The presentation explores how the Duopoly of Boeing & Airbus rules the Aircraft Manufacturing Market, The competitive Rivalry among these two companies, Porter's Five Forces acting on this industry

3. In the relatively recent commercial aircraft industry environment,
one can observe the following phenomena, in sequence:
1. Boeing is the dominant firm,
2. Boeing becomes flush with past success and allows Airbus to take
the lead,
3. Airbus is the dominant firm,
4. Airbus becomes flush with past success and allows Boeing to take
the lead.

4. Background

5. Market Share

6. Market Share
• The competition between Airbus and Boeing has been characterized as a duopoly
in the large jet airline market since the 1990s.
• In the 10 years from 2004 to 2013, Airbus has received 8,933 orders while
delivering 4,824, and Boeing has received 8,428 orders while delivering 4,458.
• In the fiscal year of 2010,Boeing generated almost 64.31 billion US dollar in
revenue compare to 45.7 billion euros ofAirbus.
• And in 2014 Boeing manage to collect 90.8 Billion dollar revenue and Airbus
collected around 60 billion euros.

7. AirbusVs. Boeing: Net Orders PerYear

8. Market Share
2014 Net Market Share

9. Annual Net Orders Received and Delivered
by Airbus and Boeing
Source : airbus.com, boeing.com

10. Reasons for Existence

11. Reasons for Duopoly
Prime Reason: Barriers to Entry
Barriers to entry exist for a number of reasons, but the end result is that
there is limited entry into a market or industry because the hurdles that
must be overcome are great, and therefore firms that are already part of the
industry or market have an advantage and are insulated from competition
from new entrants.

12. • Financing:- The cost to design, prototype, build, and deliver a new LCA is
immense. Boeing 777 the development costs were estimated to be $10‐12 billon.
The new Airbus A380 had development costs of €12 billion ($16.2 billion).
• Engineering:- Aircraft of the size produced by Boeing and Airbus require
significant engineering experience and know‐how in order to successfully
design, test, and produce a viable jetliner. Boeing has only designed eight planes
from scratch since they started building jetliners in 1955. Airbus has only
designed four since 1969.
BarriersTo Entry

13. BarriersTo Entry
• Technology:- Commercial jetliners are behind military aircraft and space flight
in terms of the volume of technological developments. It is how quickly,
efficiently, quietly, comfortably, and safely a plane reaches its destination that
matters which can be achieved only through technological advancement. New
entrants can only expect to be competitive if they are able to produce and bring
to market technology that improves upon the existing jetliners.
• Production & Logistics:- Every jetliner contains lakhs of parts, ranging in size
from rivets to seats to overhead compartments. These components must be
manufactured and brought together into one aircraft in one place. The primary
reason for the collapse of Douglas Aircraft was their inability to manage their
supply chain and bring together airplanes at a reasonable cost Boeing’s trouble
in the late 1980’s was majorly due to improper supply chain.

14. Competition Strategies

15. Porter’s
Five Forces
Model
Competitive
Rivalry
Threat of
New
Entrants
Bargaining
Power of
Suppliers
Threat of
Substitutes
Bargaining
Power of
Buyers

16. Porter’s Five Forces for
BoeingVs. Airbus (Airplane Industry)
1.)Threat of New Entrants : Low
• Humongous costs involved in setting up R&D.
• Scarcity of Resources (Technological resources).
• Capital intensive industry.
• High loyalty to existing brands. i.e., Airbus and Boeing
• Profits start to realize after a long time.

17. Porter’s Five Forces for
BoeingVs. Airbus (Airplane Industry)
2.) Bargaining Power of Buyers: Low
• Limited choice for buyers as Boeing & Airbus together, hold nearly
the entire airplane market.
• The cost involved in switching airplanes (company) is very high due
to aftermarket support/service costs.

18. Porter’s Five Forces for
BoeingVs. Airbus (Airplane Industry)
3.)Threat of Substitutes : Low
• No alternative for quick long distance journey.
• Future requirements of aircrafts will only increase demand.
• However for regional carriers focused on short distance
transportation, threat is little bit higher. They must focus on
convenience, personal preference, time and money

19. Porter’s Five Forces for
BoeingVs. Airbus (Airplane Industry)
4.) Bargaining Power of Suppliers : High
• The airplane manufacture business is majorly dominated by Boeing
& Airbus. So there’s no cutthroat competition and hence these
companies have upper hand over the buyers.
• Also, the chances of carriers, opting for vertical integration are
very unlikely.

20. Porter’s Five Forces for
BoeingVs. Airbus (Airplane Industry)
5.) Competitive Rivalry: High
• Bidding for a limited, but very high value of contracts (aircraft
orders) witness a very cutthroat competition between these two
rivals
• Fuel efficient engines, cheaper maintenance, prompt services,
pricing, etc. are the factors on which these companies compete.

21. The Strategy
• Airbus’ Differentiation Strategy – ‘Hub-and-Spoke-Concept’
• Boeing’s Differentiation Strategy – ‘Direct Point-to-Point-Traffic’
• In duopolistic markets companies are assumed to avoid direct price wars and try to
use non-price methods to differentiate their products such as engaging in
technological ‘leapfrogging’ by bypassing each others’ inventions.
• So the competitive strategy used by Boeing & Airbus, is totally based on product
differentiation concept. Differentiating factors are:
1. Shape
2. Fuel Efficiency
3. Engine
4. Internal Design / Facilities
5. Cockpit Commonality

22. Shape
• The 787 Dreamliner, developed by Boeing,
is a long-range, midsized, wide-body, twin-
engine passenger airliner.
• In 2006 Airbus began to consider a wider
body, a larger wing, more powerful
engines, a higher cruise speed and many
other changes to satisfy the airlines. So,
Airbus presented the A350 XWB with
entirely new design.
• The new wider Airbus A350 XWB body will
enable the plane to accommodate slightly
wider economy seats than its rival. The
new design maximizes usable volume.

23. Fuel Efficiency
• With the price of oil continuing to rise,
airlines are in continuous pressure in terms
of their fuel costs. This in turn it has
become an incentive for the aircraft
manufacturers to develop the most fuel
efficient planes possible.
• Airbus originally had picked up the banner
of fuel efficiency as a means of gaining an
edge over Boeing. As Airbus matured and
gained success, they became risk‐averse.
Unfortunately, fuel efficiency is a relative
to time. That which was considered ‘fuel
efficient’ a decade ago may now be a ‘gas
guzzler’ today.

24. Engine
• As the era progressed, innovations in
engine design earned a substantial
chunk of competitive advantage.
• Boeing with it’s high‐bypass
turbofan engines gained an edge
over Airbus, after losing out to
Airbus for a short while.

25. Internal Design / Facilities
• When airlines can choose between
more seats and a gym/cocktail
lounge, out goes the gym and
cocktail lounge.
• Boeing focused on more seats in 787
Dreamliner while Airbus focused on
more luxurious amenities in A380.
• Carriers ordered 159 A380s, and
almost twice as many 787s.

26. Cockpit Commonality
• In 1978 when Airbus was preparing to
launch the development of a new LCA, it
had only one product, the A300. At the
same period in time, Boeing had a diverse
product set ranging from the 727, 737, 757,
767, and 747.
• Airbus had only two offerings so it
differentiated on the basis of cockpit
commonality. Each of Boeing’s planes had
different cockpit configurations.
• Airbus saw an opportunity to configure
common cockpits For airlines, this meant
increased flexibility and decreased training
costs.

27. Challenges to Duopoly

28. The global civil aerospace market has long been a classic duopoly.
The sector has been dominated by European company Airbus and
the US giant Boeing, with only limited competition in the regional
markets.
Challenges to Duopoly

29. The Major Competitors are:

30. Emergence of New Players

31. Bombardier
• Bombardier Aerospace is a division of Bombardier Inc. The company
competes with Brazilian rival Embraer for the title of the third
largest aircraft manufacturer after Boeing and Airbus. It is
headquartered in Dorval, Quebec, Canada.
• Bombardier is a global transportation company that is present in over
60 countries on 5 continents. They operate two businesses:
Aerospace and Rail Transportation.
• It's high-performance aircraft and services are seen in a number of
different markets including, Business aircraft, Commercial aircraft,
Amphibious aircraft.
• Revenue generated by bombardier in year 2014 was $9.6 billion.
• Number of employees in the company were 38350 in the year 2014.

32. Embraer
• Embraer S.A. is a Brazilian aerospace conglomerate that produces
commercial, military, executive and agricultural aircraft and
provides aeronautical services. It is headquartered São José dos
Campos, São Paulo State.
• The company currently competes internationally with Canadian
rival Bombardier for the title of third-largest airplane maker after
Airbus and Boeing.
• Embraer has become one of the main aircraft manufacturers in
the world by focusing on specific market segments with high
growth potential in commercial, defense, and executive aviation.

33. The 3 markets for which Embraer manufactures aircraft include :
1 Commercial Aviation - EMB 120, ERJ 135, ERJ 140, ERJ 145, ERJ 145 XR,
EMBRAER 170, EMBRAER 175, EMBRAER 190 and EMBRAER 195.
2 Defense Systems - Super Tucano, EMB 145 AEW&C, EMB MULTI INTEL,
EMB 145 MP and Legacy 600.
3 Executive Aviation - Lineage 1000, Legacy 600, Legacy 500, Legacy 450,
Phenom 300 and Phenom 100.
Revenue generated in 2013 was $5.7 billion.
Number of employees in the company were 19116 in the year 2014.

36. Outsourcing Experiments

37. •Airbus and Boeing increased global outsourcing to Japan, China, India, Middle
East, Eastern Europe.These are growing markets and hence profitable.
•Large Asian and middle eastern carriers are now major customers (Singapore
Airlines, Emirates)

38. Airbus Outsourcing
• New comer in Japan and China
• Difficulty getting orders from Japanese Airlines but has contracted work with
Japanese Suppliers
• Problem - Euro Vs. Dollar - Dollar weaker, manufacturing costs in Euros but
planes sold in dollars.
• China - Sales jumped from 56-219 aircrafts in 2005, overtook Boeing
• Tianjin - First assembly plant outside Europe
• Plan to expand production to India - Presence of engineering talent
• Production of A320s in China - Need to be close to large markets
• Production of aircraft parts to Maghreb - Low cost labour

39. Boeing Outsourcing
• Outsources to multiple places and producers hence parts not perfect fits.
• Complicated supply chain
• Outsourcing of new innovation not existing technology
• Outsourced wing of 787 to Japanese Heavies- Mitsubishi Heavy Industries,
Fuji Heavy Industries, Kawasaki Heavy Industries.
• Boeing lacked know-how about plane construction earlier
• Improved supply chain management by ensuring own employees on the
ground worked with suppliers
• Tiered structure of suppliers - tier 1 assembled parts made by tier 2 and 3- tier
1 did not have enough know how to assemble, Boeing forced to buy one of
the tier 1 suppliers (Vought Aircraft industries) to give expertise to other
suppliers
• Poor design of contractual agreement

40. ThankYou
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