Airbus marketing strategy

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Changes in the current market structure

Analyzing the market structure

A new study by Forecast International entitled “The World Market for Large Commercial Jet Transports” has projected that a total of 5,835 commercial jet transports will be produced between 2004 and 2013. The total value of this production, in constant 2009 US dollars, is estimated at $545 billion. Airbus and Boeing are expected to account for the bulk of this production. Airbus production for the 10 years period is projected at 2,778 aircraft; while Airbus is forecast to build 2,911 (AEAT, 2004).

Airbus has launched the largest passenger airliner flagship A380 superjumbo jet in the commercial aviation history (Campos, 2001), while its 2 years of delay in launching (Verghese, 2009) have setback the company in financial term and finally return back in the black ink for its investors (Gow, 2008). The current delivery of the 17 A380 aircraft to their customers (Airbus, 2009b), has help made real contribution to Airbus’ huge loses of €2.8 billion in compensation and development costs (Shannon, 2006).

The outlooks of Airbus and Boeing on the future of the large commercial transport market diverge significantly, with each company developing a major new product that reflects its respective viewpoint. The A380 represents Airbus’ view that airlines require a 550+ passenger aircraft for use mainly on dense truck routes between major hubs. However, Boeing’s new midsize 787 Dreamliner series reflects that the company’s view that route fragmentation will be the dominant trend in the market, with airlines requiring smaller airliner to fly point-to-point. While Airbus has announced an immediate plan to directly challenge the Boeing Dreamliner with the A350, expected date of launch is in late 2013. The risk carried by the launch of the two contrasting new products, 787 Dreamliner and the A380. If the 787 sales to reach expected volumes, Boeing receive nothing, unlike Airbus, which will be required to pay the more than $3.5 billion in loans, if their A380 airliner fail to reach the breakeven point.

The A380 enormous R&D cost is being financed in part by European governments, and this issue has become the core of the growing dispute between the two manufacturers. The estimated $11 billion that jumbo research and development phase required has been financed, at least up to 30% of its cost, by government loans that do not need to be repaid until the first units are delivered to customers, thus lowering the risks substantially at Airbus and somewhat altering the rules of business.

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