However, one cannot completely exclude this possibility. China Daily (Nov, 2008) reported that China plans to develop a 130 to 200-seat commercial aircraft, the world's most popular type of jet, to break the market duopoly of Boeing and Airbus. China is steadily acquiring the skills and technology necessary to emerge as a major player in the global market with the help of the Airbus assembly facility, ambitions to build large aircraft by a Chinese regional jet (RJ) maker and intercontinental aerospace partnerships. Aviation Week (May, 2009) cited that Chinese aerospace companies are catching up, much like Japanese car companies caught up with Detroit in the 1970s and 1980s. A Chinese narrow body competitor to Airbus and Boeing aircraft could be ready by as soon as 2020.
Threats of Substitute Products and Services
It may be difficult to envisage a direct substitute for commercial aircraft for long haul transport since air travel is still seen as the most effective, economic and convenient mode of transport in the foreseeable future. However, a few threats exist, especially in the short haul category. These include:
- Surface transport especially by rail, is a viable substitute. Unlike airlines, railways can provide city center to city center travel and have been shown to severely impact the airline market once the journey time is brought down to below three hours. Fast bullet trains offer an attractive solution to commuting between cities. A good example would be the Alta Velocidad Española, or AVE, high-speed rail network in Spain. The Madrid-Barcelona line opened in February 2008 and the rates were similar to the costs of flying. It has since snatched half the route's air-passenger traffic.
- The Wall Street Journal (April, 2009) reported that President Obama was impressed and cited Spain’s AVE to sell his vision of a high-speed train network to the American public.If his vision is realized and the network is indeed established and used widely in the US, a great many airlines may lose market share and as a consequence reduce their fleets.
- Likewise, advances in automotive industry, such as cars capable of very high speeds, under electronic control on specially equipped freeways may have an impact on air travel.
- Finally, advances in telecommunications techniques, collaborative computing, desktop video-conferencing based on broadband ISDN type services may reduce business travel requirements and impact the airlines’ investment in new planes and routes.
The threat of substitute products does exist at the part/component level in the aerospace industry. For example, new material technology can make obsolete the materials previously commonly used in the construction of airplanes and engines.
The Bargaining Power of Suppliers
The bargaining power of aerospace suppliers is not that strong, but there are exceptions where a supplier may possess key technologies. The bargaining power of the various groups of suppliers is delineated as follows:
Engine manufacturers: They represent the single most significant group of suppliers and it can be assumed that their bargaining power is going to significantly increase as they undergo concentration. General Electric, Pratt & Whitney (US), Rolls Royce (UK), CFM (Europe) are the main competitors. Planes are usually designed for more than one engine type but the required fuel efficiencies, increased reliability needs—especially for twin engine transatlantic wide bodies—and the need to provide more power for the new large body aircraft require aircraft manufacturers to enter in joint development programs with the engine manufacturers.
Regulating bodies such as the FAA, EPA, etc.: They determine a number of constraints that the industry has to deal with. The bargaining power of these institutions is considerable as they can create major obstacles for the final approval of the planes.
Finance Companies and banks: Since the industry is extremely capital intensive, all sources of investment and financing hold considerable power. A recent trend is the development of financing and leasing companies which buy planes from the manufacturers, then lease them to various airlines. ILFC (International Lease Finance Corp) is one such company that recently ordered 30 Airbus aircraft. Meanwhile Airbus itself has formed its own financing service which has access to more than $1.5 billion revolving credit facility from 46 different banks.
Defence Suppliers: There is heavy pressure on defense suppliers to move to commercial applications, the bargaining power of these industries as they fight for additional share of the commercial market is at the advantage of the aircraft industry.
The Bargaining Power of Buyers
Airline companies and leasing companies often force cutthroat competition between the aircraft manufacturers. In particular, airlines ordering a large number of planes can press for extraordinary concessions from the prime contractors. These orders are a relatively large percentage of total sales, so buyers are in an advantageous position to demand price reductions. The switching costs for aircraft and engines are very low, which increases the buyers' power. Most recently, Ryanair (the airline is in talks with Boeing and Airbus to supply another 300 aircraft by 2016) is pressing the manufacturers to give deep discounts. United is also waving the prospect of a winner-take-all $10 billion order to drive a hard bargain with Airbus and Boeing.
Thus, the buyers detain considerable power that is increasing since there is a downturn in orders due to the economic crisis. Most of the world's leading carriers have declared, or warned of, significant losses this year. Major airlines are all pursuing unorthodox working arrangements for staff and salary sacrifices. As the airlines optimize their operations and cut their investments, the competition among the suppliers has become more intense.
From the above analysis, the aviation industry is relatively attractive to Airbus. It is in a good position to compete.. However, its major competitor Boeing has the resources and the capability to inch forward once it sorts out its delay woes. Another serious challenge in the future would be China. Its entry into the aircraft manufacturing industry is likely to upset the delicate balance between Airbus and Boeing.
- SWOT Analysis
- Strengths
Leading market position
Airbus currently has a hairline lead on the market position. The company won 777 firm net orders valued at USD100 billion at catalogue prices in 2008 as compared to its rival Boeing (662 net orders) and delivered 483 aircrafts in 2008 as compared to 375 deliveries by Boeing (Refer to Figure 1). Airbus' strong showing helped it claim 54% of all aircraft sales over 100 seats in 2008. In addition, EADS revenue in 2008 was $62.3 billion compared with Boeing's $60.9 billion.
Businessweek (June, 2009) reported that Airbus continues to book new requests for its A350. The first version of the A350 is scheduled to take wing commercially in 2013. It is designed to compete with both Boeing’s Dreamliner and the long-established, larger Boeing 777. Boeing can point to 866 orders for the Dreamliner — a staggering tally for a novel design that has been delayed for two years and faces a slew of rigorous tests before its first commercial delivery in 2010. But, so far this year, Boeing has lost 58 orders for the Dreamliner and has offset that with only 13 new orders. By contrast, Airbus can boast of 493 orders for its A350, including 10 booked at the recent Paris Air Show. And, so far, there have been no cancellations. The healthy order book is putting pressure on Boeing to consider tinkering with both its old and new planes to compete.
While Airbus enjoys an advantage in orders over Boeing, the company and its parent, EADS are facing a financial crunch arising from its own troubled development in its military wings. The total order backlog of Boeing stood at $323.9 billion in 2008, an increase of 9.1% over 2007. Boeing has also recorded increase in order from majority of its segments. Of the total backlog, the commercial airplanes segment recorded a net backlog of $278.6 billion in 2008, an increase of 9.2% over 2007. The strong order backlog assures stable revenue growth for Boeing into the future and threatens Airbus’ current lead.
Strong support from parent EADS and the EU
Airbus enjoys the strong financial base of its parent company, European Aeronautic Defence and Space Company (EADS). EADS is the dominant aerospace company in Europe. EADS operates in a number of business sectors and the company has a leading market position in each of these
business sectors:
- The world leader in the light and medium military transport aircraft market and is the only manufacturer catering to the 3-to-9 tonne military segment (CASA).
- The world's leading exporter of civil helicopters and has a 50% market share in the global civil and para public market (Eurocopter).
- The world's leading provider of 40 to70 seats regional turboprop aircraft market (ATR).
- It is the global space industry leader (EADS ASTRIUM).
Bloomberg (Aug 13, 2009) reported that net income of EADS for the second quarter of 2009 increased 76 percent to E208 million from E118 million and sales rose 19 percent to E11.7 billion. Thus, EADS can provide significant support to Airbus' operations financially and its market position and technological focus complements the operations of Airbus.
In addition, under a 1992 bilateral agreement Airbus has received billions in European government loans. Boeing contends the deal gives Airbus an advantage by lowering its commercial risk, making it easier to obtain financing.
Similarly, Boeing enjoys strong support of the US government and its agencies as well. European Commission (External Trade) reported in 2007 that Boeing enjoys significant tax breaks under the Foreign Sales Corporation and successive legislation at federal level in US. At the State and local level, subsidies to Boeing include a USD 4 billion package in the State of Washington (combining tax breaks, tax exemptions or tax credits and infrastructure projects for the exclusive benefit of Boeing) and a USD 900 million package in the State of Kansas in the form of tax breaks and subsidized bonds, some of which are known as "Boeing Bonds" will be enjoyed by Boeing until 2024.
In addition, Boeing benefits from numerous types of R&D support provided by NASA and the US Department of Defense (DOD). This support includes contracts for
- R&D work to be carried out by Boeing (ultimately benefiting Boeing's LCA division and Boeing's aircraft models),
- extensive cooperation with NASA and DOD engineers at no cost to Boeing,
- and use of testing facilities and equipment, also at no cost to Boeing.
This support is coupled with the transfer of patents and other vital knowledge to Boeing, and reinforced by stringent restrictions on the application and use of such knowledge by foreign competitors
Relatively high employee productivity
Airbus has traditionally employed fewer workers than Boeing, depending instead on a capital intensive model - more machinery, greater automation. Boeing, until recently had a labor intensive model - more labor less automation. In addition, Airbus registered comparatively strong revenue per employee. Relatively strong revenue per employee indicates the company’s stronger productivity and operational efficiency. In 2007, the company recorded total revenues of E25,216 million (approximately $37,114.2 million) with a total of 57,000 employees. The revenue per employee of the company stood at $651,126.3, which is higher than that of its close competitors like Boeing. The revenue per employee of Boeing stood at $416,742 in 2007, significantly lower than that of Airbus.
- Weaknesses
Delays in the aircraft launch
In 2007, Airbus faced a barrage of difficulties stemming from delays of both the A380 and A350. These delays could cost Airbus more than $4
billion in the form of penalties, higher production costs and order cancellations. As a result of these delays Airbus is also significantly behind Boeing in terms of its current production cycle. The company witnessed a two years delay in the delivery of its A380 aircrafts, due to several reasons:
- Problems with wiring harnesses in the digital mock-up and inaccuracy in the software.
- Challenges regarding the design and weight.
- Redesign of major elements of the aircraft due to the preference of low noise by the customers.
As a result, Airbus had to re-plan the launch of its A380 twice. These delays caused Airbus to lose billions of dollars through penalties,
higher production costs, and a slower learning curve with the A380. Further, in May 2008, Airbus announced another delay to its planned deliveries of its 525 seat A380 aircrafts. Such delays in the delivery schedule of aircrafts reflect the operational inefficiency of the company.
More recently, Boeing experienced its share of delay woes as well. According to an article in Businessweek (June, 2009), Boeing had targeted a first flight for B787 in June 2009. The program is now two years behind schedule and further delays to deliveries are inevitable--putting Boeing's hopes of consolidating its lead over the forthcoming Airbus A350 increasingly under threat. The delays are forcing some carriers further into the arms of Airbus for alternatives. Virgin Atlantic, for instance, announced on June 22 it was buying 10 new Airbus A330-300 planes, for delivery by 2012.
- Opportunities
Power 8 restructuring plan
According to Gallois (CEO, EADS), the Power 8 restructuring program was “much more than lowering costs, selling assembly plants and cutting jobs. It was fundamentally about reorienting Airbus's culture, altering it from one that often has been dominated by the parochial interests of European states into a transnational enterprise that builds aircraft as efficiently as possible”. The main aim of the Power 8 restructuring program announced in 2007 was to cut costs through;
- shedding some 10,000 jobs over the next four years;
- lean production and smart buying;
- devoting its resources in future to core activities and increasing the amount of work it outsourced from 25 to 50 percent;
- limiting to only one final assembly line at one location for each type of aircraft..
The plan aims to save Airbus E2 billion annually from 2010 onwards and free up E5 billion of cash by 2010 through efficiency improvement initiatives. In 2008, an extension of this program known as Power 8 plus was announced. The new cost-cutting measures were designed to add E650 million ($928 million) in savings to the E2.1 billion ($3 billion) target prescribed by the Power 8 restructuring program. The initiative extends the existing Power8 program from 2010 to 2012, accounting for E350 million ($500 million) in savings. Another E300 million ($428 million) will come from “internationalization” of engineering and manufacturing work. Plans reportedly call for a new parts factory in Tunisia and further investment in composite parts processes in France.
According to the Airbus website (2009), Power 8 had exceeded targets for the second year in a row, delivering cost savings of about 1.3 billion Euros. The savings are over half of the 2010 objective and Power 8 plus is expected to add a further 650 million euros in savings by 2012. The success of the Power 8 restructuring will play a pivotal role in determining Airbus' position in the future as these savings would be needed to fund future projects including the development of the A350XWB and to improve its cost base and overall efficiency.
3.4 Threats
Exchange Rate Fluctuations
Airbuses sells its planes in dollars but close to half of its costs are denominated in euros, making the company sensitive to swings in the euro/dollar rate despite efforts to hedge its currency exposure. As such, it bears the full brunt of euro/dollar fluctuations. In contrast, Boeing, is almost completely protected from exchange-rate movements because its costs are mostly in US dollars. The strong euro also means that the discounts manufacturers usually give to win big orders cut deeper into Airbus revenue. Thus, as reported in Reuters (Nov, 2007), a sharp decline of the US dollar poses an "existential" long-term threat to Airbus that could force Airbus to shift production to dollar-zone countries and rein in development plans.
Research and development spending
Airbus has been spending a very healthy level of resources on product development for the past eight years. However, almost all of this has gone into the A380 plane. The challenge is to keep this level of expenditure equally high in order to bring the A350 XWB to market by the target date of 2013. Deliveries are expected to be lower after 2009 due to the weak air travel market, so to maintain the current level of spending Airbus might have to spend 12% or more of sales on new product development. Since Airbus parent EADS is heavily dependent on key stakeholders providing the cash, there are legitimate reasons to question the availability of resources to make the A350 XWB schedule happen on time. On the other hand, Boeing increased its R&D spending after the 787 launch. It is now spending billions of dollars and a relatively high percentage of sales on the 787, plus the 747-8 and 777 Freighter. While all of these have gone over budget, still there are few doubts that Boeing can find the necessary resources.
World Trade Organization Ruling
Airbus and Boeing expect rulings shortly in the WTO investigations into government subsidies. The WTO is likely to find against European-style support through repayable launch funding. The Airbus A350XWB and A350 may escape censure but the next generation narrow-bodied aircraft will be affected.
- Core Competencies and Competitive Advantage
Both Airbus and Boeing have comparable competencies in customer knowledge and focus, large scale systems integration and lean, efficient design and production. In fact, both companies imitate the best practices of the other. For example, in planning its 787 production process, Boeing took some inspiration from Airbus, which long had assembly lines in Toulouse and Hamburg putting together major airframe components coming from several places in Europe. Subsequently, in the planning of program risk management for the A350, Airbus was inspired by Boeing and its outsourcing strategy. Despite this, Airbus has several core competencies that distinguish it from Boeing.
Composite leadership
Airbus leads the industry in the use of weight-saving composite materials in civil aircrafts. Composites on secondary structures using glass fibre reinforced plastic were introduced in 1974 on its first aircraft A300. The A380 continues this tradition of Airbus innovation using more composites (25 per cent) than any previous commercial aircraft in the primary structures, including the centre wing box (an industry first) and the rear fuselage section. Thus, the aircraft is lighter with lower fuel consumption.
Design leadership
Airbus owes its efficiency to the use of advanced computational fluid dynamics and other advanced modeling techniques in creating leading aerodynamic performance. It has a long tradition of collaborating with many European aeronautical research laboratories to benefit from their new ideas. The Airbus International Research Network involves nearly 40 research institutes and 90 universities worldwide bringing together some of the world’s best brains that helps Airbus to be innovative in manufacturing techniques and design.
Unrivalled commonality
In 1988, Airbus introduced the ‘fly by wire’ technology to the industry. Complex cable and pulley between the pilot’s central control and the flight control surfaces of the wing and the tailplane were replaced with electrical wires to enable the pilot to maneuver using side stick control. Such technology not only reduced the weight of the plane and made it more fuel efficient but also increased safety by introducing the flight envelope protection which set aircraft performance limits. This enabled Airbus to extend its commonality philosophy (near identical cockpit design and handling features) to its entire fleet so that pilots need much shorter training time (1 to 8 days as compared to 25 days) to transfer from one aircraft to another. By making it simple and inexpensive for pilots to operate several types of aircraft, Airbus promotes the concept of mixed fleet flying which gives greater flexibility to airline companies.
A380 – A technology marvel
For any organization, innovation represents not only the opportunity to grow and survive but also the opportunity to significantly influence the direction of the industry. Airbus has incorporated groundbreaking technologies in the A380 aircraft. The absence of such an aircraft in the super jumbo category gave Airbus the first mover advantage. Besides the unprecedented level of composites, the A380 uses further structural, aerodynamic, systems and avionics innovations to create an aircraft that uses 12 per cent less fuel than its rival whilst carrying 35% more passengers. Other firsts include the integrated modular electronics, electrical generation system and other components that ensure the A380 can fly and land in the event of total hydraulic power failure.
Exceptional customer service
Its objective is to keep customers’ aircraft flying with the highest possible level of safety, reliability and profitability and to minimize operators’ costs. To meet this objective Airbus provides customer service and support that is specifically tailored to each individual customer. These include:
- Assigning a personal contact who would support them from the initial sales campaign until the retirement of the aircraft.
- Placing a dedicated team of resident engineers at the customer’s main base or other remote locations to provide support during the initial period.
- Providing 24 /7 access to technical help through the AIRTRAC centre.
- Airbus Upgrade Services teams to handle requests for upgrades of cabin interiors or aircraft systems
- Taking full responsibility of the supply chain through its Customised Spares Logistics service that reduces the time taken for airline companies to get spares.
- Using the latest technology to develop e-solutions such as AIRMAN, AirFASE and AirN@v that optimize fleet maintenance, reduce turnaround time, monitor the safety and provide live data checks.
- Providing flight support training in its own training centers in Hamburg as well as in other CAE centers around the world enabling airlines to train their pilots close to their operating base.
- Maintaining standards by ensuring that the support rendered by the original equipment manufacturers meet the expected levels by publishing a supplier rating and taking actions to improve the overall results.
- Listening to its customers and using the feedback to continually improve the design, production and support of the aircraft
Vision 2020
Airbus plays a central role in EU’s Vision 2020 which sets out the challenges and goals of the future air travel. With a threefold increase in air transport predicted in coming years, Airbus is working closely with forward thinking stakeholders to build aircrafts that are safer, environmentally cleaner and quieter than any developed before. As part of this effort, Airbus leads and collaborates worldwide in a series of research programs which include:
- SILENCE – collaborative effort with 50 partners from 14 countries to reduce noise level from aircrafts by 2010.
- AWIATOR – joint research program to improve wing technology and turbulence sensors
- TANGO – collaborative effort with 34 partners from 12 countries to develop new metallic applications and composites aimed at reducing the weight, fuel consumption and emission levels of aircrafts.
- NACRE – program to improve aircraft shape and design.
In summary, Airbus has competitive advantage over Boeing as its strategies and operations are guided by the following four principles. First, it anticipates and satisfies the market by carefully listening to airlines, passengers, and pilots, and by giving the customers what they want or like. Second, it innovates continuously by boldly adopting new ideas, new materials, new procedures, and new technologies. Third, Airbus seeks to maximize airline operators' revenues by providing more passenger comfort--ergonomics, quietness, smoothness, and the "no middle seat" concept. Fourth, it develops families of aircraft that have either the same or similar cockpits and flight-handling systems, resulting in lower training costs, higher crew productivity, more flexibility for pilots, and smaller operating expenditures for airlines (Airbus Industrie, 2001a). These strategies has forced Boeing to adopt a reactor strategy and make improvements to its existing jumbo jet to produce the 787.
- Strategy Recommendations
Although Airbus and Boeing operate in the same industry, they have diametrically opposite visions of the future. Airbus predicts that the future airliners will be operating as “Hub to Hub” (Norris G., 2005), while Boeing illustrates the concept of “Airport to Airport” (Hawk, 2005) and predict that mid-sized aircrafts will be more preferable in the future. Thus, the first strategic focus is set on size (by Airbus) the other strategic focus is set on speed (by Boeing). In accordance with their two differing visions, Airbus and Boeing have set their own strategies and are working on two different classes of jets.
Strategic architecture
To quantify its long term mission, Airbus is developing its strategic architecture using objectives like Power 8 as a platform for further internationalization, focusing on key geographic markets, expanding its customer services offering and restoring its competitive edge by focusing on flexibility and efficiency. Airbus fosters values of excellence and innovation among its culturally diverse employees and considers its customers, contractors and suppliers to be partners working in the interests of safety, quality and performance.
Guarding its core competencies
Boeing and Airbus have always outsourced subcomponents and systems to international suppliers including China, India and Japan. Outsourcing is unavoidable—the best means of holding labor and structural costs within financially stable bounds.
With extensive outsourcing, both companies now tout themselves as “ system ïntegrators” rather than simply manufacturers of aircrafts.
However, Airbus has always jealously guarded its core competencies and new technologies and has relatively tight control over its supply chain. The first Airbus final assembly to operate outside of Europe is located in Tianjin, China. This is the production site of A320 Family aircraft. Critics have argued that this move is likely to erode Airbus’ stronghold on its core competencies. However, it should be noted that the A320 came into operation in 1984 and the technology involved in making the aircraft is now common knowledge among the aircraft manufacturers.
On the other hand, Boeing has elected to outsource a sizable body of knowledge. The greater part of its new airplane, the 787 Dreamliner, is being built in Japan with its three major aircraft companies in the lead role. Stan Sorscher, a Boeing engineer says,” the 787 composite wing and fuselage structure are new technologies—untried on this scale even by Boeing. Boeing developed much of the materials, manufacturing processes, tooling, tolerances and allowances, and other design features, which are then transferred to suppliers in Japan, Italy and elsewhere. Over time, institutional learning and forgetting will put the suppliers in control of the critical body of knowledge, and Boeing will steadily lose touch with key technical expertise.” Hence, Boeing is giving up its competitive edge by outsourcing the major parts of the 787 with the new composite materials.
Vision of the future
Airbus was the first company that took the risk of redefining its strategy. The feedback loop -- the time to develop and construct a new model is quite large. The initiative from Airbus to develop the new A380 model was therefore quite a challenge. It was a brave strategic move that required a even more serious implementation. Any company that is remodeling its business strategy will face implementation problems. In the case of Airbus these are very visible for the world, not in the last place for the long feedback loop.
Allegiance of employees
Airbus was able to sell its vision and garner the allegiance of its employees to support the Power 8 restructuring plan. In fact, Power 8 exacerbated the threat of job losses due to outsourcing, yet Airbus only suffered minor labor protests (although European unions are known to be more militant than their US counterparts). Union leaders at Airbus realized that a strike could aggravate an already precarious situation since delays on the A380 mega jet knocked billions off the bottom line and the euro's rise against the dollar has seriously dented its competitive edge against Boeing. Union leaders even agreed to that 1.5% pay raise, well below France's 2.5% inflation rate in 2007.
Despite better perks and higher wages, Boeing’s 27000 employees went on a strike over wages, health benefits and the threat of job losses due to outsourcing. This caused Boeing to delay its test flights and delivery of the 787s and lose some of its customers.
Based on the discussions in the earlier sections, Airbus’ strategies seem to be well crafted to optimize its strengths and take advantage of the opportunities that come its way. Hamel and Prahalad (1999) suggested that in order to compete for the future, companies need to redefine strategy as one that is more concerned with ’stretch goals’ that challenge employees to reach the seemingly impossible and developing the strategic architecture to identify core competencies to build and nurture. In my opinion, Airbus seems better equipped to compete for the future as compared to Boeing for the following reasons:
- Airbus envisions a future of the aircraft industry and has systematically worked towards creating “New standards. Together.”
- It continues to challenge its own orthodoxies and ‘learn to forget’ its unique historical links with the founding countries to regenerate its core strategies.
- Unlike Boeing, Airbus has a view of strategy that addresses more than the problem of maximizing profits in today’s market. In a bid to attain industry foresight and intellectual leadership, Airbus strives to gain a deeper understanding than competitors of the trends and discontinuities – technological, demographic, regulatory, lifestyle to transform industry boundaries and create new competitive space.
- Unlike Boeing which tends to look at the future through the narrow aperture of existing served markets and make incremental changes, Airbus enlarges its opportunity horizon by viewing the company as a portfolio of competencies and focuses on its current and future capabilities to find its niche.
- Whilst Boeing competes for product leadership (B787) within the existing industry structure, Airbus is competing to shape the future airline industry by giving customers something that does not yet exist, but that if it did exist and the customer was made aware of its existence and was told how to use it, would beat a path to your door to buy it – as in the case of A380.
Thus, Airbus has made critical effort to rededine its strategies in an effort to get back on track.
6.0 Potential Fallout
There are a number of minefields that Airbus must navigate. One is its ability to survive the financial crunch and continue with its manufacturing of the A380 and A350XWB. Many of its partner countries in the EU are facing the brunt of the 2009 economic downturn and whether the promised funds will materialize remains to be seen.
Second, as a subsidiary Airbus is inextricably linked to its parent company EADS. While it makes every effort to distinguish itself as a separate entity, it is difficult to break away ties completely and re-orientate into a different culture in a short period of time. The danger of the parochial interests of European states domination is real and Airbus must make every effort to guard against it.
Third, Airbus must learn from the slip-ups of Boeing particularly with regards to supply chain. On complex aircraft it is possible that failures or shortfalls in production at one or more key component manufacturers could bring the production line to a screeching halt as experienced by both Airbus and Boeing.
Finally, the new manufacturing paradigm, which is based on shifting risk, research, design, and engineering into a “globally-diffused” production chain, is nothing short of a complete change in airliner manufacturing. Spreading out the risks and the financial investment of the project to hundreds of individual suppliers across the world, this globally-diffused production process concurrently represents new economics in the capital, financing, and human skills necessary to design, build, and bring new airliners to market. But it also potentially opens up the airliner production business to new entrants – new entrants with new ideas, new approaches, new vision – all of which will be a challenge to Airbus.
7.0 References
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