The Battle To Win The Sky

The Aerospace industry is dominated by two main players: Boeing and Airbus. This article is about the historical battle between superjumbo, Boeing 747 Vs Airbus 380. This is also an amazing case study on how different strategies affected the highly luxurious aviation industry.

On April 27, 2005 in front of a crowd of 30,000 on ground with thousands of viewers all around the world, an European company Airbus SE launched A380, an ambitious project with maximum passenger capacity of 853 rightflly called Superjumbo.

The 4-engined, 460-ton aircraft is the biggest airliner ever built and was launched as a luxury product, promoting itself among the seven wonders in the world or as “Hotel in the Air”.

It is allowing airlines to customize bar and lounge areas, lie-flat seats in business class, and private suites.

The New Super Jumbo was Airbus’s bet to pull market share away from its chief U.S. rival, Boeing Co., who had a year of setback. Despite thriving as the most loved airplanes by customers, Airbus announced that they will stop the production of A380 by 2021, after serving the market for only 12 years.

So, what led to the fall of Airbus 380 and why the world might never produce very large aircraft carriers?

During World War 2 and the Civil War, American firm Boeing dominated and was the only pioneer in the civil aviation and military aviation industry.

In 1970 the Airbus Industrie was founded as a consortium of major aerospace multi corp in Germany (Deutsche Aerospace, now a Daimler-Chrysler subsidiary known as DASA), England(Britain’s Hawker Siddeley, later BAE Systems), France (Aerospatiale Matra), and Spain (Construcciones Aeronauticas, CASA).

The European firm soon started taking over the market. Boeing saw some of its clients taken over by a European firm. The rivery soon fueled the trade dispute between the United States and Europe.

The market again hit turbulence when in 1990 Airbus announced the A380 project to challenge the dominance of Boeing’s very large aircraft carrier 747. Even though, both the companies were projecting almost equal profit, sale of even single wide aircraft would heavily impact the sale margin for the company. The only aircraft which was

serving the demand of the very large plane market was Boeing 747.

A senior executive at Aerospatiale complained,

“The problem is the monopoly of the 747, which is a fantastic advantage. They have a product. We have none.”

Studying the market requirement, aviation analyst estimated that there is room for only one key player in a very large scale aircraft market.

Boeing started to reach out to Airbus to join the venture to research the market for large planes. However, some Airbus employee claimed it was just a strategy to delay the making of the plane, and started their own research study on the market.

Airbus and Boeing independently began to study the feasibility of launching a superjumbo

capable of holding 500 to 1000 passengers. Two firms ended up individually strategizing the

product based on the two different versions of the future of air travel.

The core of Boeing 787 product development was Point to Point travel which was focused on individual cities where customers can go from point A to point B without changing the flight.

Marty Bentrott, vice president of sales, marketing, and in-service support for the 787, said,

"Since 1990, the number of city pairs more than 3,000 nautical miles apart served by the world's airlines have doubled, the number of frequencies offered by the airlines have doubled, and the number of available seat-kilometers (seating capacity times miles flown) have doubled. None of these trends show any signs of abating; meanwhile, the average airplane size has actually declined slightly. Clearly, customers prefer more point-to-point flights, flown more frequently, on smaller airplanes.”

"Our strategy has been to design and build an airplane that will take passengers where they

want to go, when they want to go, without intermediate stops; do it efficiently while providing the utmost comfort to passengers; and make it simple and cost-effective for airlines to operate."

However, the A380 jet-powered cruise liner was built around the Hub and Spoke strategy, assuming in future the large number of population will be living in major cities in the world, the airlines will continue to fly smaller planes on shorter routes (spokes) into a few large hubs, then onward to the next hub on giant airplanes.

Boeing 787 Dreamliner with a flying capacity of around 300 passengers, promised to deliver

technical innovation with it’s fuel efficient twin engines and lightweight composite materials. The company was calling it, “Game Changer”.

To meet the ‘schedule’, the company decided to ask different manufacturers to make different parts while also funding the process on their own.

Whereas, A380 has the capacity of 853 people with 4 engine double decker luxurious ride,

giving airlines more luxury to customize two full-length decks, including features like bar and

lounge areas, showers, lie-flat seats in business class, and private suites.

The A380 was a bold challenger to US rival Boeing's dominance of the large aircraft market.

When Boeing 787 Dreamliner was announced, the company quoted the response to be “better than imagined”, with 20 purchase orders from Air India, 14 purchase orders form Air Canada Boeing also won 10 orders for the 787 from Korean Air Lines. The 787 was embracing a new long-haul plane promising impressive fuel efficiency. However, the company delayed the launch of the product hustling the task to manage different manufacturers, and suffered quality issues.

Meanwhile, Airbus 380 was suffering due to its size. Most major airports simply don't have adequate landing space, taxiways, ramp space, fueling and boarding facilities for the gigantic A380.

Airbus assumes major airports will expand to make room for it, but that's a lot to expect from over 200 major airports worldwide.

Some important airports are refusing, including the world's busiest: Atlanta-Hartsfeld. Of the world's 30 busiest hub airports, 17 are American. U.S. airport expansions are commonly funded by government subsidies, and U.S. politicians aren't eager to subsidize the European jumbo's needs.

Whereas, Boeing's 787 smaller, more-numerous jetliners potentially create a huge traffic

demand at airports that simply don't have room for that many large planes coming and going.

Though direct flights may be more efficient on paper, it increases the burden on already

overwhelmed air traffic control.

Air travel after Sept. 11, 2001, made even short flights feel like long hauls. Both Boeing and Airbus witnessed a plunge in stock prices during that period.

Air travel was going through a transformation while simultaneously changing the framework for the aviation industry.

In February 2019, when one of the major superjumbo client Emirates reduced the order for 53 aircrafts to 14, Airbus decided to cease the production of its A380 superjumbo.

Even though the aircraft is loved by the customer, airlines owners found it unprofitable when too many seats go unfilled, structural restriction due to its large size. With the dying Hub and spoke model and increasing fuel price, it was pricey to maintain 4 engines of superjumbo.

Since 2005, a total of 57 firm orders for the A380 have been canceled by airlines including

Emirates, Virgin Atlantic, and Lufthansa. A cargo version of the plane also never took off

because of a lack of interest.

However, the industry wasn't as surprised when Airbus announced the end in production.

Aviation Analyst said, "Everyone saw it coming. A380 was developed to beat the Boeing 747, which was first developed to serve as a military fighter plane”

”The main issue was delay in launching the aircraft, the market was already moved to fewer stop point to point travel rather than hub and spoke.”

Richard L. Aboulafia, an aerospace analyst with the Teal Group, an aviation research firm in Fairfax, Va. said, “Starting in 2000, Airbus was doing well, Boeing had to reconsider how it did business. That led to the framework for the 787 — getting the development risk off the books of Boeing and coming up with a killer application."

That approach grows out of another gamble by Boeing that the future of the airline business will be in point-to-point nonstop flights with medium-size planes rather than the current hub-and-spoke model favored by Airbus, which is developing the 550-seat A380 superjumbo as its premier long-haul jetliner.

Boeing won the battle. However, they continued facing an ethical cloud of challenges like often corrupt deals with other nations, the Pentagon military tank scandal.

The fall of the A380 is a perfect case study for a limited strategy affecting business models. It will also serve as proof of the wisdom of understanding the marketplace well enough to lead, rather than follow.

It was interesting to see evolving two companies with fundamentally different products, based on diametrically opposite visions of the future with billions of dollars at stake.

However, even after stopping the production of A380, Airbus and Boeing maintained the duopoly with each other. “Despite news of the company's decision to close its flagship A380 program, on Thursday, Airbus announced stronger-than-expected fourth-quarter results, with revenues up 11 percent to over 23 billion euros," Reuters reported.

Due to an unprecedented COVID 19 pandemic, which majorly hit the airline industry. Boeing has also announced a stop in production for its 747 model, confirming the absence of the very large planes from the sky in near future.