Airbus marketing strategy

Posted on Posted in General

Evaluate its effect on competition

Airbus’ real challenge is for company to raise price nearer to those of Boeing if it wants to financially remain competitive by end of the decade.

A380 prices for launch customers have reportedly been slashed by 35-40% (Rothman, 2008). Based on BBC (BBC, 2006) reports, this would raise the breakeven for the A380 to about 420 aircraft. This target is still achievable but market conditions may change and keep market demand at about 750 for the next 10-15 years (Haines, 2006). In addition, Airbus will also need to start charging close to the A380 list price and delivery of the planes, this has proven to generate positive cash flow at the company through 2009 (Gow, 2008). With a strong Euro, Boeing products might become more attractive, especially for the next 4-5 years. A more worrisome trend is that some of the A380 orders and options are likely to either be reduced or cancelled altogether. Indeed, a large majority of Japanese and US airlines are still not committed to buying this aircraft. It is unlikely that Japan Airlines will make a decision on a 747 replacement until 2008-2010 (Laurent, 2008), by that time, Boeing might have completed development its upgraded 747 with current new advancement of technology.

Airbus might hesitate more in the aircraft concept, this is articulated by the expansion of point-to-point travel, which was opposite to Airbus super-hubs strategy. It is clear that few airports can accommodate A380, who in turn will only serve major super-hubs such as LHR, FRA, and LAX. For the rest, 777, A340, and later 787 Dreamliner or A350 will dominate.

Conclusion

The launch of the A380 will make clear what Boeing really thinks about the superjumbo market. If it really believes that market cannot support a new aircraft, it should be relieved to see that Airbus made the mistake of launching the A380, and should not have tried so hard to prevent it; it would not develop an all-new competitor. Boeing doe really believes that there is market for two aircraft; otherwise, it must admit to being forced into an uneconomic venture of McDonnell Douglas due to competitive pressure from Airbus. The only other option seems to continue to try to sell the Airbus A350 and to obstruct the Boeing 787 Dreamliner on collateral grounds like satisfying the world airlines market requirements, with the support of the Pan European governments. After a great market strategy move during the 20th century, in the Airbus-Boeing competition, Airbus will have to realign itself on the Boeing lead.

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