver on time. Production problems,
management turmoil, and a market slowdown (spurred by the Asian economic crisis) collided
head-on with Boeing's planned system upgrades, sending the aerospace giant into a tailspin.
The company took years to recover, and the crisis triggered a massive reengineering attempt.
Boeing is now following in its rival’s footsteps by outsourcing the manufacturing of more
components. “The goal is to transform Boeing into a company focused on design, marketing,
and assembly while letting others build the parts,” says one Boeing spokesperson.
3
OPPOSING VIEWS OF THE FUTURE
Boeing and Airbus have very different visions of the future of aviation. Airbus believes
that the number of people traveling between the world’s biggest airports will grow faster than
airport capacity, boosting demand for a new generation of gigantic planes. Airbus projects
that the market potential for a super jumbo is about 1,500 planes. So it is spending $12 billion
to develop the world’s biggest passenger jet, which it claims will revolutionize air travel just
as the 747 did. The wide A380 super jumbo double-decker will seat 555 passengers (and can
be configured to seat 800), surpassing Boeing’s 416-seat 747-400. The A380 will showcase
the latest technology and use light-weight composite materials currently found in military
aircraft, making the A380 cheaper to operate per seat-mile than Boeing’s 747-400. But the
super jumbo will fly no faster than today’s jets.
“Not worth it,” says Boeing chairman Phil Condit. After taking a close look at the super
jumbo, Boeing concluded that it couldn’t make the plane pay. Boeing sees demand for new
jets in the 400 plus category ranging between 400 and 1,000 units over the next 20 years. The
company plans on servicing this growth with its current 747 model and a new longer-range
version that could fly an additional 775 miles without sacrificing airspeed or cargo capacity.
In fact, Boeing thinks the Europeans “have gotten themselves in a terrible jam. They just
won’t be able to meet their commitments,” says Joe Sutter, the engineer who led the design
team that produced the original 747. Airports would need to spend hundreds of millions of
dollars to upgrade terminals and taxiways to service the A380 and its two levels of jet ways.
Furthermore, the super jumbo’s huge capacity limits its use to only the most densely traveled
routes.
In contrast, Boeing is betting that airlines will begin using moderately smaller planes to
fly passengers directly between smaller cities, bypassing congested hub airports.
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The company anticipates that new airports will be developed to accommodate passenger
needs—especially in trans-Pacific and intra-Asian markets. So instead of building a super
jumbo, Boeing will spend about $10 billion to develop a near-supersonic plane that will be
able to fly 20 percent faster than today’s conventional planes without breaking the sound
barrier and without increasing operating costs. The Sonic Cruiser 20XX will save one hour of
flying time for every 3,000 miles flown, which could change the way the world flies (perhaps
as dramatically as the introduction of the jet engine.
MARKET GAMBLES—BOTH FIRMS “BET THE COMPANY”
If the Airbus vision is right, the newcomer will likely steal some of the most lucrative
sales from large markets such as Japan, where Boeing holds a commanding market share. For
instance, if the Japanese buy the A380, Airbus could become the undisputed world leader in
the market for big jets, ending Boeing’s 30-year jumbo-jet monopoly. Furthermore, if it turns
out that customers like the A380 better than Boeing’s current 747 or its planned long-range
version, they may be tempted to buy their smaller jets from Airbus as well as their larger jets.
On the other hand, if Airbus has misjudged the market demand for super jumbos, the
company and its backers would be facing a financial catastrophe. For one thing, developing
the proposed A380 could zap resources from existing lines, which would hurt the company's
overall competitiveness at a time when Boeing is devoting its engineering efforts to
squeezing costs out of planes and manufacturing processes while developing a smaller plane
for faster travel.
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REFERENCE LIST
Cole, Jeff. “Flight of Fancy.” Wall Street Journal, 3 November 1999, A1, A10.
Edmondson, Gail, Janet Rae-Dupree, and Kerry Capell, “How Airbus Could Rule the Skies.”
Business Week, 2 August 1999, 54.
Holmes, Stanley. “Boeing Jettisons a Plant.” Business Week, 2 February 2001, 14.
Michaels, Daniel. “Europe’s Airbus Ready to Spread Wings as a Company.” Wall Street
Journal, 23 June 2000.
Michaels, Daniel. “Flying High.” Wall Street Journal, 25 September 2000.
Michaels, Daniel. “Giant Jet Gets Orders It Required.” Wall Street Journal, 30 November
2000.
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