Boeing vs Airbus

In todays marketplace, distinct differences in the way competitive products work have become increasingly rare. But functional product differentiation is exactly what the rivalry between the Airbus A380 and the Boeing 787 Dreamliner is all about: Two companies with fundamentally different products, based on diametrically opposite visions of the future, engaged in a Hatfields versus McCoys battle with billions of dollars at stake. Each company has made a series of big bets. The Airbus A380 super-jumbo is a plane for the annals of aviation history. When it goes into service later this year, it will be the biggest, baddest airliner around, capable of ferrying from 550 to 800 passengers (depending on configuration). With its two full-length decks and the promise of amenities such as sleeper cabins, cocktail lounges and a gym, it is sure to capture the publics imagination. But for all its promise of innovation, the A380 represents a bet-the-house wager on one of the most disliked same-old models of air travel: the hub-and-spoke. The A380 is built around the assumption that airlines will continue to fly smaller planes on shorter routes (spokes) into a few large hubs, then onward to the next hub on giant airplanes. It also presumes that passengers will want to put up with the hassles of changing planes in exchange for the privilege of traveling in a jet-powered cruise liner. Whether the A380 will live up to the hype remains very much to be seen. Passengers may become disenchanted with the plane if it turns out to be a freighter rather than a luxury liner. When airlines can choose between more seats and a gym, out goes the gym. Sound cynical? Not to those of us who fondly remember the upstairs first-class lounge in the early 747s. Second, and even more importantly, Boeings (nyse: BA news people ) 787 represents an appealing alternative. Its based on a fundamentally different vision, and it is radically different by design. Boeing doesnt take the current hub-and-spoke model as a given. Marty Bentrott, vice president of sales, marketing and in-service support for the 787, says that since 1990, the number of city pairs more than 3,000 nautical miles apart served by the worlds airlines have doubled, the number of frequencies offered by the airlines have doubled, and the number of available seat-kilometers (seating capacity times miles flown) have doubled. None of these trends show any signs of abating; meanwhile, the average airplane size has actually declined slightly. Clearly, customers prefer more point-to-point flights, flown more frequently, on smaller airplanes. Marketplace insight is at the core of 787 product development. Our strategy has been to design and build an airplane that will take passengers where they want to go, when they want to go, without intermediate stops; do it efficiently while providing the utmost comfort to passengers; and make it simple and cost-effective for airlines to operate, Bentrott says. Rather than seek economies through scale, the 787 will deliver economy through technological innovation, making the most of newly designed, fuel-efficient twin engines and lightweight composite materials. The 787 offers a very different take on the flying experience, too, focusing on comfort rather than perks that could be eliminated by airlines: more standing headroom, larger windows and bathrooms, and higher humidityall features that will benefit passengers regardless of seat configuration. If Airbus appears to covet recognition in the Guinness Book of World Records, Boeing seems predisposed to making a favorable impression in airlines inventories. To date, carriers have ordered 159 A380s, and almost twice as many 787s. Both Airbus and Boeing have a hedge in their back pocket. To compete directly with the A380, Boeings 747-8 uses fuel-efficient engines like the 787 to carry 450 passengers. To counter the 787, Airbus is offering a white elephant called the A350, which has been widely derided as out of step with the changing times. According to Boeing, the 787 is the result of over a decade of focus groups and scientific studies to gain a better understanding of passenger comfort and how the design of airplane interiors can make flying a more pleasant experience. If Airbus made comparable efforts, we are hard-pressed to find the evidence. The ordeals of air travel after Sept. 11, 2001, make even short flights feel like long hauls. Did people really tell Airbus that they are perfectly happy to stand in more lines in exchange for a cocktail lounge? Airbus could not be reached for comment. Boeing versus Airbus is one of the most hard-fought, closely watched marketing battles out there. Its also one of the most fascinating. Not long ago, it appeared as if Airbus had gained the upper hand. If Boeing succeeds in winning this battle and it appears to be well on its wayit will amount to one of the great reversals of business fortunes. It will also serve as proof of the wisdom of understanding the marketplace well enough to lead, rather than follow. Airbus In the summer of 1988, a group of Airbus engineers led by Jean Roeder began working in secret on the development of a ultra-high-capacity airliner , both to complete its own range of products and to break the dominance that Boeing had enjoyed in this market segment since the early 1970s with its 747. McDonnell Douglas unsuccessfully offered its smaller, double-deck MD-12 concept for sale . Roeder was given approval for further evaluations of the UHCA after a formal presentation to the President and CEO in June 1990. The megaproject was announced at the 1990 Farnborough Air Show, with the stated goal of 15% lower operating costs than the 747-400. Airbus organized four teams of designers, one from each of its partners to propose new technologies for its future aircraft designs. The designs would be presented in 1992 and the most competitive designs would be used. In January 1993, Boeing and several companies in the Airbus consortium started a joint feasibility study of an aircraft known as the Very Large Commercial Transport , aiming to form a partnership to share the limited market . This joint study was abandoned two years later, Boeings interest having decreased because analysts thought that such a product would unlikely earn the $15-billion in development costs. Despite the fact that only two airlines had expressed public interest in purchasing such a plane, Airbus was already pursuing its own large plane project. Analysts suggested that Boeing instead would pursue stretching their 747 design, and that air travel was already moving away from the hub and spoke system that consolidated traffic into large planes, and toward more non-stop routes that could be served by smaller planes. In June 1994, Airbus began developing its own very large airliner, designated the A3XX . Airbus considered several designs, including an odd side-by-side combination of two fuselages from the A340, which was Airbus’s largest jet at the time. The A3XX was pitted against the VLCT study and Boeing’s own New Large Aircraft successor to the 747 . From 1997 to 2000, as the East Asian financial crisis darkened the market outlook, Airbus refined its design, targeting a 15 to 20 percent reduction in operating costs over the existing Boeing 747-400. The A3XX design converged on a double-decker layout that provided more passenger volume than a traditional single-deck design, in line with traditional hub-and-spoke theory as opposed to the point-to-point theory of the Boeing 777, after conducting an extensive market analysis with over 200 focus groups . Still, since the 1995 forecasts to the present, others including a former Airbus executive have disputed the hub-and-spoke justification, and continued to predict that the market for very large aircraft such as the A380 is small. Boeing During the late 1990s, Boeing began considering replacement aircraft programs as sales for the 767 and Boeing 747-400 slowed. The company proposed two new aircraft, the 747X, which would have lengthened the 747-400 and improved efficiency, and the Sonic Cruiser, which would have achieved 15% higher speeds while burning fuel at the same rate as the existing 767. Market interest for the 747X was tepid, but the Sonic Cruiser had brighter prospects. Several major airlines in the United States, including Continental Airlines, initially showed enthusiasm for the Sonic Cruiser concept, although they also expressed concerns about the operating cost. On 11th September 2001increased in petroleum prices, making airline company more interested in efficiency rather than speed. The worst-affected airlines, those in the United States, had been considered the most likely customers of the Sonic Cruiser, and thus Boeing officially canceled the Sonic Cruiser on December 20, 2002. Switching tracks, the company announced an alternative product using Sonic Cruiser technology in a more conventional configuration, the 7E7, on January 29, 2003. The emphasis on a smaller midsize twinjet rather than a large 747-size aircraft represented a shift from hub-and-spoke theory towards the point-to-point theory, in response to analysis of focus groups. â€Å"The 7E7 looks fairly traditional on the outside, but it will be dramatically different on the inside. † -Time The replacement for the Sonic Cruiser project was dubbed the 7E7. Technology from the Sonic Cruiser and 7E7 was to be used as part of Boeings project to replace its entire airliner product line, an endeavor called the Yellowstone Project (of which the 7E7 became the first stage). The E was said to stand for various things, such as efficiency or environmentally friendly; however, Boeing ultimately claimed it merely stood for Eight. Analysis Comparing Boeing and Airbus development and decision in aircraft manufacturing, both have same final target: to deliver high capacity, low-fuel-consume, long-travel-range airplanes. But if we compare Boeing 787 with Airbus 380 decision we can conclude that Boeing’s decision to modify the 747 model to improve its capacity is better than Airbus decision to develop new kind of jumbo-jet because: * Single Airbus 380 production cost is US$346.3 million while Boeing 787-9(the most expensive models) is US$218. 1 million. * Airbus 380 total orders (by the end of November 2010) is 234 with deliver ratio of 17. 75% (41 delivered) while Boeing 787 total orders (by 14th December 2010) is 846 with deliver ratio of 0% (0 delivered) As the fact goes, we can see that production cost of Boeing 787 is lower than Airbus 380, this is ha ppen because Boeing 787 is slight modification of Boeing’s earlier aircraft such as 747 and 767 (787 will be the successor of the 767. Airbus 380 is entirely new kind of airliner in Airbus line of product. The development cost only of A380 is â‚ ¬11 billion (production cost not included). Seeing from customer eyes, the fact is Boeing 787’s orders have reached the number of 846 units while Airbus 380 orders only 234 units. But because of the numerous delays on both sides, the delivered unit only reaches 41 units for Airbus and 0 units for Boeing. Latest Facts Graph Conclusion Boeing and Airbus have always been two major aircraft production company in the market. Both of them are competing to be the best in their field whether in terms of business strategy or fuel-saving technology to meet the market demand. They keep developing their ideas to be innovative and improved in order to maximize the demand of their products. In the early years, it’s clear that Boeing dominates the market, overthrow the Airbus. But since the 1970s Boeing has faced increasing competition from Airbus, which has expanded its family of aircraft to the point where Airbus and Boeing now cover an almost identical market. Airbus has delivered more planes than Boeing every year from 2003 onwards. Airbus orders have exceeded Boeings in every year since 1999 except for 2000, 2006 and 2007, which went to Boeing. In 2005 Airbus won more orders by number, but Boeing won 55% by value. In summary, of the last 10 years (2000–2009), Airbus won 6,452 orders while delivering 3,810, Boeing won 5,927 orders while delivering 3,950. Therefore the managers are required to filter, analyze all the information that can take part in building a better improvement for the aircrafts and are necessary to do decision-making carefully. Firstly they need to identify the alternatives, secondly evaluating alternatives and last but not least selecting the best alternatives. A deep thoughts and long process are needed as procedure to reach for the final best decision that can contribute to the increase in the growth of sales. Both Boeing and Airbus have different business strategy to win the market value. Although basically they have similar technology, they have different body specifications and capacity. Given the scale of investment, the effort to design jetliners and competition in the same markets, it stands to reason they are similar in both size and technology. But it doesn’t always work that way: Airbus developed the huge and less successful A380 while Boeing concentrated on the more modest 787. From a business standpoint, Boeing is in a slightly better situation. The 787 is sell very well and is already a profitable product, as is the 777. Airbus is in a worse position because of the number of duds they have in the portfolio. The A380 will not be profitable in the next decade if ever it is not selling at all in the past couple of years and they need about 450 to break even it is also doubtful that the A350 will match the total sales volume of the 787 and the 777 (or its replacement) which is the A350s mission. The 787 is also a fuel-efficient aircraft that is more likely to reduce the cost of fuels during the long-haul journey. The possible high reduction cost during travelling is a big advantage for the airline companies who purchased the 787. Lower operating costs mean lower ticket price for the consumers. This creates a mutual benefit between the business airline companies and consumers. Boeing 747 already existed in late 1960s and became the first biggest passenger plane on earth that time. The reasons why this plane is made are to reduce air traffic, to reduce airfare and try to make another success like 707. Because the plane is massive, it can bring many people at once. Therefore, it’ll reduce the cost and reduce air traffic. In size A380 is bigger than Boeing 747. In capacity also, A380 carries more passenger than Boeing 747, but the cons are Airbus A380 much more expensive than Boeing 747 and Boeing 747 has lower cost per trip rather than A380. Thus, it’ll make the company makes more profit. Basically the two competitors had a different approach in their basic foundation. For Airbus, the answer is â€Å"bigger and better. † The A380 is a massive plane designed for long trips, conserving fuel by consolidating passengers onto one flight where two were needed before. Boeing has a different approach flexibility. Its three versions of the 787 are adapted for different purposes. The 787-3 has a large passenger capacity over short distances, while the 787-8 and 787-9 are built for longer trips, but carry fewer passengers to maintain fuel efficiency. References