Super Fast vs. Super Big -- Passenger Aircraft Industry at Crossroads. (Editorial)

By Macharzina, Klaus | Management International Review, July 2001 | Go to article overview

Super Fast vs. Super Big -- Passenger Aircraft Industry at Crossroads. (Editorial)


Macharzina, Klaus, Management International Review


Global competition on the passenger aircraft market has increased dramatically in recent years. The merger of Boeing and McDonnell Douglas in 1997 left the world with only two major competitors. Boeing in the US and Europe's most successful multinational business alliance, Airbus Industries. Air carriers benefit from the bipolar nature of the market for passenger aircrafts. They use the commonality within an aircraft family of one manufacturer in order to reduce costs not only for spare parts and maintenance, but also for pilot training and deployment.

For many years, Boeing has dominated the passenger aircraft market. Boeing produced more than 60 percent of the large passenger airplanes. Last year Boeing delivered 489 airplanes compared to 311 by Airbus and logged 611 orders compared to 520 for Airbus. But since its transformation in the year 1997 from a consortium of four European partners (Aerospatiale, Daimler Aerospace Airbus (each with a 37.9% stake), British Aerospace (20%), and the Spanish Casa (4%)) into an independent company with one goal of producing passenger aircrafts, Airbus Industries pressed ahead by improving and expanding both the high and low ends of its product line. The current Airbus line covers the entire spectrum of modern passenger aircrafts, and the market share of Airbus Industries increased to more than 50%. The market segment for 350+ seat aircrafts, however, is still monopolized by Boeing. Studies predict that this market will by value represent around 35% of worldwide demand for aircrafts.

With its A380 project, Airbus Industries aims to develop a passenger aircraft with a seating capacity of up to 825 (min. 555) and a range of up to 16,200 km. This aircraft will by the year 2004 surpass Boeing's 747 as the world's largest passenger plane. In a first reaction to this project Boeing came up with a 525 passenger stretch version of its 747. But the market tends to prefer Airbus. Up to now Airbus has reaped more than 60 orders for the A380 555-seat version and several options for the 825-seat version; no air carrier has shown interest yet to place an order for the 747X.

It seems that Boeing is striking the sails in the battle for Super Jumbo customers. Boeing dropped its plans to build the stretch version of the classic 747 and shifted its focus to a new arena -- speed -- with the development of a smaller radical jet with about 175-250 seats. This new airplane named "Sonic Cruiser" will fly close to the speed of sound and allow faster, higher, and farther flights than any other current airplane. It also shall be less noisy at takeoff and landing. The new design is to complement Boeing's existing product line. Drawings show an aircraft unlike existing commercial jets, with delta wings near its tail, two smaller wings near the nose, and a pair of engines blended into the wing. The delivery of the "Sonic Cruiser" is announced for 2006, but the project is in fact still in its infancy. Boeing is not yet able to say how many passengers it will carry, how far it will fly or what it will cost. Without any doubt such a plane can be built. The question is whether the new Boeing jet can make money for airlines and meet the strict noise and pollution standards. It will burn 40 per cent more fuel than other commercial jets.

The 44th Paris-Le Bourget Air Show in June 2001 was dominated by the trans-Atlantic rivalry between Boeing and Airbus, with both companies touting very different visions of future air travel. But with respect to the large market for Super Jumbos it can be speculated if Boeing's decision is definitive or it only puts such a project on hold. It seems that this year has brought the turning point on the passenger aircraft market. Before the Paris Air Show Boeing had booked 124 orders and Airbus 144. During the show Airbus obtained another 155 firm orders including a 111 plane order (10 for the A380) from International Lease Finance Corp. and 20 additional options on planes. …

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