Continuing the Airbus analysis

By 1998, the market share was equally divided between the two and by 2002 the scales were firmly tilted in Airbus’s favor. A Bear Sterns report in August 1999 went on to claim that though “earlier customers were cautious about supporting Airbus, it has become acceptable and even stylish to laud Airbus and chastise Boeing”. Boeing on its part, tried to wrest back its eroding customer base by offering discounts up to 25%. Though this helped it get a lot of orders, it was not able to meet the deliveries due to short supply of raw materials and problems in its workforce. This led to a loss of conviction eroding and the customers returning to Airbus. This was another major blow to Boeing.

In 1998, Airbus announced to the world that it was planning to build a super Jumbo jet A-380 to compete against Boeing’s 747. The investments for this venture were so huge, that advisers and Boeing questioned the wisdom of such a decision. Airbus expects the global air traffic to increase by 5% every year for the next 20 years and hence felt there was a need for large aircrafts. Its argument was that considering the increased air traffic, there would be a higher demand for larger planes which could transport more number of persons, thus being fuel efficient, cheaper and environment friendly. Its Jumbo jet would accommodate 555 persons, almost 140 persons more than Boeing’s 747. Airbus received positive signals from various airlines as well as freight transport companies who also felt that the bigger planes would be more economical.

In consultation with almost 60 airports worldwide, Airbus came up with innovative designs to help in effortless takeoff and landing, efficient space utilization and passenger comfort. They also claimed that due to the modern technologies being used, their planes would be 25% cheaper on the operating costs, which further aroused interest in their A-380.

In the past, Airbus had couple of issues with raising finances for its projects. Being a multi-partner consortium, there were always problems related to one partner trying to make his position stronger, rather than trying to strengthen the alliance. In the late 80s, the US Government lodged a petition against Airbus at The General Agreement on Tariffs and Trades. It alleged that Airbus was being given an unfair advantage by the consortium partners, by means of financial assistance with no repayment terms and conditions. Airbus denied these allegations vehemently. However, the European governments had to sign a deal with the US Government, which put an upper limit on the financial assistance that they could lend to Airbus and that Airbus would have to repay the loan amount within 17 years.

Being registered under the French laws, Airbus did not need to publish its financial details. Due to the absence of this important data, a lot of countries were not willing to finance it, since they were not sure of the returns on their investments. To take on Boeing better, Airbus decided to improve its organization structure, on corporate lines. Airbus was incorporated in 2001 under French law as a simplified joint stock company or S.A.S. (Société par Actions Simplifiée). With the planned launch of the A-380 in October 2007, Airbus plans to take its competition with Boeing to a whole new level.