In order to get the better of eachother, these player have crafted very different strategies with their new planes. While Boeing’s (B787) strategy revolves around jets which can be easily accommodated and can fly to any destination, Airbus (A380) bets on transportation between two large centres with maximum load and focuses on a maximum inventory utilisation strategy. Boeing is betting big on the Dream liner 787 and hopes that it will turn the table in its favour. The manufacturing for the 787 was started after signing a deal worth $6 billion for 50 firm orders from All Nippon Airways of Japan. With an estimated cost of $8 to $10 billion per piece, the 787 is targeted at the twin engine, medium to long-range market segment, with a capacity of 200-300 passengers. The good news for Boeing is that with the increasing demand for the Dreamliner, its production line is now fully booked until 2015! “Our assumption is that demand for the newly launched aircraft models, such as the Dreamliner, will exceed supply for the foreseeable future,” supports Englund. With the A380, Airbus is already meeting its expectation. The aircraft has already been introduced with the Singapore Airways and Emirates among others. As per latest news, Airbus has 198 orders for the A380 from 16 customers. Apart from the A380, Airbus on its part also unveiled the blue-print of the smaller A350, which will compete with Boeing’s 787 directly. The planned A350 is being developed as an upgraded and more advance derivative of the existing A330-40. With an enhanced new wing, more fuel-efficient engines coupled with other new technologies, the A350 is ready to take the game forward. The development cost for the prototype is estimated to be $5.3 billion. In 2008, Airbus added 163 net orders and 16 customers to its already high launch customer base, culminating in a total of 478 net orders from 29 customers. As per an Airbus report with 4Ps B&M, in 2008, the A350 enjoyed a majority 64% orders, compared to rivals (read: Boeing).
“Looking at the order backlog at the end of 2008, Airbus and Boeing are equal (3,715 aircraft in backlog versus 3,714). If one looked at the dollar value of the backlog, I would estimate that Boeing is in the lead given the large number of orders it has for the 787,” explains Fraser putting a new argument. But Airbus has been able to register a 7% rise in deliveries to a record 483 planes during 2008, while Boeing - hit by a machinists’ strike - saw its deliveries fall by 15% to 375 planes. In terms of market share, Airbus is definitely leading at this time, but discounting Boeing would be a mistake. “In prior years, Airbus beat Boeing in terms of deliveries, but by modest amounts. We forecast that Airbus will edge Boeing in deliveries by only 5-10 aircraft,” predicts Fraser.
It is clear that apart from each other, these players also need to be cautious about emerging market dynamics. In these difficult times, both are facing major cancellations of orders from various airlines in the wake of the global liquidity crisis. Airbus has already recorded a sales fall of 42%, Boeing has had a fall of an even larger 53%. Looking at the scenario, one thing is for sure, the Samurai who makes the first and most feasible move to counter the ‘crisis of confidence’ will emerge as the reckoning force in the long run. Now could be the time to look for another Saiga Takamori!
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Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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