Top Banner

of 95

Aircraft Industries

Apr 10, 2018

Download

Documents

swati000
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
  • 8/8/2019 Aircraft Industries

    1/95

    A Adcox Aviation Trade School: United States

    Aeritalia: Italy

    Aermacchi: Italy

    Aero Design & Engineering: United States

    Aeronautica Agricola Mexicana SA (AAMSA): Mexico

    Arospatiale: France

    Aero Vodochody: Czech Republic

    Aeronca Aircraft: United States

    Aichi: Japan

    Airbus Industrie: France/Germany/UK

    Aircraft Manufacturing Co. (Airco): United Kingdom

    Alisport Srl: Italy

    American Champion Aircraft: United States

    Antonov: Russia/Ukraine

    ATR: France/Italy

    Aviat Aircraft: United States

    Avro: United Kingdom

    Avro Canada: Canada

    B Bayerische Flugzeugwerke: Germany

    Bede Aviation: United States

    Beech Aircraft: United States

    Bell Aircraft: United States

    Bellanca Aircraft: United States

    Boeing: United States

    Boeing Vertol: United States

    Bombardier Aerospace: Canada

    Bowers (Fly Baby): United States

    Bristol Aeroplane Co.: United Kingdom

    British Aerospace: United Kingdom

    British Aircraft Corp (BAC): United Kingdom

    Bcker Flugzeugbau: Germany

  • 8/8/2019 Aircraft Industries

    2/95

    Budd Manufacturing: United States

    C Call Aircraft Company (CallAir): United States

    Canadair: Canada

    Caproni: Italy

    CASA: Spain

    Cessna Aircraft: United States

    Champion Aircraft Corp: United States

    Chance Vought: United States

    Chengdu Aircraft: China

    Cirrus Design: United States

    Colonial Aircraft: United States

    Columbia: United StatesColumbia (2005-2007): United States

    Consolidated: United States

    Convair: United States

    Culver Aircraft: United States

    Curtiss/Curtiss-Wright: United States

    D Dassault Aviation: France

    Davis Aircraft: United States

    de Havilland Company: United Kingdom

    de Havilland Canada: Canada

    Diamond Aircraft: Austria

    Douglas Aircraft: United States

    E Eastern Aircraft: United States

    Embraer: Brazil

    English Electric: United Kingdom

    Erco: United StatesEurocopter: France/Germany

    Evans Aircraft Company: United States

    Extra Flugzeugbau: Germany

    F Fairchild Aircraft: United States

    Fairey Aviation: United Kingdom

  • 8/8/2019 Aircraft Industries

    3/95

    Fiat: Italy

    Fieseler: Germany

    Fleet Aircraft: United States

    Focke-Wulf: Germany

    Fokker: Netherlands

    Folland Aircraft: United Kingdom

    The Ford Motor Company: United States

    Fouga et Cie: France

    G Gates Learjet: United States

    General Atomics: United States

    General Dynamics: United States

    General Motors: United StatesNew Glasair LLC: United States

    Globe Aircraft: United States

    Gloster Aircraft Company: United Kingdom

    Goodyear Aircraft: United States

    Government Aircraft Factory: Australia

    Granville Brothers Aircraft: United States

    Great Lakes Aircraft: United States

    Grob Aerospace: Germany

    Grumman: United States

    Gulfstream: United States

    Gyrodyne: United States

    H Handley Page Ltd: United Kingdom

    Hanriot et Cie: France

    Hawker/Hawker Siddeley: United Kingdom

    Heinkel Flugzeugwerke: Germany

    Hiller Helicopters: United States

    Hindustan Aeronautics: India

    Hipp's Superbird, Inc: United States

    Hispano-Suiza: Spain

    Hoppi-Copters, Inc.: United States

  • 8/8/2019 Aircraft Industries

    4/95

    Hughes Aircraft: United States

    Hunting Percival: United Kingdom

    I Intermountain Manufacturing Co (IMCO): United States

    Interstate Aircraft & Engineering Corp: United States

    J Junkers Flugzeugwerke: Germany

    K Kaman Aerospace: United States

    Kazan Helicopters: Russia/Tartarstan

    The New Kolb Aircraft Co: United States

    L Laird Airplane Co.: United States

    Laister-Kauffman: United States

    Lake Aircraft: United States

    Lancair International: United States

    Learjet, Inc.: United States

    Lockheed Martin: United States

    Loening Aeronautical Engineering Co.: United States

    LTV (Ling-Temco-Vought): United States

    Luscombe Airplane Company: United States

    M Macchi: Italy

    The Glenn L. Martin Co.: United States

    Maule Air, Inc: United States

    McCulloch Aircraft: United States

    McDonnell Douglas: United States

    Messerschmitt AG: Germany

    Meyers Aircraft Co.: United States

    Mikoyan-Gurevich (MiG): Russia

    Mil Moscow Helicopter Plant: Russia

    Mitsubishi Corporation: Japan

    Mooney Aircraft Company: United States

    Morane-Saulnier: France

    Moulton Taylor: United States

    Avions Mudry et Cie: France

  • 8/8/2019 Aircraft Industries

    5/95

    N Nakajima Hikoki: Japan

    Nanchang Aircraft Manufacturing Co: China

    Nardi: Italy

    Naval Aircraft Factory (NAF): United States

    Neico Aviation: United States

    NZAIL (New Zealand Aerospace Industries, Ltd): New Zealand

    Nieuport: France

    North American Aviation: United States

    Northrop Aircraft: United States

    O Barney Oldfield Aviation: United States

    Osprey Aircraft: United States

    P Pacific Aerospace: New Zealand

    Packard Motor Car Co.: United States

    Panavia Aircraft: Germany/Italy/UK

    Pentecost Helicopters: United States

    Percival Aircraft: United Kingdom

    Piasecki: United States

    Pilatus Flugzeugwerke: Switzerland

    Piper Aircraft: United States

    Pitts: United States

    Polikarpov: Russia

    PZL: Poland

    Q Quad City Ultralight Aircraft Corp: United States

    R Raytheon Aircraft: United States

    Rearwin Airplanes: United States

    Republic Aviation: United States

    Robinson Helicopter: United States

    Rockwell International: United States

    Rose Aeroplane & Motor Co: United States

    Rumpler Flugzeugwerke: Germany

    Rutan Aircraft: United States

  • 8/8/2019 Aircraft Industries

    6/95

    Ryan Aeronautical: United States

    S Saab Aerospace: Sweden

    Sabreliner Corp: United States

    Schweizer Aircraft: United States

    Scottish Aviation: United Kingdom

    Seversky Aircraft: United States

    Shenyang Aircraft: China

    Short Brothers: United Kingdom

    SIAI Marchetti: Italy

    Sikorsky Aircraft: United States

    SOCATA: France

    SPAD: France

    Start+Flug GmbH: Germany

    Staudacher Aircraft: United States

    Stearman: United States

    Steen Aero Lab: United States

    Stephens Aircraft: United States

    Stinson Aircraft: United States

    Stoddard-Hamilton: United States

    Sud-Aviation: France

    Supermarine Aviation: United Kingdom

    T Taylor Aircraft: United States

    Teledyne Ryan: United States

    Texas Engineering & Manufacturing Co (TEMCO): United States

    Thorp Engineering Co: United States

    Transall: France/Germany

    Tupolev: Russia

    V Van's Aircraft: United States

    Vertol: United States

    Vickers Ltd: United Kingdom

    Vought Aircraft: United States

    Vultee Aircraft: United States

  • 8/8/2019 Aircraft Industries

    7/95

    W Waco: United States

    Western Electric: United States

    Williams International: United States

    Wolf Aircraft: United States

    Wright & Co.: United StatesY Yakovlev: Russia

    York Enterprises: Canada

    Z Zivko Aeronautics, Inc.: United States

  • 8/8/2019 Aircraft Industries

    8/95

    Airbus vs Boeing: Contrasting Views for the

    Future

    Case Study Reference No. COM0159K

    This case was written by Supratim Majumdar under the direction of Bitan Chakraborty,IBSCDC. It is intended to be used as the basis for class discussion rather than toillustrate either effective or ineffective handling of a management situation. This casewas compiled from published sources. 2006, IBSCDCNo part of this publication may be copied, reproduced or distributed, stored in a retrievalsystem, used in a spreadsheet, or transmitted in any form or medium electronic,mechanical, photocopying, recording, or otherwise without the permission of IBSCDC

    AIRBUS VS BOEING: CONTRASTING VIEWS FOR THE

    FUTURE

    JUMBOS TO SUPER JUMBOS

    In early 1999, The Boeing Company (Boeing) conjectured, that in the future it might loseits monopoly in the commercial aircraft industry. Boeings 747 - the 400-seater jumbo,was the most profitable and visible product in the entire product line of the company. ButBoeing was facing a reduction in the number of new orders for the giant aircraft (ReferExhibit 1). In 2000, Boeings arch-rival, the European consortium, Airbus S.A.S.(Airbus), was gearing up with its plans to launch the double-decker, super-jumbo A380,capable of carrying over 600 passengers. A380 was the most advanced, spacious andefficient aircraft ever conceived. Industry experts had expressed their anticipation thatBoeing 747 jumbos, which had dominated the large passenger aircraft market (above400 seats category) for over 30 years, since its inception in 1970, would lose itsdominance, to Airbus economical and technically advanced super jumbo A380

    The growing acceptance of Airbus among airlines across the world, was also a matter ofconcern for Boeing. In 1998, in terms of delivery (in value terms) of new aircrafts, Boeinghad two-thirds share of the U$65 billion global passenger aircraft market. However, in1998, Airbus captured 46% of all new orders for passenger aircrafts from the airlines,which was more than double, as compared to 1995. In the first half of 1999, Airbusacquired 62% of the new orders for passenger aircrafts and the remaining 38% wastaken up by Boeing

  • 8/8/2019 Aircraft Industries

    9/95

    Boeing believed that the A380 would be detrimental for Airbus. Boeing was opposed tothe idea of developing an all new aircraft to compete with Airbus A380. Developing anew aircraft was an expensive, complex and time consuming affair. Instead, Boeingopted to make design modifications in its existing 747 jumbos, to accommodate over 500passengers, 20% more than its existing models, at a lower cost. The company also hadplans to add new engines to increase the fuel efficiency and flight range of the 747

    model. The company assumed that by upgrading its 747 model, it would be able to meetthe demand for aircrafts with above 400 seats, inspite of being based on 30 year oldtechnology. Boeing planned to proceed with one of these new jumbos, as soon as

    Airbus got the nod from a couple of airlines to go ahead with its A380. In order to preventAirbus entry into the US market, in 1997, Boeing entered into an exclusive 20 yearscontract with the major US Airlines (Delta, Continental and American Airlines). In 1999,these three airlines accounted for over 11% of the global aircraft demand. Boeing hadsimilar plans to strike exclusive deals with major airlines, to deter Airbus from launchingits new jumbo jet.Boeing was convinced that the future air-travel market would evolve into long-range,point to point travel in 350-seater aircrafts rather than 550-650-seater super jumbos thatlink giant, hub airports. Boeing also predicted that in the next 20 years, there would be

    demand, only for 400-seater super jumbos (the type Airbus was developing) from theairlines. Airbus, however, forecasted an optimistic market scenario, where the demandfor super jumbos would cross 1,500 (including 300 freight versions). The companyemphasized that it could reap profits, even if it reached half that mark. Boeing dismissed

    Airbus claim that the new super jumbos would be 15-20% cheaper to fly, than theexisting 747 jumbos. Both the companies were busy convincing the major airlines to beton their future jets.

    AIRBUS: THE GENESISAirbus was established in December 1970, by a consortium of firms, viz., GermanysDaimlerChrysler Aerospace and France's Aerospatiale. The Spanish company CASA,

    joined the consortium in 1971. Prior to the formation of Airbus, the European aerospaceindustry was weak and fragmented. The European companies feared that the three big

    US civil-aircraft manufacturers, Boeing, McDonnell Douglas1 and LockheedCorporation2, would takeover Europes weak and divided aerospace industry. To beatthe US giants, the European companies united and co-operated with each other, toproduce commercial aircrafts under the Airbus umbrella.

    1 McDonnell Douglas was a major American aircraft manufacturer, producing a number of famouscommercial and military aircraft. The company was merged with Boeing in 1997.2 Lockheed Corporation was an aircraft company founded in 1912, which merged with Martin Marietta in1995 to form Lockheed Martin. The company withdrew from the civilian aircraft business in 1981.

    1

  • 8/8/2019 Aircraft Industries

    10/95

    Airbus vs Boeing: Contrasting Views for theFutureCase Study Reference No. COM0159K

    This case was written by Supratim Majumdar under the direction of Bitan Chakraborty,

    IBSCDC. It is intended to be used as the basis for class discussion rather than toillustrate either effective or ineffective handling of a management situation. This casewas compiled from published sources. 2006, IBSCDCNo part of this publication may be copied, reproduced or distributed, stored in a retrievalsystem, used in a spreadsheet, or transmitted in any form or medium electronic,mechanical, photocopying, recording, or otherwise without the permission of IBSCDC.Related Products AvailabilityTeaching NoteStructured AssignmentDistributed and Printed by Phone : 91(40) 23435310 - 11IBSCDC, India Fax : 91(40) 23430288www.ibscdc.org E-mail : [email protected] rights reserved

    2

    AIRBUS VS BOEING: CONTRASTING VIEWS FOR THEFUTUREBy Supratim Majumdar, IBS Research Centre, Kolkata

    JUMBOS TO SUPER JUMBOSIn early 1999, The Boeing Company (Boeing) conjectured, that in the future it might loseits monopoly in the commercial aircraft industry. Boeings 747 - the 400-seater jumbo,was the most profitable and visible product in the entire product line of the company. ButBoeing was facing a reduction in the number of new orders for the giant aircraft (ReferExhibit 1). In 2000, Boeings arch-rival, the European consortium, Airbus S.A.S.(Airbus), was gearing up with its plans to launch the double-decker, super-jumbo A380,capable of carrying over 600 passengers. A380 was the most advanced, spacious and

    efficient aircraft ever conceived. Industry experts had expressed their anticipation thatBoeing 747 jumbos, which had dominated the large passenger aircraft market (above400 seats category) for over 30 years, since its inception in 1970, would lose itsdominance, to Airbus economical and technically advanced super jumbo A380.The growing acceptance of Airbus among airlines across the world, was also a matter ofconcern for Boeing. In 1998, in terms of delivery (in value terms) of new aircrafts, Boeinghad two-thirds share of the U$65 billion global passenger aircraft market. However, in1998, Airbus captured 46% of all new orders for passenger aircrafts from the airlines,which was more than double, as compared to 1995. In the first half of 1999, Airbusacquired 62% of the new orders for passenger aircrafts and the remaining 38% wastaken up by Boeing (ReferExhibit 2).Boeing believed that the A380 would be detrimental for Airbus. Boeing was opposed to

    the idea of developing an all new aircraft to compete with Airbus A380. Developing anew aircraft was an expensive, complex and time consuming affair. Instead, Boeingopted to make design modifications in its existing 747 jumbos, to accommodate over 500passengers, 20% more than its existing models, at a lower cost. The company also hadplans to add new engines to increase the fuel efficiency and flight range of the 747model. The company assumed that by upgrading its 747 model, it would be able to meet3the demand for aircrafts with above 400 seats, inspite of being based on 30 year oldtechnology. Boeing planned to proceed with one of these new jumbos, as soon as

  • 8/8/2019 Aircraft Industries

    11/95

    Airbus got the nod from a couple of airlines to go ahead with its A380. In order to preventAirbus entry into the US market, in 1997, Boeing entered into an exclusive 20 yearscontract with the major US Airlines (Delta, Continental and American Airlines). In 1999,these three airlines accounted for over 11% of the global aircraft demand. Boeing hadsimilar plans to strike exclusive deals with major airlines, to deter Airbus from launchingits new jumbo jet.

    Boeing was convinced that the future air-travel market would evolve into long-range,point to point travel in 350-seater aircrafts rather than 550-650-seater super jumbos thatlink giant, hub airports. Boeing also predicted that in the next 20 years, there would bedemand, only for 400-seater super jumbos (the type Airbus was developing) from theairlines. Airbus, however, forecasted an optimistic market scenario, where the demandfor super jumbos would cross 1,500 (including 300 freight versions). The companyemphasized that it could reap profits, even if it reached half that mark. Boeing dismissed

    Airbus claim that the new super jumbos would be 15-20% cheaper to fly, than theexisting 747 jumbos. Both the companies were busy convincing the major airlines to beton their future jets.

    AIRBUS: THE GENESISAirbus was established in December 1970, by a consortium of firms, viz., Germanys

    DaimlerChrysler Aerospace and France's Aerospatiale. The Spanish company CASA,joined the consortium in 1971. Prior to the formation of Airbus, the European aerospaceindustry was weak and fragmented. The European companies feared that the three bigUS civil-aircraft manufacturers, Boeing, McDonnell Douglas1 and LockheedCorporation2, would takeover Europes weak and divided aerospace industry. To beatthe US giants, the European companies united and co-operated with each other, toproduce commercial aircrafts under the Airbus umbrella.1 McDonnell Douglas was a major American aircraft manufacturer, producing a number of famouscommercial and military aircraft. The company was merged with Boeing in 1997.2 Lockheed Corporation was an aircraft company founded in 1912, which merged with Martin Marietta in1995 to form Lockheed Martin. The company withdrew from the civilian aircraft business in 1981.

    4

    Airbus first aircraft, the A300B2, was launched in 1969 at the Paris Air Show. A300B2was a wide bodied, twin-engine aircraft, which could carry 226 passengers in acomfortable two class layout. The following year, a stretched version of A300B2, the250-seater A300B4, was launched and Air France was the first to purchase it. The twoaircrafts entered service in 1972 and 1974, respectively. By the end of 1975, Airbus hadcaptured 10% of the market and had orders for 55 aircrafts. The company received aboost,in July 1978, with the launch of A310, a shortened version of the A300B2. In1979, British Aerospace (BAE) became a full partner of the Airbus consortium. By theend of 1979, Airbus had captured 26% of the market and had 256 orders from 32customers and 81 aircrafts in service with 14 airlines.In spite of the recession in the mid 1980s, Airbus anticipated correctly, that with therecovery of the economy, demand for modern, cost efficient aircrafts would increase,which would replace the older aircrafts manufactured by Boeing. In 1984, therefore,

    Airbus launched the A320, a narrow-bodied plane that had a seating capacity of 150-170passengers. The A320 incorporated new technologies and the aircraft provided betteroperating efficiency, better performance and greater passenger comfort. It was the firstcommercial aircraft to feature fly-by-wire3 controls and side sticks (Generally aircraftshave central sticks but for better ergonomics Airbus replaced it with side sticks, whicheliminate visual obstruction between the pilot and the instrument panel in the cockpit).This set the standard for all subsequent Airbus cockpits and for the industry as a whole.Fly-by-wire also enabled Airbus to develop a family of aircrafts, which had identical

  • 8/8/2019 Aircraft Industries

    12/95

    cockpits and flight handling characteristics. The new A320 was promptly selected byairlines like Air France, British Caledonian, Adria Airways, Air Inter and Cyprus Airways.The A320 was one of Airbus best-selling aircrafts, popular with passengers and airlinesalike. Between 1984 and 1999, Airbus launched different versions (A321, A319 and

    A318) of the A320. These different versions were capable of carrying 108 to 185passengers (ReferExhibit 3). With this, Airbus completed the entire range of narrow

    body, medium to short range f leet of aircrafts.The success of the A320, gave Airbus the confidence to develop two aircrafts in a singleprogram. In 1987, Airbus took the initiative to launch two wide bodied, medium to long3 In fly-by-wire the control inputs from the pilot are transmitted to the flying surfaces by electronic signalsrather than mechanical means.

    5range aircrafts. During the late 1980s, Airbus began looking for opportunities, forproducing aircrafts for medium and long-haul markets. Work began simultaneously on atwin-engine, medium range and a four-engine, long range aircraft. The culmination of thecompanys efforts was the launch of the four engined A340, in 1993, which entered intoservice with Lufthansa and Air France. The A340 was the first, entirely new, long rangeaircraft to enter commercial operations in over 20 years, since Boeing 747. The twinengined

    A330, which joined service in 1994, had the lowest operating costs compared toother aircrafts that were designed for wide-range routes. Two additional versions of theA340, the A340-500 and the A340-600, which entered service in 2002, were developedin close collaboration with the airlines.Over the years, Airbus had cleverly exploited the gaps in Boeings product line and hadsuccessfully projected itself as a technological innovator, with relatively new andtechnologically superior aircrafts, rather than being a cheap imitator of Boeing. 56% of

    Airbus total fleet was less than 15 years old, as compared to 30% of Boeings (ReferExhibit 3 & 4). Most of Boeings aircrafts were antiquated and its design and technologydated back to the 1960s and 1970s. Airbus developed aircrafts that suited every need ofthe global airlines. The company developed a full range of aircrafts, from the 107 seater

    A318 to the 380 seater A340. The wide spectrum enabled airlines to switch easily from

    Boeing to Airbus and to spread their maintenance costs over a whole family of planesrather than on just one model. Compared to Boeing, Airbus aircrafts weretechnologically superior, had better operational efficiency, superior cabin comfort, lowmaintenance cost and were flexible enough to be operated under any kind of routestructure. Frederic Brace, Vice President of Finance, United Airlines, opined that oncean airline got an Airbus in its fleet it intended to procure more of them, as Airbusmanufactured good aircrafts that were economical to operate.

    Airbus added many innovative airline-friendly features to its aircraft. Unlike Boeing,which customized the cockpit for every model, Airbus preferred a single flight deck andsame flight handling characteristics, so that pilots could shift and adapt easily acrossdifferent models. In case of Airbus, a pilot needed eight days of re-training to move fromthe narrow-bodied A320, to the wide-bodied A330, as compared to several weeks in

    case of a transition from a Boeing 737 to a 747.6

    AIRBUS WOESIn 1992, the US and European aircraft makers signed a bilateral deal on financing newaircrafts. According to the deal, the launch aid4 for Boeing and other US aircraft makersfrom the US government bodies (like NASA and Pentagon) was upto 3% of thecompanys turnover. The European companies agreed to limit the launch aid for newaircrafts, to 33% of the total development cost. The European companies receivedlaunch aid in the form of soft loans from the European governments. It was also

  • 8/8/2019 Aircraft Industries

    13/95

    stipulated that the aid would have to be repaid with interest, within 17 years. However,Boeing had accused Airbus of receiving launch aid above the agreed limit from theEuropean governments, for the A380 project, in spite of the bilateral aid deal. In return,

    Airbus alleged that Boeings airline business was indirectly subsidized by the USdefence budget.The four members of the consortium had proportionate (according to their ownership

    stake) voting rights on the major issues regarding Airbus. In the past, Airbus faceddifficulties in operating efficiently, as an independent corporate entity. The members ofthe consortium shared the development cost and work for any new aircraft amongthemselves. The group companies supplied critical components like wings and fuselagesfor the aircraft. The corporate structure of Airbus was considerably politicized andfinancially opaque. Airbus was often forced to purchase components at high rates fromconsortium members and didnt always get the best deal. In 1998, the individualpartners garnered profits, by selling components to Airbus. However, the following year,

    Airbus reported a loss of U$204 mn, on sales of U$13.3 bn. Airbus blamed the losses onthe high prices it had paid to its partners, for components.

    Airbus was indirectly under the control of four European governments - French, German,Spanish and British. To satisfy their political and business interests, the governments of

    these countries frequently interfered with the business affairs of Airbus. According toindustry analysts, Airbus could have better control over costs if it operated as anindependent company rather than as a consortium. Due to the high development cost ofany new aircraft, the consortium members often sought financial help in the form of soft4 Launch aid is the soft governmental loan for the development of the new aircraft. Launch aid is paid backto the governments as a royalty on sales.

    7loans from their respective governments. Moreover, Airbus had to convincegovernments that there was sufficient demand for the aircrafts, in order to arrange fundsfrom them.To build such a huge aircraft, was a great challenge for Airbus. Smooth operational coordinationamong four different manufacturing locations, across four nations was a

    daunting task. Different modules of the aircraft were manufactured at various locationsand the final aircraft was assembled at one point. Arranging the logistics to facilitateequal and fair distribution of work among the consortium members, was also a matter ofworry for Airbus, as problems crept up in past projects.Sales analysis of Boeing and Airbus exhibited the declining sales of Boeing 747, while

    Airbus strengthened its position in the shorter range aircraft sales. A few importantairlines like British Airways and United Airlines, had converted several 747-400 orders tosmaller 777s. Asian routes being fragmented, there was an increased demand for mini

    jumbos like the A340 and the Boeing 777 (3-class), at the cost of Boeing 747s. ChinaAirlines and Singapore Airlines showed a preferential shift towards mini-jumbos.International carriers like Delta Air Lines and American Airlines, discontinued using theBoeing 747, altogether.. Japanese airlines were also uninterested in increasing their

    fleets by including jumbos.Airbus was worried about the arrangement of funds, for meeting the initial developmentcosts of the massive A380. The development cost of the aircraft was expected to reachU$15 bn. Airbus was expecting to get 40 percent of its funds from suppliers likeSweden's Saab, 30 percent from governmental loans arranged by its partners, and therest from its internal resources. Establishing a new corporate structure was an essentialpre-requisite for arranging this finance. As huge investments were required to developand manufacture aircrafts like A380, Airbus required atleast 50 confirmed orders for thenew aircraft from the airlines, before starting its commercial production. Lufthansa, Virgin

  • 8/8/2019 Aircraft Industries

    14/95

    Atlantic, Qantas, Singapore and Malaysian Airlines, were among 11 passenger airlinesthat had agreed to buy the A380. Emirates was the largest customer, ordering 45 A380s.

    Airbus predicted, that at the earliest, the new aircraft would roll out of its assembly line in2006.8

    CONTRASTING VIEWSBoeing, however, expected that air travel would be de-regulated worldwide, resulting inan increased demand for long range, faster, smaller and fuel efficient aircrafts.

    According to Boeing, big aircrafts suited the regulated markets, because the number offlights was restricted and the airlines operated from big hub airports. So, the airlinespreferred big aircrafts that could carry a large number of passengers. Whereas, in a deregulatedmarket, the number of flights would increase, as customers would prefer pointto-point connectivity between destinations instead of the hub and spoke model. Thus,the demand for smaller aircraft would increase. Randy Baseler (Baseler), MarketingHead, Boeing, substantiated Boeings claim by citing a case. In 1987, there was onlyone daily flight [a 400-seater, Boeing 747] between Chicago and London. Further, 60%of all transatlantic flights between the US and Europe were using Boeing 747s. Thescenario changed by 2000, when there were 21 daily flights between Chicago and 11different destinations of Europe and the majority of them were Boeing 767 or Boeing777, with 250 to 350 seating capacity. Baseler predicted that further fragmentation oftransatlantic flight routes to 160 destinations would increase the usage of Boeing 777sand Airbus A330s, in place of Boeing 747s. According to him, there would be furtherpoint-to-point routes in Asia and demand for the long-range versions of Boeing 777s and

    Airbus A340s would increase.Airbus acknowledged Boeings claims and further predicted that there would be a rise inthe demand for large aircrafts, flying between big international hubs. The company, withits A380, targeted to capture half the market in the jumbo category which was dominatedby Boeings 747s. Airbus argued that Air Travel was growing by 5% a year and that by2015, the number of travelers would also increase. The limited capacity of big airports,especially in Asia, would create a demand for large aircrafts (ReferExhibit 5). But theworlds busiest airports were changing their terminal buildings to accommodate A380s.Heathrow airport would spend 450 mn to accommodate A380s. In addition, largeaircrafts would reduce noise, pollution, and congestion in big airports because theyrequired fewer landings and take-offs. Analysts estimated, that by 2015, the trafficincrease in a single year would be equivalent of total air traffic in 1969 - the year in whichBoeings 747 was launched. To manage such heavy traffic across the globe, hugeaircrafts like A380s would be needed. John Leahy, Marketing Director, Airbus, pointed9out, that in the mid 1990s, when Airbus launched the narrow bodied A320 and the A330-340, Boeing claimed that there would be no demand for these kinds of aircraft. However,in later years, Boeing launched similar kinds of aircraft in the market. Airbus also fearedthat Boeing might subsidize the price of 747s to reduce the market of A380s. Congestionat major airports was a growing problem for airlines. According to Airbus, airlines wouldtherefore use bigger aircrafts to carry a greater number of passengers. Big aircraftswould also be more efficient than smaller ones, in using increasingly valuable take-offand landing slots. But Boeing believed that air travel had become fragmented and thatpassengers wanted to fly on smaller jets, used on more frequent routes, which would bypassmany of the busy hub airports, by providing direct services, especially betweensecondary/smaller cities. Boeing believed it can meet the airlines demands much better,with a combination of its stretched 747 on the big trunk routes and its slightly smaller, but

  • 8/8/2019 Aircraft Industries

    15/95

    much newer, long-distance aircraft, the 777, on the less-busy ones.Airbus was optimistic about the future of the A380 because it received favorableresponses from a host of passenger airlines and leading freight operators. Singapore

    Airlines, Cathay Pacific, Malaysia Air Lines and Emirates were the prospectivecustomers of the A380. Among freight operators, Federal Express and Atlas Airexpressed interest in the freight version of the A380, because of its ability to carry 150

    tons of cargo over 6,000 nautical miles (11,120 kms or 6900 miles on land). A380 wouldsave one day for the freight operators between Asia and North America.

    Airbus also consulted 60 airport authorities worldwide, to find out whether the newaircraft would be able to land and take-off easily. Weight was a critical issue, since

    Airbus had promised the airlines that the A380 could be used on the same runways thatwere being used by Boeing 747, even though its fuselage was ten inches wider. Airbushad developed a new lightweight material called Glare, made of aluminum alloy andglass-fiber tape. If this was used instead of regular aluminum to fabricate the body of the

    A380, the aircraft would be several tons lighter.

    A RISKY PROPOSITIONOn 19th December 2000, Airbus finally got the approval from its shareholders to goahead with the proposed super jumbo project, the A380. The A380 project was the

    10biggest aircraft development project globally. Airbus received 50 pre-production ordersfor the new aircraft. The initial customers for the aircraft were - Emirates, Air France,International Lease Finance Corporation (ILFC), Singapore Airlines, Qantas, and Virgin

    Atlantic. Airbus tried to lure the airlines by offering discounts on the approximate price ofthe aircraft (U$200 mn). Airbus estimated that it needed to sell 229 aircrafts before itcould earn profits. To recover the total investment made by Airbus, the Europeangovernments and suppliers, Airbus needed to sell at least 780 aircrafts.

    Airbus was aware that launching a new aircraft was a complicated and risky proposition.The development cost of an aircraft was huge and in case of the A380, it was estimatedto be over U$12 bn. In 2000, the development cost of the aircraft was more than the totalasset value of Airbus. To get returns on the investment, Airbus would have to ascertainthat the new aircraft would sell sufficiently and would remain in service for quite sometime. Big orders for the A380 would help Airbus bring down the unit cost of the aircraft. Itwas predicted that if the production of A380 was doubled, Airbus could cut 20% costs ofthe aircraft. Apart from the cost benefits, wide acceptance of the aircraft among airlines,would enable Airbus to spread the technology across its existing aircrafts. Boeing hadtried hard to persuade airlines that they would be better off, buying a cheaper version ofa stretched 747, which it planned to develop at a cost of only U$4 bn. Boeing claimedthat the upgraded version of Boeing 747, would match the performance of the A380.With the successful production of A380, Airbus would have a full range of aircrafts withwhich it could challenge the market leader, Boeing. In the past, Airbus had alwaysaccused Boeing of holding down the price of its popular aircraft (Boeing 777s and 767s),because it could cross-subsidize it, using the hefty profits it made from the 747s. Would

    Airbus challenge Boeing in the virgin territory of super jumbos?11Exhibit: 1New Orders and Deliveries for Boeing 747** It include all the models of 747Source: Compiled by IRCK

    Exhibit: 2Historical Orders

    Year 1996 1997 1998 1999 2000

  • 8/8/2019 Aircraft Industries

    16/95

    Boeing 671 530 607 355 598Airbus 183 394 517 421 483McDonnell Douglas* 44 16 NA NA NANet Orders 898 940 1,124 776 1,081* Merged with Boeing in 1997Source: Compiled by IRCK

    Exhibit: 3Airbuss Fleet^

    Year 1990 1995 1996 1997 1998 1999 2000New Deliveries 747 70 25 26 39 53 47 25Total Delivery 527 256 271 375 563 620 491Percentage (%) 13 10 10 10 10 8 5New Orders 747 120 35 61 36 15 35 26Total New Orders 533 444 671 530 607 355 598Percentage (%) 41 11 12 8 3 10 5SegmentNarrowBodyRange (Km) Capacity CruisingSpeed

    (km/h)ServiceEntryType

    A318 6,000 107 870 2003 Short to medium rangeA319 6,800 124 903 1996 Short to medium rangeA319CJ 11,600 124 870 1999 Long range largecorporate jet

    A320 5,550 150 903 1988 Short to medium rangeA321 5,550 185-220 903 1993 Short to medium rangeWide Body

    A300B2/B4 3430 /5357 220-336 917 1972/1974 Medium rangeA310 9,600 220 897 1983 Medium to long range

    A300-600 7,700 266 897 1984 Medium rangeA300F 4,800 51 tons NA 1988 Medium range cargofreighter

    A330-200/30012,500/10,500253/295 880 1998/1993 Long range/ Medium tolong range

    A340-200/30014,800/13,700

    261/295 914 1993/1992 Long rangeA340-500/60016,700/14,800313/380 882 2002 Long range

    12^This list is not exhaustiveSource: Compiled by IRCK

    Exhibit: 4

  • 8/8/2019 Aircraft Industries

    17/95

    Boeings Fleet^Narrow Body Capacity Range (Km) CruiseSpeed(Km/h)ServiceEntry

    Type707-120B 110-179 8,485 1,010 1958 Medium to longrange707-320B 189-219 9,265 1,009 1959 Short to mediumrange717-200 106-117 3,800 811 1999 Short to mediumrange720 112-149 6,687 1,009 1960 Short to mediumrange727-100/200 131/189 5,000/4,500 1,017 1963/1967 Short to mediumrange737-100/200 100/115 2,855/4,260 943 1968/1967 Short range737-300/400 149/188 5,000/3,850 943 1984/1988 Short to mediumrange

    737-500/600 132 2,815/5,648 943 1990/1998 Short to mediumrange737-700/800 12-50 12,000 871 1998 Long rangecorporate jet757-200/300 178-239/2895,000/6,500 914/850 1982/1999 Medium rangeWide Body747-100/200 397-452 9,045/12,778 967/981 1970 Long range747-300/400 470/416 11,675/13,214 996/939 1983/1989 Long range747SP 316-440 12,325 1,000 1976 Long range767-200/300 290/350 12,352/10,880 914/900 1982/1986 Long range767-400 245 10,418 850 1999 Long range

    777-200/300 305/394 16,417/13,427 905/893 1995/1998 Long range^ This list is not exhaustive 30 percent of the fleet is less than 15 years old.Source: Compiled by IRCK

    Exhibit: 5Airline Passenger Travel, 2001 forecastRoutes % of Total Traffic GrowthLatin America 4.9 5.9North America 38.7 4.1Middle East 2.8 4.5Europe 26.9 5.7

    Asia-Pacific 24.5 7.4Africa 2.2 5.8Source: International Civil Aviation Organization

    13Annexure: 1Airbus at a Glance*Established 1970Based in Toulouse, FranceEmployees 52,000Turnover20 billion EuroShareholders EADS (80%), BAE SYSTEMS (20%)European Operations France:

  • 8/8/2019 Aircraft Industries

    18/95

    Toulouse, St Nazaire, Nantes, MaulteGermany:Hamburg, Bremen, Nordenham, Stade, Varel,Laupheim (Aircabin), Buxtehude (KID Systeme)Spain:Getafe, Illescas, Puerto RealUK:Filton, BroughtonMain SubsidiariesAirbus North America

    Airbus ChinaAirbus JapanAirbus Transport InternationalSpares Centers Hamburg (Germany)Frankfurt (Germany)

    Ashburn, Virginia (USA)Beijing (PRC)SingaporeTraining Centers Toulouse (France)Miami, Florida (USA)Beijing (PRC)

    Field Offices 130Resident customersupport representatives175In-service Airbus fleet Over 3,700 aircraft* Data is for 2004Source: Compiled by IRCK

    14Annexure 2Pictorial Comparison of Boeing 747 & Airbus A380

    Source: http://news.bbc.co.uk

  • 8/8/2019 Aircraft Industries

    19/95

    Annexure 3

    Source: www.airbus.com

    SPECIFICATIONS OF A380Total Length 239ft 3 inchesWing Span 261ft 8 inchesPassenger Aisles Triple-AislesSeating Capacity 555 seatsNumber of Engines 4 Power PlantsMax. Gross Weight 540,000 KgMaximum Range 14,800 KmFirst Service 2006

    15REFERENCES1. Mascolo, Georg & Hawranek, Dietmar; Dueling for the U$100 Pentagon Deal,http://www.spiegel.de, June 27, 2005.2. Ghemawat, Pankaj & Esty, Benjamin; Airbus vs. Boeing in Super Jumbos: A Caseof Failed Preemption, http://ssrn.com, February, 2002.3. Andorf, Alexander; Battle for the Skies: Airbus Vs. Boeing,http://www.airborneaircrafts.com, May, 2005.4. Airbus A380 completes test flight, http://news.bbc.co.uk, April 27, 2005.5. Irwin, Douglas A. & Pavcnik, Nina; Airbus versus Boeing revisited: internationalcompetition in the aircraft market, Journal of International Economics 64 (2004) 223-245, www.elsevier.com, August 2003.

    6. Airbus unveils 'superjumbo' jet, http://news.bbc.co.uk, January 18, 2005.7. Madslien, Jorn; Airbus vs. Boeing: The next battle, http://news.bbc.co.uk, April 26,2005.8. Madslien, Jorn; Boeing fighting back at Air Show, http://news.bbc.co.uk, June 14,2005.9. Max Kingsley Jones, Rivals cross swords, Flight International, June 14, 2005.10. Leslie, Devon and Attfield, Rick; Airbus Vs. Boeing: Who's moving in the rightdirection??, http://www.flightsim.com.11. Daly, Matthew; Boeing Biting into Airbus' Market Share, www.etcnews.com, April26, 2005.12. Creswell, Julie; Boeing Plays Defense, http://www.fortune.com, April 19, 2004.13. Holmes, Stanley; Dawson, Chester & Matlack, Carol; Airbus vs. Boeing: Rumble

    over Tokyo, www.businessweek.com, April 2, 2001.14. Boeing, Airbus Showdown At 40,000 Feet, www.forbes.com.15. Timeline - Airbus A380 'superjumbo', http://news.bbc.co.uk, April 25, 2005.16. Company Profiles The Boeing Company & Airbus S.A.S.; http://search.epnet.com.4

  • 8/8/2019 Aircraft Industries

    20/95

    Asia

    1

    Boeing and Airbus: The Asian ChallengeCase Study Reference No. INA0071CThis case was written by Krishnakumar, IBSCDC. It is intended to be used as the basisfor class discussion rather than to i llustrate either effective or ineffective handling of amanagement situation. This case was compiled from published sources. 2006, IBSCDCNo part of this publication may be copied, reproduced or distributed, stored in a retrievalsystem, used in a spreadsheet, or transmitted in any form or medium electronic,mechanical, photocopying, recording, or otherwise without the permission of IBSCDC.Related Products AvailabilityTeaching NoteStructured AssignmentDistributed and Printed by Phone : 91(40) 23435310 - 11IBSCDC, India Fax : 91(40) 23430288www.ibscdc.org E-mail : [email protected]

    All rights reserved2

    Boeing and Airbus: The Asian Challenge

    - KrishnaKumarChina's passenger traffic is increasing vigorously and will be the third-largest only behind thatof the United States and Europe in the future.

    Li Jiaxiang, PresidentAirChina1The important thing is we all agree there's going to be higher than world average growth andthere's going to be a significant demand for aircraft in China. When we have increased demand,

    we have increased production rate. We're looking at whether we should go beyond 30 (planes) amonth.

    Laurence Barron, PresidentAirbus China2Asiahadalwaysbeenalarge, potentialmarket forthetwogiantsintheaviationindustry,the

    American Boeing Corporationandthe EuropeanAirbus Industries. Theopeningoutofthethird

    worldto foreigninvestmentwiththeadventofglobalisationsawcompetitionintensifyingbetween BoeingandAirbustodominatetheAsianmarket. WiththebeginningofthenewmillenniumAirbushadcomeup withanengineeringmarvel,theA 380 doubledecker-the firstplanetohavetwo floors. The firstofficialtest flightoftheA 380 (Exhibit I)wasonApril 27,20053 at Toulouse, France. SingaporeAirlineswasthe firsttoorderthe planewhichwouldseecommercialoperationsin 2006. Theorderbookingswithoptionsin 2005 hadcrossedthe 200mark. Nottobeoutdone, Boeinghaddevelopedthe 787 Dreamliner4 (Exhibit II)togointocommercialuseby 2008. The firmordersonhandasofApril, 2006 forthisstate-of-the-artairlinerwere 350 valuedat $51 billion,including 20 byAir India.5(Exhibit III)Thedilemma facedbybothcompanieswastogetAsianleadership by primarilydevelopingthe

    marketsin China, Japan, Singapore, Malaysiaand Indiawhichwould,inturn,help thembecometheuniversalleaderintheaviationindustry. Todothiseffectivelytheyhadtonotonlymonitortheeconomicdevelopmentand financialavailabilityofthedevelopingnationsbutalsostep up

    effortsinresearchandcutting-edgetechnologiestoensurethatthebest productwas putonthe

    market, fine-tunedto passengercomfortandsatisfaction.

    Background: BoeingHeadquarteredin Chicago, Illinois, U.S.A.,the Boeing Companyemployedmorethan 153,000peopleinmorethan 67 countrieswithaturnoverin 2005 of $54.8 billion. Themaincommercial

  • 8/8/2019 Aircraft Industries

    21/95

  • 8/8/2019 Aircraft Industries

    22/95

    717-200 twinjet. The 747-400ERmadeits first flighton July 31, 2002. Theairplanewasthe7 www.boeing.com/history/boeing/boeing.html8 www.centennialofflight.gov/essay/Aerospace/Douglas_later/Aero30.htm9 www.aviation-history.com/boeing/314.html

    10 www.boeing.com/history/mdc/dc-3.htm11 www.nasm.si.edu/research/aero/aircraft/boeing_367.htm12 www.boeing.com/earlyyears

    13 www.airliners.net/info/stats.main?id=97

    14 www.boeing.com/history/boeing/future.html15 ibid

    41,308th 747 assembledby Boeinginits Everett, Wash., factory,makingittheworld'smostpopularwidebody jetliner.Atthe ParisAirShowin 2003, Boeingannouncedthatapproximately 500,000 votescastbypeoplein 160 countriesindicatedthatthenewestmemberof 700 series passenger jet family,the7E7,wouldbecalledthe Dreamliner. OnApril 26, 2004,the Boeingboardofdirectors

    announcedthe formallaunchofthe 787 passenger jet,basedona firmorder for50 787s fromANA (All NipponAirways),withdeliveriesscheduledtostartin 200816. TheANAorderwasthelargestlaunchorderinhistory foranew Boeingcommercial jet. Itwasnamedthe 787 Dreamlineron Jan. 28, 2005,thedaythecompanyannouncedorders fromthe People's Republicof China for

    60ofth

    eairplan

    es. Th

    e787

    -8 D

    reamlin

    erand 787

    -9 D

    reamlin

    erairplan

    esca

    rry 217 t

    o257passengersinthree-classconfigurationsonroutesof 9,781 and 9,551 miles (15,700 and 15,400

    km),respectively.Athird 787 familymember,the 787-3 Dreamliner,accommodatesnearly 289passengersinatwo-classconfigurationandwasoptimized forroutesof 4,027 miles (6,500 km)17.Inthelasttwodecadestherehavebeensomechangesatthe Boardlevel. FrankShrontz,who

    headedtheteamin 1985 as President,became Chief Executive Officerin 1986 and BoardChairmanin 1988. In 1992, Phil Conditbecame Presidentof Boeing; CEO in 1996 and BoardChairmanin 1997. When Boeingmergedwith McDonnell Douglas Corporation, Philip M. Condit

    remained CEO and Chairmanofthenew Boeing Boardof Directors. Harry C. StonecipherofMcDonnell Douglasbecame Presidentand Chief Operating Officer18 of Boeing. However,asex

    scandalsaw Stoneciphergivewayto JamesA. Bellwhoactedas Presidentonaninterimbasiswith Board ChairmanLew Plattextendinghisroleasnon-executivechairman. On June 30, 2005

    W. Jame

    s McNerney, J

    r.of 3M wasna

    med B

    oard Chai

    rman, P

    resid

    entand CEO

    of Th

    eBoe

    ingCompany. Hehadbeenamemberofthe Boeingboardof Directorssince 2001. JamesA. Bellremained Chief Financial Officer,andLewis E. PlattbecameLead Director19.

    Background: Airbus

    Airbus,knownasAirbus Industrie, wasofficially formedin 1970 asaconsortiumof FrancesAerospatialeand DeutscheAirbus,agroupingofleading Germanaircraftmanufacturing firms20.TogetherthecompanieshaddecidedtobuildtheA300,the firsttwin-enginewidebodyairliner,tofillagap inthemarketandtochallengeAmericansupremacyintheaviationindustry. Shortly

    afterwards Spains CASA joinedtheconsortiumandin 1974 theAirbus Industrie GIE, Groupe

    dIntrt Economique,moveditsheadquarters from Paristo Toulouse. BritishAerospace joinedAirbus Industriein 1979. Eachofthe fourpartners,knownasAirbus France,Airbus Deutschland,Airbus UKandAirbus Espaa,operatedasnationalcompanieswithspecialresponsibilities for

    producing pa

    rtsofth

    eaircraft,t

    obe

    transp

    ortedt

    oTou

    lou

    se

    for

    finalassemb

    ly. The

    GIEprovidedasingle face forsales,marketingandcustomersupport. In 2001,Airbusbecameasinglefullyintegratedcompany. ItwasincorporatedunderFrenchlawasasimplified jointstock

    companyor"S.A.S." (Socit parActions Simplifie - Simplified Shares Society). The EuropeanAeronautic Defenceand Space Company (EADS),amergerofthe French, Germanand Spanishinterests,acquired 80 percentofthesharesand BAE Systems,thesuccessorto British

    Aerospace, 20 percent. In 2005 ithad 55,000 employeesontherollswithasalesturnoverof22.3 billionanddelivered 378 airliners (Exhibit VI). Ofthis 289 were SingleAisle Family

    aircraftand 89 widebodylongrangeairliners,A330sandA340s.Asof March, 2006 airbushad

  • 8/8/2019 Aircraft Industries

    23/95

    16en.wikipedia.org/wiki/Boeing_787_Dreamliner17ibid

    18 Building forthe future1983-1998,www.boeing.com/history19ibid20http://events.airbus.com/about/history.asp

    56377 ordersonhand,ofwhich 4231 weredelivered. Thetotalaircraftinoperationworldwidewas

    4050.21Airbusbeganwiththewidebodied,doubleisled,eight-in-a-rowA300 followedbytheA310. ButitwastheA320,withitslandmark fly-by-wiretechnology,that putAirbusamongthetop two

    manufacturersofcommercialaircraftintheworld. ThelongrangeA330 andA340 confirmeditstechnicalexpertiseincivilaviation (Exhibit VII). Thecompanytookaninnovativestep in 2004tounifythedesignand productionmanagement processesbysettingup Centresof Excellence

    in preferredlocationsattheir16 manufacturingsitesin France, Germany, Spainandthe UK,

    complementedbysubsidiariesin NorthAmerica, Chinaand Japan,anda jointengineeringcentrein Russia. Thiswasdonetosimplifyworking. Eachcenterwasresponsible forspecific partsof

    theaircraftandhaditsownchainofdecisionmakingandcommand. ForAirbus,the featherinitscap wasin January 2005 whenit presentedtheworldslargestandmostadvanced passenger

    aircraftthe doubledeckerA380,whichhadits first flightinAprilthesameyear. Itseats 555

    passengersbutcanbereconfiguredtohave 853 seats.22 Itwastheanswer forhighdensityrouteswheremore passengerscanbeaccommodatedwithoutincreasingthenumberof flights. TheA380sunveilingwas precededbyanannouncementthatAirbuswastobuildtheA350,alongerrangemid-sizetwinengineaircraftthatwouldbringexceptionallevelsofefficiencyandcomforttothelongrangemarket. OvertheyearsAirbushadgrown from 421 aircraftorders ($34 billion)

    in 1989 to 1111 aircraftorders ($95.9 billion)in 2005 (Exhibit VIII).

    2005 was a record for the whole industry and forAirbus in particular, saidAirbus Presidentand CEO, Gustav Humbert.Airlines have never ever placed so many orders, a sign that they arevery optimistic about the future of air transportation, with also a lot of new carriers emerging

    and bringing cheap air travel to an increasing number of consumers. But it also reflects the needfor more modern equipment to face the rising fuel prices. We are pleased to have maintained our

    lead in terms of market share. But, more importantly, we continue to increase our production

    output, based on a backlog never seen in history, which secures work for the next four to fiveyears at very high production rates.23Airbuswasmanagedbyan Executive Committeeheadedby Presidentand Chief ExecutiveOfficerGustav Humbertandappointedbythe Shareholders Committee,whichconsistsof five

    members from EADS andtwo from BAE Systems. Eachmemberofthe Executive Committeewasresponsible forcore functionsandstrategyinhis field. Therewere fourGeneral Managers,eachcovering France, Germany, Spainandthe UK,whilethesubsidiariesin Chinaand Japanwereeachheadedbya Presidentandin NorthAmericabya Chairman. Charles ChampionwasCOO andheadoftheA380 programme. Glen FukushimaandLaurence Barronwere Presidents

    ofAirbus JapanandAirbus Chinarespectively.

    The Asian ConnectionChina

    In the last five years, passenger traffic in China has witnessed an unprecedented rise of 95percent and looks like it will continue to be the fastest growing market over the next 20 years.24Steve Miller, Rolls-Royce's Vice Presidentof CustomerBusiness forChina.21 www.airbus.com22 http://en.wikipedia.org/wiki/Airbus_A380

    23 www.airbus.com/history24Chinasaviationboomdrivesworldmarketwww.terradaily.com/news/ 21st.September, 2005

    6The Chineseconnectionwith Boeinggoesbacktonearlyacentury. Intheyearitwasestablished

    the founderasked Beijingborn Wang Zhutodesignanewseaplane fortheAmerican Navycalled

  • 8/8/2019 Aircraft Industries

    24/95

    themodel C. In 1935, Chinabecamethe firstcountrywhere Boeingset-up aserviceofficeandin1939 PanAmericanAirwaysbegan flyingto HongKongacrossthe Pacificwiththe 314 Clipperseaplanes. Thedecadeofthe 40ssawthe DC- 2 & 3 operatein China. In 1972 inthewakeofPresident Nixons pathbreaking,bridgebuildingvisit,the Chinese CivilAviationAdministrationordered 10 Boeing 707sandlauncheditselfasamajorplayerintheworldmarket. Moreordersfollowedespeciallyafterthevisitof Vice PremierDeng Xiaopingtothe United Statesin 1979

    whentherelationship betweenthetwocountrieswas putonaneven footing.Asof March 2005,ofthe 802 jetlinersoperatingin China,excluding HongKongand Macao, 501 weremanufacturedby Boeing. TheirChinaunitmarketsharewas 63% andseatmarketshare 67%.25In today's competitive marketplace, passengers are asking for comfortable, low-fare, convenient

    flights with more frequency choices, said Randy Baseler, VP Marketingof Boeing Commercial

    Airplanes.They want flights to be as short as possible, and they prefer non-stop service.26The20-yearGross Domestic Product (GDP) forecast forChinawas foranaverageannualincreaseof5.9% whichwasthehighestintheworld. Citinghigh GDP growthratesasakeydriverindomestictraffic, Baselernotedthat China's fleetwasexpectedtoincreasebya factorgreaterthan

    three-foldinthenext 20 years. Total fleetsizein 2021 wasestimatedat 2,320 units,comparedwith 636 airplanesin 2001. China,with 1.3 millionmetrictonnesmovedannually,wasthe

    secondlargestdomesticaircargomarketin 2002 afterthe United States. Domesticcargowithin

    Chinawasexpectedtogrow 10.3% annuallyand passengertravel 8.4% yearly forthe 20-yearforecast period.27Airbusentered Chinain 1985 when China EasternAirlines firstutilizedtheiraircraft. Byend2005 theyhad 93 aircraftinoperation.Also Guangzhoubased China SouthernAirlines flew 43aircraft,thenational flagcarrier,AirChina,operated 26 and Chengdubased SichuanAirlineshad

    a fleetof 15. Morethan 260 Airbusaircraftwerealreadyinoperationwithairlinesin China,HongKongand Macau. By 2020 Chinawasexpectedtobecomethesecondlargestaviationmarketintheworldwiththenumberofinternational Chinesetravelerscrossing 100 millionwhichwould,inturnmeana four-foldgrowthin Chinese passengertraffic.28 Consequentlythe

    demand forplanes,of 100 seatcapacitiesandabove,wasexpectedtobearound 1500 units.Havingcrossed justover50% marketshareby 2006 Airbuswouldensurethatitcapturedmorethanhalftheneworders from Chinainthe future.

    Airbus plannedtoconsiderablyincreaseits procurement from Chinainthecomingyears,withvaluestouching US$60 millionannuallyby 2007. Industrialco-operationbetweenAirbusandtheChineseaviationindustrybeganin 1985,whenthe GeneralAdministrationof CivilAviationofShanghai,now China EasternAirlines,becamethe firstcarrierin ChinatooperatetheAirbus.Contracts forChinesecompaniestobuildsectionsofAirbusaircraft followed,asdid furtherorders from Chineseairlines.Aerospatiale,whichwasnowAirbus France,signedits first productsub-contractingagreementin 1985 with XianAircraft Co.tomanufactureandassembleaccess

    doors forAirbusA300/A310 widebodyaircraft. Sincethen,thetotalvalueof projects

    subcontractedbyAirbusto Chinesemanufacturershadexceeded US$500 million.25www.boeing.com/companyoffices

    26Boeing: Continuousgrowth forChinasaviationmarketwww.tdctrade.com/shippers/vol2527ibid28www.airbus.com/en/worldwide

    7Thecontractscoveredincreasing productionrates forA320 accessdoors,A330/A340 brake

    bladesand passengerdoorskin fortheA320 family.29JapanJapanslinkwith Boeinggoesbackto 1928 whentheyboughta F2B-1 foruseasasports plane30.In 1953 Boeingbeganoperationsin Japanbysettingup Boeing Japan Inc. Mitsubishi,Kawasaki

    and Fuji,thethreelargestheavyindustriesaerospacemanufacturing firmsin Japan,hadbeensupplying Boeingwithvarious parts forthe 767 aircraftmanufacturewhichwasabout 15% oftheairframesvalue. In 1978 thesuccessofthis partnership resultedinmorethan 85 Japanese

  • 8/8/2019 Aircraft Industries

    25/95

    companiesbecoming programme partners,subcontractorsandsuppliersto Boeing foralltheirjetlinerassemblies. In 1983 All NipponAirwaystookdeliveryofits 50th Boeing 767 andin 1998JapanAirlinestookdeliveryofits 100th Boeing 747. Thisdeliveryconfirmed JapanAirlinesas

    thelargest Boeing 747 Jumbooperatorintheworld. In 2005 JapanAirlinescompletedthecontract forthe 787 Dreamlinersand Next-Generation 737-800. Till Junethesameyear Japan

    hadordered 796 Boeingairplanesworthmorethan $70 billion. Forthenexttwodecades Boeing

    had forecastthat Japaneseairlineswouldrequire 1,176 airplanes,valuedatapproximately $147billion31.Airbusenteredthe Japanesemarketin 1979 when JapanAirSystems (JAS,whichlatermergedwith JapanAirlines)ordereda fleetofsixA300B2s. Thesewerethe firstwidebody jetstobeacquiredbythecarrierandwereusedtomeetdemandondomesticroutes. JapanAirlinesthen

    begantoacquireothertypesofA300 planes.All NipponAirwaysbecamethesecond Japaneseairlineto purchaseAirbusaircraft,theA320.32 Tenoftheseenteredservicein 1991.All Nippon

    latertookdeliveryofsevennewA321s,whichbecamethe first foreign-builtcivilairlinertogainJapanesetypecertification. In May 2005, Sagawa Express Co.Ltd,oneofthelargestcargo

    businesscompaniesin Japan,establishedasubsidiary, GalaxyAirlines Co.Ltd,andselectedAirbusA300-600 freightertoinaugurateitsownairtransportbusinessin Japanandin March2006 Japansnewlow-costairline StarFlyerstartedoperationswiththeA320 ontheKita-

    Kyushu-Tokyoroute.33Airbusmaindisadvantagewasthemorethan fiftyyearsheadstart Boeinghadoveritin Japan.All NipponAirwayshadordered 5 A320sin October 2005. Butthiswasonlytoservethemtill

    the Boeing 737NG (New Generation)cameonthemarket. Theairline placeda firmorderonBoeinginearly 2006 for53 long-range planesestimatedat $13 billion. Theywanttousethe 365-

    seat 777-300ERstoreplacethe fleetof Boeing 747 and 777 planes, passingovertheAirbusA380.Amajor factorcontributingtothe preference forBoeingaircraftwastheclosemanufacturing partnership between Boeingandseveral Japaneseconsortiums,mostnotablyintheproductionofthewingsof 787. Besidesthat,airlinesin Japanwerebeingconsultedby Boeingin

    thedesign phaseof 777.Also BoeinghaddevelopedgoodcontactsatdifferentlevelswiththeJapanesegovernmentwhichcouldbeutilisedduring finalisationoftenders.Airbuswasalso fullygearedtotacklethese problemsbasedontheirlong-termcommitmenttooperatein Japan.

    India29www.airbus.com/en/worldwide30www.boeing.com/companyoffices/aboutus/boejapan.html31ibid

    32 www.airbus.com33ibid

    8AfterChina, Indiawasratedthenextgrowingeconomic powerhouseinAsia. Boeingsrelationship with Indiagoesbacktomorethanhalfacentury. In 1960 Indiaenteredthe jetagewiththeintroductionofthe 707 transatlantic jetliner34. Justoveradecadelater,in 1971,the 747Jumbowentintoservice.Air India,theinternationalcarrier,startedthe Eightieswithaprogrammeof fleetrenewal. Inthe first phase,Air India purchasedthreeAirbusA300-B4sin1982. Inthesecond phase,sixA310-300swereinductedintothe fleet. Theairlineacquiredtwomore

    Boe

    ing 747-300 C

    ombiai

    rcraftin Oct

    ober/November

    1988 andtwoAi

    rbusA310sinAugust 1990. FourBoeing 747-400swereinductedintothe fleetbetweenAugust 1993 and July

    1994. Twomore Boeing 747-400swereinductedin November 1996. One B 747-400 andnineAirbus 310shavebeeninductedondryleaseinthe fleetintherecentmonths35.In January 2006 Air India formallyannouncedanorderagreementwith Boeing for68 airplanesvaluedatmorethan $11 billion36.Air India'sorderconsistsof 23 777s,includingeight 777-200LR (LongerRange) Worldlinersand 15 777-300ERs (Extended Range),and 27 787-8Dreamliners.Air India Express,awholly-ownedsubsidiaryofAir India,willreceive 18 Next-Generation 737-800s.Boeing's commitment to the Indian aviation industry dates back more

  • 8/8/2019 Aircraft Industries

    26/95

    than 60 years, Boeing CEO Alan Mulallysaid,37 Air India is a valued and long-time partner,and we look forward to working closely with this great airline as it expands its operations with itsall-Boeing fleet and brings its unique offerings to the world.

    The positive economics of the 777-200LR, 777-300ER and 787 Dreamliner will offerAir Indiaoperational cost savings and the flexibility to serve new, ultra-long-range nonstop routes that our

    passengers demand, such as Delhi-New York and Mumbai-San Francisco, saidAir India CMD

    V. Thulasidas. The combination of the 777 and 787, matched with the reliability and lowoperating costs of the 737s, will provide a competitive advantage forAir India andAir India

    Express.Air India will ensure that these new aircraft have the latest passenger amenities onboard so that, with the induction of these aircraft, Air India can emerge as one of the leading

    global carriers, 38 Thulasidasadded.Additionally, Boeinghadannouncedthatitwascommitted

    toinvestinginaregionalmaintenance,repairandoverhaul (MRO)base,anda pilottrainingfacilityin India. Detailsofthiseffortweretobe finalizedoverthecomingmonths.Threeyearsearlierin February, 2003 attheAeroIndia 2003 expositionin Bangalore,itwasannouncedthat IndianAirlineswould purchase 43 Airbusairplanes. Itwouldcompriseofa

    combinationofA319,A320 andA321 models.39 Thedealwasworth $2.1 billionwithdeliveriesextendedup till 2010. The Indiangovernmenthad plannedtoreplacemostofitsaging fleetof

    aircraftinthenext 15 years. ItwaslikelytomergeAir Indiaand IndianAirlinesto formasingle

    entity foreaseofoperations. Togenerate funds,an Initial Public Offeringwasalsoonthecards,scheduledtotake placebefore March, 2007.Also,theliberalization policiesofthegovernmenthadseentheentryofmany private playersintothe fray. ForbothAirbusand Boeingthenexttwo

    decadeswouldrepresentagreatopportunitytosellaircraftmodelsin India.Atthe ParisAirshowin June, 2005 thedramaticriseofairtrafficin Indiawashighlightedwhen

    thetotalvalueoforders from Indiancompaniescrossed $13 billion. Thisincluded 100 A320sfromthelow-coststart-up IndiGoairlines,anorder forA380 superjumbosandotheraircraft from34www.airindia.com/page.asp35ibid36www.boeing.com/news/releases/ 11th.January, 2006

    37ibid38http://webbolt.ecnext.com/coms2/news_58369, 17th.January, 200639Airbusaces Boeingin Indiadealwww.bizasia.com, 6th.February, 2003

    9IndiasKingfisherAirlinesandasplitorder from JetAirways forbothAirbusand Boeingsplanes. Togetherwith forecastsofatravelboomin China,Airbusasserted Indiawasoneoftheworldsmost promisingmarketsand predictedthat 100 millionnewurbanmiddle-classconsumerswouldbecome potentialairtravelersby 2010.40 India is starting a rapid economicexpansion and we think air travel will be part of that, commentedAirbus Chief CommercialOfficerJohnLeahy.41 HecontinuedthatAirtraveltendstogrowattwicetherateof GDP. TheIndiangovernmenthadestimated 20% annualgrowthindomesticandinternationalairtrafficbytheendofthedecade. Indian passenger fleetswere forecasttoalmosttreble from 150 to 400 in

    thesame period.42

    Future OutlookChina is one of the key commercial aviation markets for The Boeing Company,said FredHoward, Presidentof Boeing China. Boeingestimatestheworld fleetwilldoubletoalmost33,000 jetsby 2021 andthatairlineswillinvest $1.8 trillioninnewcommercialairplanes,which

    equatestoabout 24,000 airplanedeliveriesthroughthenext 20 years. Chineseairplane

    manufacturerslikeAVICI areeagertowinbacktheirownhomemarket fromthe foreignaviationgiants BoeingandAirbus.

    Airbushadnamed Chinaasits partnerinthedesignofthenewA350. In December 2005 itsignedadealwiththe Chinesegovernmenttoassemble planesin China. TheagreementwassignedinToulousebyAirbuschiefexecutive Gustave Humbertandthedeputyheadof China'snationaldevelopmentandreformcommission, Zhang Xiaoqiang.43 ThedealcouldleadtoAirbus

  • 8/8/2019 Aircraft Industries

    27/95

    assemblingsomeofitssmallerA320 single-aisle jetsin China. Thecompanysaiditwouldcarry

    outa feasibilitystudytoestablishwhetheritshouldbuildanalternativeassembly point forA320planesin China.Accordingto Ma Xiaowen,aseniorconsultantwith Great Wall Industry44,Chinasstaterunaerospacecompany,thedecisionto fabricate planeswouldhelp Airbusincreasesales.Airbusseniorvice-president forMarketingand Pricing, OlivierAndriesdeclared,Airbusis not only selling aircraft in China, but also committed to the long-term development of China's

    aviation industry.45In March 2006 Boeingand JapanAirlines (JAL)signedanagreementthatwouldreduce JALsoperatingcostsbyallowing Boeingtomanageamajorityoftheairlinesspare partsinventory.46In 2001 Boeingand JALhadenteredintoacontract formanagementofalimitedscopeofexpendable parts. Thecurrentagreementappreciablyexpandsthatrelationship andaugmentsthe

    valueof JALsmaintenanceoperations. Thesystemwasknownas Integrated MaterialManagementwhere Boeingwouldberesponsible forpurchasing,inventorymanagementand

    logistics forJALsreplaceableaircraft parts. The partswerestoredatasiteneartheairlineoperationsuntilneeded. JALonly paid forpartswhenitneededthemwhichgreatlyreducedits

    inventoryholdingcostsandimprovedthereturnonassets. This programwasaninnovativedevelopmentinexpanding Boeingssupplychainservicesto providevaluetobothairline

    clienteleandsuppliers.40Booming IndiabuoysAirbusatshowwww.msnbc.msn.com/id, 16th.June,200541ibid42www.indiadaily.com/editorial 13th.May, 2005

    43Airbusand Chinastrengthentieshttp://news.bbc.co.uk/1/hi/business/ 4th.December,200544Heim,Kristi Boeingstumblesinrace forChina 20th.June, 2005 www.seattletimes.nwsource.com45Airbusexpectssoaring China purchase,www.chinadaily.com 25th.March,2004

    46Boeingand JapanAirlines Sign Dealon End-to-End Supply-Chain Solutionwww.webwire.com 15th.March,2006

    10Mitsubishi,Kawasaki, Sumitomoand Furukawaaresomeofthetop suppliersinvolvedinthe

    manufactureoftheA300 seriesofAirbus47.Atotalof 16 Japanesecompanieshadbecome

    contractors forthebestsellingsingle-aisleA320. TheA380 had forgedevenstrongerpartnerships

    betweenAirbusandthe Japaneseindustry. ItwasestimatedthattheA380 production programmewouldbringabout US $4.6 billiontothe Japaneseindustry,confirmingAirbusconfidenceinJapanesetechnologicalskills,qualitystandardsanddependability. Witheightoutof 10 main

    A380 routesexpectedtobeginorendintheAsia-Pacificregionoverthenext 20 years, Japanwouldbeakeymarket forAirbusinthenexttwodecades.

    Accordingtoanalysts,thecurrentracewasbetween BoeingandAirbusinoutsourcingto Indiatoproducebetterplanesatlowercosts. Whilethe Europeanaircraftmaker,Airbus,hadstartedtalkswith HindustanAeronauticsLimited (HAL)in Indiatodevelop components fortheA380, Boeinghadawardedanewdealto HCL Technologiestodevelop software foritslatestinnovation,the787 Dreamliner.Accordingto Boeings SeniorVice President Thomas Pickering,HCLTechnologies will focus its software development services on two aspects of the 787 programme.

    First, it will provide a hosting platform for the flight test computing system to support therequirements of the 787 global team. Second, the company will be providing software

    development services to many of the 787 systems partners.48 Boeinghad forecast 492 aircraftinthenext 20 years from Indiavaluedat $36 billionaccordingto SeniorVice-President (Sales)

    Dinesh S Keskar.49In December, 2005 SingaporeAirlineswasinterestedinacquiringalong-rangeversionofthewide-body 777,the Jumbo 747 andthenew 787 Dreamliner,givingthedealalist-pricevaluerangingbetween 11 billionand 16 billiondollars. Thetransactionwouldmarkanotherwin forBoeingintheAsia-Pacificregion. HongKong's Cathay PacificandAustralia's Qantasboth

    bookedmajororders forBoeing jets,afterthecompanywonasuccessionofbigorders fromChina. Byend 2005 BoeingovertookAirbuswhich,inrecentyears,hadovertaken Boeinginairplanedeliveries,byloggingin firmorders for870 aircraft. Butnegotiationsbetween Singapore

    AirlinesandAirbushavecontinuedanddiscountscouldalterthedeal.This is one of the last

  • 8/8/2019 Aircraft Industries

    28/95

    majorAsian campaigns to be resolved andAirbus, whose A340 Singapore currently flies, will no

    doubt be slashing their prices to regain some market share after a triumphant year in the region

    for Boeing's wide-body offerings, BancofAmerica Securitiesanalyst NickFothergillsaid.50Whileitsyoung 90-plane fleetwasmostly Boeing, SingaporeAirlineshadordered 10 A380swith

    another15 onoption. Theywouldbethe firstairlinetocommercially putintooperationthesuperjumbowhenitisdeliveredin November, 2006. Thecompanyalsooperated fiveAirbus

    A340s.AirbuswasconfidentofmoreordersinAsiaandannouncedin December, 2005 itsbiggestdealin China, for150 mid-range planesworthnearly 10 billiondollars.51 In May, 2006 aspokesman forMalaysianAirlines,anothermiddle-level playerinAsia,saidthatthecompanywouldbuyorlease 50 medium-rangeaircrafttoreplace 39 Boeing 737-400s. Healsostatedthat

    theKualaLumpur-basedcarrierwas finalizingselectionbetweentheAirbusA350 andtheBoeing 787.5247www.airbus.com/japan

    48Chopra, Sonal BoeingandAirbusrushtowards Indiatooutsourceservicesandsoftwareswww.indiadaily.com, 9th.February, 200549Boeingexpects 492 planeorders from Indiain 20 yearswww.hindustantimes.com/31st.January, 2006

    50http://asia.news.yahoo.com/051224/ 24th.December, 200551Op.citasia.news.yahoo.com52Asianshowdownlooms forBoeingandAirbus 17th.February, 2006 www.iht.com/articles/bloomberg/bxplanes.php

    11Asianairlines,withacombined 2005 profitestimatedat $1.5 billion,wouldbethebiggestbuyersoflargeaircraftby 2023,accordingtoa forecastbyAirbus.Asiandemand foroutsized planesseatingmorethan 450 peoplewillseeanupwardtrend,giventhe factthatincomesareontherise

    in Indiaand China,asalsoexpectedincreaseintourismto China forthe 2008 Olympic Games.Airbusneedstosellmoreofthewide-bodied planeswithtwo passengeraisleseachtocatchupwith Boeinginvalueof 2005 contracts.Airbushadbooked 526 airplaneordersinAsiavaluedat$39.4 billionin 2005 comparedwith Boeing's 381 planeordersvaluedat $45.5 billion.53 Thetwo

    majorswonarecord 2,057 ordersin 2005,withcarriersin China, IndiaandotherAsiancountries

    accounting formorethan 40 percentofthetotalunitssold. China'sairlinesordered 352 planesin2005 from BoeingandAirbus, 17 percentofthetotalordersreceived. India,ledbylow-costairlineslikeAirDeccan,ordered 337 planes.54Forthetwogiantsofaviationattainingthe firstrankinindustrywoulddependonindividual

    performanceintheAsia-Pacificregion. Thesewouldbethedevelopingmarketsinthenexttwodecades poweredbythetwoeconomic powerhouses, Chinaand India. Japanand Singapore-Malaysiawouldalsoseeanupswinginaircraftrequirement. ToeffectivelymeettheseneedsbothBoeingandAirbuswouldhavetogive primeimportanceto productup-gradation,technologicalinnovationandmarketingstrategy. Withnewmodelsontheanvil,theefficientdevelopmentof

    thesemarketswouldensuresteadyabsorptionofairplane productlinesinthe future. TheAirbus

    missionstatementsumsitup significantly.Airbus' mission is to provide the aircraft best suitedto the market's needs and to support these aircraft with the highest quality of service.55

    Exhibit I

    Airbus A 380TheAirbusA380 isadouble-decker, four-enginedairlinermanufacturedbyAirbus S.A.S. It firstflewonApril 27, 2005 from Toulouse, France. Commercial flightsshouldbegininlate 2006 after

    15 monthsoftesting,withthedeliveryofthe firstaircrafttolaunchcustomerSingaporeAirlines.Duringmuchofitsdevelopment phase,theaircraftwasknownastheAirbusA3XX,andthe

    nickname SuperjumbohasbecomeassociatedwiththeA380. TheA380 isthelargest passenger

    airlinerintheworld,toppingthe Boeing 747,whichwasthelargest for35 years.ThenewAirbusiscurrentlysoldintwoversions. TheA380-800 cancarry 555 passengersinathree-classconfigurationorup to 853 passengersinasingle-classeconomyconfiguration.Expectedrange forthe-800 modelis 15,000 km (8,000 nauticalmiles). Thesecondmodel,theA380-800F freighter,willcarry 150 tonnesofcargo 10,400 km (5,600 nauticalmiles). TheA380-

  • 8/8/2019 Aircraft Industries

    29/95

    900 isa proposedstretchvariant, forwhichtheA380'swingwasoriginallydesigned. Integrated53Op.cit Asianshowdownlooms forBoeingandAirbus54Ibid55http://hosted.nlr.nl/public/hosted-sites/imcad/partners/airbus.html

    12ModularAvionics (IMA)isthemainavionicsarchitecture. Itisbasedoncommercialoff-theshelf(COTS)design. Many previousdedicatedsingle-purposeavionicscomputersarereplaced

    bydedicatedsoftwarehousedinonboard processormodulesandservers. Thiscutsthenumberofpartsaswellas providingincreased flexibilitywithoutresortingtocustomisedavionics. Itreducescosts,andbenefits fromthecheaplycommerciallyavailablecomputing power.Whenthe 747 replacedthe Douglas DC-8 asthebiggestairliner,thetechnologyusedwasessentiallysimilar (similar flightcontrols,hydraulics,electricsandavionics)butscaledup forthe

    size. ThesamehowevercannotbesaidabouttheA380 andthe 747-400.AscomparedtotheBoeing 747 thecolossalsizeoftheA380 requiresnovelapproachestoapplicationoftechnologies,especially forweightsaving purposes,inorder forittomeetits performanceguarantees. Manyofthetechnologies firstusedheremaylaterbeusedbyother jetlinersas

    operationalexperienceisaccumulated. Giventhehistoryoftheairlineindustry,theA380 will

    significantlyexpandtheimprovementsthatthe 747 mademoreseatsandlowerseat-distancecosts-while providingwiderseatsandbetteramenities. With 555 passengers,theA380

    representsa 35% increaseoverthe 747-400 instandardthree-classconfiguration,alongwithanearly 50% largercabinvolume-meaningmuchmorespace perpassenger.Source: http://en.wikipedia.org/Airbus

    Exhibit II

    The Boeing 787 DreamlinerThe Boeing 787,orDreamliner,isamid-sizedwidebody passengerairlinercurrentlyunder

    developmentby Boeing CommercialAirplanesandscheduledtoenterservicein 2008. Itwill

    carrybetween 200 and 350 passengersdependingontheseatingconfiguration,andwillbemorefuel-efficientthancomparableearlierairliners. Inaddition,itwillbethe firstmajorairlinertousecompositematerialinthemajorityofitsconstruction.Priorto January 28, 2005,the 787 wasknownasthedevelopmentaldesignator7E7. OnApril 26,2005,oneyeartothedayafterthelaunchofthe program,the finallookoftheexternal 787 design

    was frozen. Withalessrakishnoseandamoreconventionaltail,the finaldesignhassuperioraerodynamicsascomparedtotheinitial 7E7 conceptThe 787 essentiallyusesthetechnology proposed forthe Sonic Cruiserinamoreconventionalairframeconfiguration (see Features). Boeingclaimsthatthe 787 willbeup to 20% more fuelefficient

    thancurrentcomparableaircraft. Roughlyone-thirdofthisefficiencyimprovementwill

    come fromtheengines;anotherthird fromaerodynamicimprovementsandtheincreaseduseof

    lighterweightcompositematerials;andtherest fromadvancedsystems. Themostnotablesystemadvancementcontributingtoefficiencyisa "moreelectricarchitecture" whichreplacesbleedairandhydraulic powerwithelectrically poweredcompressorsand pumps. Technology fromtheSonic Cruiserand 787 willbeusedas partof Boeing's projecttoreplacetheirentireairlinerproductline, Yellowstone (ofwhichthe 787 isthe firststage).Source: http://en.wikipedia.org/Boeing

    13Exhibit III

    Airbus-Boeing competition: Plane net orders 2002-2005

    Exhibit IV

    The Boeing Company Financial Summary

    Quarter ended 31st.March

    (Millionsexcept persharedata)2006 2005 ChangeRevenues $14,264 $12,681 12%

  • 8/8/2019 Aircraft Industries

    30/95

    Earnings from Operations $959 $687 40%Operating Margin 6.7% 5.4% 1.3 PtsReported Net Income $692 $535 29%Reported Earnings perShare $0.88 $0.66 33%*Operating Cash Flow $2,055 $1,405 46%

    *After

    pensi

    onc

    ontribu

    tionSource: http://www.boeing.com/news/releases/2006/

    14Exhibit VBoeing Product List

    Commercial Airplanes717737747767777787 Dreamliner

    Out-of-Production Models707727757DC-8DC-9DC-10MD-11MD-80MD-90Source:www.boeing.com/products

    Exhibit VI

    Airbus Performance in 2005Airbusbooked 1,111 newgrossordersand 1,055 netordersduringtheyear.

    2005 deliveriestotalled 378 aircraft,bringingturnover fortheyeartoapproximately 22.3 billion.

    Thebacklogatyear-endwas 2,177 aircraft,valuedat $220.3 billionthehighestever,ensuringworkforthenext fourto fiveyearsatrecordproductionrates.

    Airbusachieveda profitabilitymarginaboveitstargetof 10 percent.Source:www.airbus.com/en/airbusfor/analysts/

    Exhibit VII15

    Airbus Product List on 1st.April, 2006Aircraft Description Seats Launch

    date

    1st

    flight

    1st

    deliveryA300 2 engine,twinaisle, 250-

  • 8/8/2019 Aircraft Industries

    31/95

    375 May 1969 Oct 1972 May 1974A310 2 engine,twinaisle,modifiedA300200-280 July 1978 Apr1982 Dec 1985

    A318 2engin

    e,singl

    eaisl

    e,sh

    ortened6.17m fromA320 136 Apr1999 Jan 2002 Oct 2003

    A319 2 engine,singleaisle,shortened3.77m fromA320 145 June 1993 Jan 1995 Apr1996A320 2 engine,singleaisle 180 Mar1984 Feb 1987 Mar1988A321 2 engine,singleaisle,lengthened6.94m fromA320 220 Nov 1989 Mar1993 Jan 1994A330 2 engine,twinaisle 253-440 June 1987 Nov 1992 Dec 1993A340 4 engine,twinaisle 261-440 June 1987 Oct 1991 Jan 1993

    A350 2engin

    e,twinaisl

    e

    250-

    300 Oct 2005 2009 2010*A380 4 engine,twinaisle,doubledeck555-840 Dec 2002 Apr27,2005 Q4 2006* A350-900 deliveryrescheduledtoatleast 2012. 800 & 1000 variantsayearortwolater.Source: http://en.wikipedia.org/Airbus

    16

    Exhibit VIII

    AIRBUS ResultsYear 1989 1990 1991 1992 1993 1994 1995

    Aircraft orders 421 404 101 136 38 125 106

    Value of orders 34 27 9.4 9.8 3.5 9.1 7

    (US$ billion)

    Cumulative orders 1331 1690 1767 1808 1777 1848 1935

    Aircraft deliveries 105 95 163 157 138 123 124

    Turnover

    US$4.9 US$ 4.7 US$ 7.5 US$ 7.7 US$ 8.7 US$ 8.5 US$ 9.6

    (billion)

    Cumulative

    deliveries 557 652 815 972 1110 1233 1357

    Order backlog 774 1038 952 836 667 615 578

    Number of

    customers 87 101 104 108 113 112 122

    Number of

    operators 70 68 79 97 109 123 131

    Year 1996 1997 1998 1999 2000 2001 2002

    Aircraft orders 326 460 556 476 520 375 300

    Value of orders 23.6 29.6 39 30.5 41.3 44.7 24.3

  • 8/8/2019 Aircraft Industries

    32/95

    (US$ billion)

    Cumulative orders 2236 2674 3203 3633 4125 4399 4632

    Aircraft deliveries 126 182 229 294 311 325 303

    Turnover

    US$8.8US$11.6US$13.3US$16.7US$17.2Euro20.5Euro19.5

    (billion)

    17Cumulative

    deliveries 1483 1665 1894 2188 2499 2824 3127

    Order backlog 753 1009 1309 1445 1626 1575 1505

    Number of

    customers 133 140 160 169 173 180 191

    Number of

    operators 126 146 158 178 188 188 188

    Year 2003 2004 2005

    Aircraft orders 284 370 1111

    Value of orders 24.3 34.4 95.9

    (US$ billion)

    Cumulative orders 4886 5252 6307

    Aircraft deliveries 305 320 378

    Turnover

    Euro19.3Euro>20Euro~22.3

    (billion)

    Cumulative deliveries 3432 3752 4130

    Order backlog 1454 1500 2177

    Number of customers 186 204 225

    Number of operators 210 232 249Source:http://www.airbus.com/store/mm_repository/pdf/att00003196/media_object_file_1989-2005_results.xls

  • 8/8/2019 Aircraft Industries

    33/95

    EADSEuropean Aeronautic Defence and Space Company N.V. (EADS)

    Type Naamloze

    vennootschap(Euronext: EAD,BMAD: EAD, FWB: EAD)

    Industry Aerospace, defence,telecommunications

    Founded 2000

    Headquarters Leiden, Netherlands

    Area served Worldwide

    Key people Bodo Uebber (Chairman), Louis Gallois(CEO)

    Revenue 42.82 billion (2009)[1]

    Operating

    income

    (322 million) (2009)[1]

    Profit (763 million) (2009)[1]

    Total assets 80.30 billion (2009)[1]

    Total equity 10.64 billion (2009)[1]

    Owner(s) SOGEADE(22.46%)

    Daimler AG(22.46%)

    SEPI(5.48%)

    Employees 119,500 (2009)[1]

    Divisions Airbus

  • 8/8/2019 Aircraft Industries

    34/95

    Astrium

    Cassidian

    Eurocopter

    Website www.eads.com

    Type Subsidiary

    Industry Aerospace

    Founded 1970 (Airbus Industrie)

    2001 (Airbus SAS)

    Headquarters Blagnac, France

    Key people Thomas Enders, CEO

    Harald Wilhelm, CFO

    John Leahy, Chief Commercial Officer

    Fabrice Brgier, COO

    Products Commercial airliners (list)

    Revenue 27.45 billion (FY 2008)[1]

    Netincome 1.597 billion (FY 2008)

    Employees 52,000[2]

  • 8/8/2019 Aircraft Industries

    35/95

    Parent EADS

    Subsidiaries Airbus Military

    Website www.airbus.com

    Produced 1988 -

    Number built 4,425 as of 30 September 2010[1]

    Unitcost A318: US$56.0 to $62.1m (2008)[2]

    A319: $63.3 to $77.3m (2008)

    A320: $73.2 to $80.6m (2008)

    A321: $87.7 to $92.8m (2008

    Boeing

    Airplane Families 2008 $ in Millions

    737 Family

    737-600 51.5 -- 58.5

    737-700 58.5 -- 69.5

    737-800 72.5 -- 81.0

    737-900ER 76.0 -- 87.0

    747 Family

  • 8/8/2019 Aircraft Industries

    36/95

    747-400/ -400ER 234.0 -- 266.5

    747-400/ -400ER Freighter 238.0 -- 268.0

    747-8 293.0 -- 308.0

    747-8 Freighter 301.5 -- 304.5

    767 Family

    767-200ER 127.5 -- 139.0

    767-300ER 144.5 -- 161.5

    767-300 Freighter 155.0 -- 166.0

    767-400ER 158.0 -- 173.0

    777 Family

    777-200ER 205.5 -- 231.0

    777-200LR 237.5 -- 263.5

    777-300ER 257.0 -- 286.5

    777 Freighter 252.5 -- 260.5

    787 Family

    787-3 150.0 -- 155.5

  • 8/8/2019 Aircraft Industries

    37/95

    787-8 161.0 -- 171.5

    787-9 194.0 -- 205.5

    Orders and deliveries summary

    Model Series Orders Deliveries Unfilled

    Commercial Jets

    737-600 69 69 -

    737-700 1,527 1,041 486

    737-700C 15 13 2

    737-800 3,390 2,004 1,386

    737-900 52 52 -

    737-900ER 244 77 167

    Commercial Jets Total 5,297 3,256 2,041

    Business Jet

    737-700BBJ 119 103 16

    737-800BBJ 19 15 4

  • 8/8/2019 Aircraft Industries

    38/95

    737-900BBJ 7 4 3

    Business Jets Total 145 122 23

    Grand Total 5,442 3,378 2,064

    Competition between Airbus and Boeing (sometimes referred to as the "Airliner Wars") is a result of

    the two companies' domination of the largejet airlinermarket since the 1990s, which is itself a

    consequence of numerous corporate failures and mergers within the globalaerospace industry over the

    years.Airbus began its life as a consortium, whereas Boeing took over its former arch-rival, McDonnell

    Douglas, in 1997. Other manufacturers, such as Lockheed and Convairin the USA

    and Dornierand Fokkerin Europe, have pulled out of the civil aviation market after disappointing sales

    figures and economic problems. The collapse of the Eastern Bloc and its trade

    organisationComecon around 1990 has put the formerSoviet aircraft industry in a disadvantaged

    position, althoughAntonov, Ilyushin, Sukhoi, Tupolev andYakovlev develop new aircraft and gain a small

    market share. All this has left Boeing and Airbus in a near-duopoly in the global market for large

    commercial jets comprising narrow-body aircraft, wide-body aircraft andjumbo jets.

    However, Embraerhas gained market share with their narrow-body aircraft in the Embraer E-jets series.

    There is also a similar competition in regional jet manufacturing between Bombardier

    Aerospace and Embraer.

    In the decade between 2000 and 2009 Airbus received 6,452 orders, while Boeing received 5,927. Airbus

    had higher deliveries between 2003 and 2009, but fell slightly short of Boeing's deliveries, delivering

    3,810 aircraft compared to Boeing's 3,950. The competition is intense, and each company regularly

    accuses the other of receiving unfairstate aid from their respective governments.

    y

    y

    y

    y

    y

    y

    y

  • 8/8/2019 Aircraft Industries

    39/95

    y 1 Competition by product

    o 1.1 Range overlap

    o 1.2 Passengers/range km (statute miles) for all models

    o 1.3 Airbus A320 vs Boeing 737

    o 1.4 Airbus A330 and Airbus A340 vs Boeing 767 and Boeing 777

    o 1.5 Airbus A350 XWB vs Boeing 787 and 777

    o 1.6 Airbus A380 vs Boeing 747

    o 1.7 A330 MRTT - KC-45A

    1.7.1 EADS A330 MRTT - Northrop Grumman KC 45 A versus Boeing KC-767

    y 2 Competition by outsourcing

    y 3 Competition through use of technology

    y 4 Competition through provision of engine choices

    y 5 Effect of currency on competition

    y 6 Orders and deliveries

    y 7 Boeing's Product Plan

    y 8 Safety

    y 9 Controversies

    o 9.1 Subsidies

    o 9.2 World Trade Organization litigation

    y 10 See also

    y 11 References

    y 12 External links

  • 8/8/2019 Aircraft Industries

    40/95

    Competition by product

    [edit]Range overlap

    Though both manufacturers have a broad product range in various segments from single-aisle to wide-

    body, manufacturers' offerings do not always compete head-to-head. As listed below they respond withslightly different models.

    The A380, for example, is substantially bigger than the B747.

    The A350 XWB competes with the high end of the B787 and the low end of the B777.

    The A320 is bigger than the 737-700 but smaller than the 737-800.

    The A321 is bigger than the B737-900 but smaller than the previous B757-200.

    The A330-200 competes with the smaller B767-300ER.

    Airlines can use this as a benefit since they get a more complete product range from 100 seats to 500

    seats than if both companies offered identical aircraft.

    [edit]Passengers/range km (statute miles) for all models

    A chart comparing the passenger capacity (2-class typical) and range (maximum in nautical miles) of in-production, future,

    and out-of-production since 2000 Airbus and Boeing aircraft.

  • 8/8/2019 Aircraft Industries

    41/95

    2,645

    to

    3,185

    (2400s

    m)

    5,600

    to

    5,900

    (3500s

    m)

    6,800to

    7,700

    (4500sm

    )

    9,000

    to

    10,200

    (5900s

    m)

    10,500to

    11,300

    (6800sm)

    12,250

    to

    12,500

    (7700s

    m)

    13,300

    to

    13,900

    (8500s

    m)

    14,200to

    14,800

    (9000sm

    )

    14,900

    to

    15,200

    (9300s

    m)

    15,400

    to

    16,000

    (9800s

    m)

    16,700to

    17,400

    (10500sm)

    100-

    139

    (B717-

    200)

    A318-100B73

    7-600

    140

    -

    156

    B737-

    700A319-100

    B737-

    700ER

    148

    -

    189

    B737-

    800A32

    0-200

    177

    -

    255

    A321-

    200B73

    7-900

    (B757-

    200)

    (A310-200)

    (A310-

    300)

    B767-

    300ER

    B767-

    200ER

    B787-8

    243

    -

    375

    (B757-

    300)

    B767-

    400ERB74

    7SP

    253

    -

    300

    (A300)(A300-

    600)

    A330-

    200

    A340-200

    A350-

    800B78

    7-9

    295

    -

    440

    B787-3 B777-200

    A330-300

    A340-

    300

    B777-

    200ER

    A350-

    900

    B777-200LR

    313

    -

    366

    A340-

    500

    A340-

    500HGWA3

    50-900R

    358

    -

    550

    B747-

    100SRB7

    47-300SR

    B747-

    100B777-300

    B747-

    200

    B777-

    300ERA3

    50-1000

    380

    -

    419

    A340-

    600A340-

    600HGW

    410

    -

    B747-

    400

    B747-

    400ER

  • 8/8/2019 Aircraft Industries

    42/95

    568

  • 8/8/2019 Aircraft Industries

    43/95

    Height

    3.95 m (13 ft)Fuselag

    e Width3.76 m (12 ft 4 in)

    Fuselag

    e

    Height

    4.11 m (13' 6")

    39,300 k

    g

    40,600 k

    g

    42,400 k

    g

    48,200 k

    g

    Typical

    empty

    weight

    28,120 k

    g

    (61,864 l

    b)

    33,200 k

    g

    (73,040 l