Summary Of Airbus:
Setting the Standards
Kevin Winberg, Dawn Walter, John Jablonsky,
Matt Seidl, Alex Eliades
MQM 385 Section 7
Fortune Global Ranking: #100
Table of Contents
Strengths and Weaknesses of Airbus………………………………………………………………
Airbus’s Macroenvironment………………………………………………………………………..
Airbus’s Corporate-Level Strategies………………………………………………………………
Airbus’s Business-Level Strategies………………………………………………………………..
Airbus’s Organizational Structure………………………………………………………………….
Airbus vs. Boeing…………………………………………………………………………………..
Recommendations for Airbus……………………………………………………………………..
References………………………………………………………………………………………...
(1)​ ​Strengths and Weaknesses of Airbus
Various strengths of Airbus are as follows:
(1) Strong parent company
The parent company of Airbus is the Airbus Group, which is is a global leader in defense,
aerospace, and related services. According to the Business Source Alumni Edition Database,
Airbus Group has a strong position in the market and operates in a number of different business
sectors while excelling within each sector (Marketline, 2015). Airbus Defense and Space, one of
the three divisions of the company, is a global dominant force as it ranks second in space
globally and first in the defense and space companies in Europe (Marketline, 2015). In addition
to this, Airbus Group has established its presence in more than 170 locations across the globe
(Marketline, 2015).
Another important factor has been Airbus Group’s contribution to research and
development, in which the parent company has established itself as the largest investor in
research and development of aerospace companies in the world. It maintains research and
development centers in China, Russia, the United States, India, and Singapore (Marketline,
2015). Airbus Group’s role in research and development has enabled Airbus to improve its
performance in innovations and to build a competitive advantage in its manufacturing
techniques. With Airbus Group’s successful global presence, the company owns about 40,000
patents or patent applications across over 10,000 inventions (Marketline, 2015). In addition to
this, Airbus Group has a strong financial base, market position, and technological development
focus which allows the parent company to provide substantial support to the operations of
Airbus.
(2) Strong product portfolio and diversified customer base
Offering a strong product portfolio to a diversified customer base allows Airbus to
leverage its opportunities across a range of markets and reduce risks toward the company.
According to the Business Source Alumni Edition Database, the commercial segment product
line is composed of passenger aircraft, corporate jets, and freighter aircraft which range from the
107-seat A318 aircraft to the 525-seat A380 aircraft (Marketline, 2015). The aircraft in these
three product lines include single aisle, wide body, and very large aircraft.
Along with Airbus’s commercial segment is its military segment. The military segment
manufactures different airlift and support missions, from the A330-based Multi Role Tanker
Transport to the A400M Multi Role Airlifter (Marketline, 2015). Because of of its wide range
product portfolio, Airbus is able to market its products to a diversified customer base including
some of the top airliners across the world: Lufthansa, Qantas, United Airlines, British Airways,
and more (Marketline, 2015).
(3) Eco-efficiency
Airbus has found success in making structural improvements in its aircraft designs to
improve its energy efficiency. Airbus has achieved this through decreasing fuel consumption
(Cansino, 2017). Airbus’s strength to improve its eco-efficiency can be seen through its recent
development with the A320 aircraft. Airbus introduced structural components called winglets
which are positioned at the top of the wing (Cansino, 2017). Data taken from the air traffic in
Spain project that the winglets will reduce CO2 emissions between 66.29 and 59.56Gg (Cansino,
2017).
In addition to this, the A320 aircraft with addition of the winglet has decreased fuel
consumption by 15%, reduce 50% of NO emissions, and reduced 8% of its operating costs
(Cansino, 2017). In addition to improving the structural design of its aircrafts, Airbus launched
the blue five initiative which focuses on saving energy and water as well as reducing waste, CO​2​,
and VOC. From the blue five initiative, Airbus looks to add strength to further its capability of
producing eco-efficient technologies for its aircraft.
Various weaknesses of Airbus are as follows:
(1) Delays in delivery
Delays in delivery have been an issue for Airbus over past years, especially in the A380
aircraft. Because of this, Airbus has accumulated backlogs which could affect top line growth if
the delays continue to persist. According to the Business Source Alumni Edition Database, In
2009 delays in delivery of the A380 aircraft caused a 26% drop in the share of Airbus Group. As
a consequence, the chief executive officer and multiple managers left the company (Marketline,
2015). Following this, the company experienced cancelled orders on freighters from FedEx and
UPS as Airbus focused on the A380 aircraft (Marketline, 2015).
According to his article “Airbus Beats Forecasts, Warns of Slowdown in Orders,”
Driskill states that Airbus exceeded its delivery expectations in 2016 with its highest ever at 8%
(Driskill, 2017). Driskill also adds that the company experienced difficulties in the supply chain
and in the cabin for the A350 aircraft. At the end of 2016 the overall backlog for Airbus was
6,874. This could pose problems for making the deliveries of the A350 aircraft for the years
ahead as the company is looking at the A350 aircraft to generate a large portion of future sales
(Driskill, 2017). Therefore, if Airbus runs into future delivery issues with the A350 aircraft then
the company’s top line growth could diminish.
(2) Operational defects and inefficiencies
Operational defects and inefficiencies that have occurred to aircraft could prove to be a
weakness for Airbus that could damage its brand image. These past defects could instill a lack of
confidence in the consumer for the safety of the airline. According to the Business Source
Alumni Edition Database, some of these defects in past years occurred because of engine failures
in the A380 aircraft (Marketline, 2015). For one instance in 2010, an A380 aircraft being
operated by Qantas suffered an engine failure after takeoff in Singapore and had to turn around
and make an emergency landing back in Singapore (Marketline, 2015). Also, in 2009, the airliner
Emirates warned Airbus of the various problems it witnessed with the A380 aircraft with a
written report of listed complaints; these included engine defects, missing cabin fittings, and
burnt electric cables (Marketline, 2015).
For any commercial airline, operational inefficiencies can weaken its position in the
market as consumers purchasing the aircraft will become skeptical of the safety level of the
aircraft. In addition to this, these defects will make passengers hesitant to purchase tickets
associated with flying that particular aircraft.
(3) High production costs
High production costs can create a weakness for Airbus as it competes with its rival
Boeing and the emergence of new markets for future market share. In the past, Airbus has
endured high production costs for its aircraft from financial problems evolving from the
previously discussed delays in delivery and defect issues. When thinking logically, delays in
delivery are triggered from delays in production. According to the Business Source Alumni
Edition Database, delays in production are caused by challenging interiors and union and
government objections to streamlining (Marketline, 2015).
Henceforth, as more delays in delivery and production accumulate, the costs that the
company endures to manufacture the aircraft increases. High production costs could also lead to
the company’s inability to generate large sums of money for its most expensive aircraft.
Presently, the company is looking to make the A350 the future provider of sales. With expected
delivery and production delays expected to come for the new aircraft, the question is will Airbus
be able to allocate the sums in order to reach the expected demand of the aircraft.
(2)​ ​Airbus’s Macroenvironment
Airbus’ macroenvironment plays a large role in how the company operates. External
considerations outside of the company and industry along with industry-specific considerations
weigh heavily on the company and must be taken into consideration. The ‘large commercial
aircraft’ sector of the aerospace industry is unique as there are many considerations and factors
that have an effect on how companies conduct themselves. None of those factors can be
controlled or manipulated by companies and are almost impossible to anticipate.
The aerospace industry, like most industries, is subject to political and legal forces and
factors that will affect how the companies conduct their business. Government intervention on
economic operations, safety regulations, and other matters attempting to protect passengers’
interest all have an effect on Airbus’s manufacturing and business operations (Flouris, 2016). In
this industry, there are also numerous regulations, restrictions, and issues that have an impact on
demand and other economic conditions. These issues and regulations are related to topics such as
international trade, tax policy, competition, war, and terrorism.
Demographic and social forces also play roles in how Airbus conduct themselves
efficiently. Differing travel preferences for different age groups offer both potential opportunities
and threats for Airbus to capitalize on and must be taken into consideration. For example,
younger generations are more likely to pay extra for added amenities such as extra head and
legroom, power outlets, or in flight Wi-Fi than older generations (Market Realist, 2017). Airbus
must analyze the differences in preference amongst different age groups in order to create the
most value for the most customers. Along with this, the millennial age group is currently
entering the full-time work force and therefore will have higher levels of disposable income, thus
increasing their demand for air travel.
Geographically speaking, emerging markets in this sector of the industry such as India,
China, and the Middle-east can be particularly attractive and offer great opportunities for growth
to Airbus (Flouris, 2016). These locations have growing middle classes which has a great effect
on the demand for airliners. Along with this, the recent societal shift in preference towards
greener alternatives puts pressure on companies in the aerospace industry like Airbus to make
their products and services better for the environment, which also ties into the global and
technological forces affecting the company and industry.
The technological and global forces that impact Airbus are mostly concerned with the
airline industry’s fuel consumption along with the efficiency and environmental impact in
regards to the airliners themselves. Airbus has developed numerous technological innovations in
an effort to make their aircraft have lower rates of fuel consumption and greater energy
efficiency. (UKEssays, 2017). Global forces are centered around the pressure that airliners leave
a reduced carbon footprint, consume less fuel, and utilize more alternative fuels (Market Realist,
2017).
The large commercial aircraft sector of the aerospace industry’s economic performance is
directly tied to several environmental conditions outside of its control. Some of these include
growth in GDP, levels of disposable income and per capita income, crude oil prices, and
industrial production output (Flouris, 2016). These all have a direct impact on end consumers’
willingness and economic ability to travel via airline, which in turn affects the performance of
the airline industry. When fuel prices rise or levels of disposable income decrease, this has a
negative effect on the airline industry's economic performance, which hurts companies like
Airbus as these airline companies are the primary customers of Airbus (Market Realist, 2017).
Within the industry itself, there are also many factors that weigh heavily on Airbus. The
bargaining power of buyers in the industry is growing as a shift in the airline industry towards a
preference of budget airlines has placed a greater emphasis on lowering cost operations. This
has resulted in many airlines beginning to demand different or new airliners that have lower
operating costs, putting pressure on Airbus to develop them to maintain market share
(UKEssays, 2017). Advancements in technology which require specialized facilities and a
greater demand on rarer resources like carbon fibre for lighter airliners implies that the
bargaining power has been shifting more towards the suppliers.
Risk of entry into this industry is rather low and is not currently a large concern to
Airbus. The initial required investments are very high and it would be extremely difficult for new
entrants to compete with big companies like Boeing or Airbus. Threat of substitutes is also
rather low for this industry. One of the largest threats is the increase in development of high
speed rail systems which could lower demand for air travel in the future (Market Realist, 2017).
The competition in this industry is tough, however, as it is dominated in large part by
only two companies, Airbus and Boeing. These two companies make up an intense rivalry and
are constantly fighting over market share, especially because they serve similar or the same
customer base. Some smaller new entrants specializing in low maintenance costs and high fuel
efficiency have increased the competition even more, and as a result both Boeing and Airbus
have begun to place a heavier emphasis on developing similar airliners (Market Realist, 2017).
For example, Airbus has recently developed a new model of airliner, the A380, in order to
directly combat Boeing’s 747. Airbus designed this aircraft to serve the same purpose as the 747
but simultaneously boasts higher passenger capacity and better fuel efficiency (Flouris, 2016).
(3) Airbus’s Corporate-Level Strategies
The corporate-level strategies are as follows; Restructuring, Technology and Innovation,
and Strategic Outsourcing. With such a large, worldwide company, the correct strategies among
all the levels of a firm have to well-thought out. The corporate, business, and functional
strategies each hold their own place within an organization, and the three corporate strategies
above are some of the highlighted ways how Airbus is trying to achieve the number one spot in
their industry.
The first corporate strategy going to be discussed is restructuring. While many times the
public eye judges success off of size and numbers, sometimes it is important to scale back a
little. From the 1970’s-to-2013, the one idea that Airbus consistently pushed was the idea of
growing in all directions (Management Overview, 2017). In 2012 though, that mindset changed
when a merger with BAE was unsuccessful. Shortly after, Airbus decided it was time to review
their strategy and principles as a company. They realized that they primarily wanted to focus on
being an aerospace company as it was their most successful business unit.
As such, they had to reinforce their commercial aviation, while consolidating the defense
and space divisions (Management Overview, 2017). In addition, they also begun selling off
business units and subsidiaries of the company. Airbus said, ​"Some business areas are identified
as divestment candidates as they do not fit the strategic goals,”. Airbus also had to deal with
certain budgeting issues.
CEO Tom Enders said that the new priorities they were placing had to do with logical
follow-ups to the new strategic mindset they have in place now (​France-Presse, 2017​).
Sometimes the best way to move forward is to take a couple steps back, and this is exactly what
Airbus has decided to do. They have already seen some positives with this strategy and are going
to continue with it.
The second corporate strategy that Airbus uses is their innovation and technology. One of
Airbus’ goals is to always look for better and newer methods to be able to apply innovative
technology into their products, businesses, and services. Being able to stay ahead of the curve in
this type of industry is crucial, especially with such a rival like Boeing. Airbus applies
technology to their business units that not only will help revenues, but their customers, such as
developing cockpit designs that improve pilot workload and efficiency. A more recent
technology applied to their aircrafts is a higher hydraulic operating pressure mechanism, which
provides more power with less weight, resulting in lower costs and increased reliability.
Another innovation is the Brake to Vacate technology, which allows aircrafts to
decelerate quickly and safely (​Bellamy, 2017​). There is a common theme to the technology that
Airbus is trying to install into the aircrafts, and for the most part, it all centers around efficiency.
They are currently in the process of working on and completing a Synthetic Vision System,
which will focus on reducing pilot workload during the busiest phases of the flights. Airbus has
created a TAT (Turn-Around Time) Optimizer which airlines have the ability to perform real
time monitoring of on-ground activities.
Lastly, one of their milestone technological achievements has to do with Satellite-Based
Navigation, a system that uses satellites to provides geospatial positioning. Though still in
development, this has the potential for great things in the future. Through these trials, pilots and
air traffic controllers are providing feedback and capturing data on the procedures in terms of
flyability, safety, workload and the reduction of CO2 emissions and fuel consumption (​Bellamy,
2017​). This could be Airbus’ biggest breakthrough yet.
Lastly, outsourcing is another main strategy that has been at the core of its business
practices over many years with Airbus. With the mission to provide the best aircraft, Airbus
needs to have the highest quality parts, material, and value chain. Airbus has a history of
collaborating with other companies to accomplish their goals. They have some 7,000 suppliers in
over 20 countries to chose from (Management Overview, 2017).
Airbus is committed to outsourcing with the best long-term suppliers. This allows for
increased industrial flexibility as well as enhanced lean design and manufacturing. Airbus
already outsourced a lot of its value chain, but that grew even larger recently. They increased
their outsourcing spending to $2 billion in India, compared to the $400 million before (Daily
News India, 2017). The increase is a sign of growth and need for ultimate efficiency.
(4) Airbus’s Business Level Strategies
The business-level strategy are as follows; (1) focus differentiation strategy, (2) focus
low-cost strategy and (3) market segmentation strategy. Airbus’s business-level strategies are
critical for the company to sustain a competitive advantage within the commercial jetliner
industry. Over the past half century Airbus has been in a competitive battle with Boeing. The
pendulum continues to swing back and forth between the two companies in who dominates the
industry.
The first business-level strategy Airbus uses is the focus differentiation strategy. Since
Airbus is one out of the two large players in the commercial jetliner industry it does not need to
use a low-cost strategy as its only strategy in order to gain a competitive advantage. Instead, by
continuously innovating, the company is able to sell its product at a premium price. One of the
ways Airbus tries to customize its product is by having the “no middle seat” concept (Tong,
2003). This helps differentiate their product because it adds superior comfort to their flight
experience than Boeing.
Another differentiator for Airbus’s aircrafts is how much larger they are compared to
Boeing’s aircrafts. The A380 model plane is a double decker plane that is forty-nine percent
larger than the Boeing 747. This makes the flight experience more comfortable for their
passengers. By creating differentiated products , Airbus creates a competitive advantage for itself
and increases its yearly revenue.
The second business level strategy Airbus uses is focus low-cost strategy. Although as a
company Airbus is having success using focus differentiation as its strategy, the battle with their
main competitor Boeing forces them to try new strategies in order to keep up. In order for Airbus
to keep their A330 planes active, Airbus sell their planes to low-cost airlines such as Ryanair and
AirAsia X Bhd. (Wall, 2013). Even though Airbus started to replace the A330 in 2015 by the
A350, the A330 might stay in production for another ten years because of its low-cost (Wall,
2013). By keeping the A330 in production, Airbus supplies a luxurious, high-quality option to
low-cost airlines and stay competitive with an old aircraft.
The third business-level strategy Airbus uses is market segmentation. Airbus segments its
product in the commercial jetliner industry depending on the particular business and consumer
needs. When segmenting to consumers Airbus targets many different airlines such as Lufthansa,
Emirates and Air France. While targeting this particular airlines, they are also targeting
consumers who want the top class flying experience. Airbus does not need to worry about
low-cost within this strategy, because their product covers a particular segment that focuses on
quality instead of cost. If they are successful, they can sustain a competitive advantage and
increased revenue in the long-run.
These three business-level strategies is what gives Airbus the advantages it has today.
Airbus has set itself up for success by following multiple business-level strategies. By continuing
to innovate and improve their products Airbus will be able to compete with Boeing and any other
possible competitor. Also, by having only one other main competitor, Airbus is able to take risks
in how they want to introduce new strategies. They do not have to feel pressured in being
replaced because they have been around for half a century and have earned the trust and loyalty
from their customers.
(​5) Airbus’s Organizational Structure
Airbus is currently streamlining its organizational structure to compete better against
competitors like Boeing. The restructuring was announced on September 30th, 2017 by Tom
Enders, the chief executive of Airbus Group (Wall, 2016). The end goal is to merge its corporate
headquarters with its commercial-jetliner unit. The merger will be known simply as Airbus
(Reiff, 2016). All other divisions (dealing with defense, space, and helicopters) will become
subsidiaries (Reiff, 2016). During the merger an unspecified number of management jobs will be
eliminated as well to improve profitability (Wall, 2016).
This change comes at an important time for Airbus as it looks to eliminate costs and
streamline operations. It has been a part of a Mr. Ender’s four-year campaign to improve the
company. There are numerous benefits to this restructuring. The first is Airbus can eliminate
duplicate corporate roles and functions. From previous mergers, Airbus was left with a
headquarters in both Paris and Munich and two CEOs (Rothman, 2016). This restructuring will
eliminate duplication within the company and move the headquarters from Paris and Munich to
Toulouse, France.
Another benefit of the restructuring is the French, German, and Spanish government have
reduced involvement in all company decisions (Wall, 2016). Those three governments originally
had power because Airbus was created out of a combination of European aerospace and defense
assets. Enders was able to remove their involvement with shareholder backing in the early stages
of the restructuring (Wall, 2016).
This restructuring is important to close in on its rival Boeing as well as improve
efficiency in order to meet its delivery targets. In the past, there has been a fear that Airbus will
fall short of those plans. If Airbus is not able to meet its targets, the company’s reputation will
falter and it may lose market share to Boeing. Airbus is a strong competitor, but it cannot
willingly sacrifice more market share to Boeing. The main goal of this merger is create better
synergies within the company and ensure success in its projected targets.
Before the merger, an argument could have been made saying Airbus was a decentralized
multidivisional structure. There were two headquarters controlling the top of the structure. As
corporate, the structure was split between the different divisions: commercial-jetliner, defense,
space, and helicopter. Each had its owns functions. The commercial-jetliner was its largest
division, almost serving as its own headquarters.
During the merger, the structure is being transformed into a functional one. As mentioned
above, the head office and the commercial-jetliner unit is combining to form Airbus. All other
divisions are being transformed into subsidiaries, individual companies with 50% voting stock
owned by Airbus, or being sold off to other companies. As compared to its previous structure,
Airbus will become a centralized company.
Airbus has chosen not to publish its new organizational structure. The reason is not
entirely clear, but it could be for secrecy or the fact that the restructuring is not yet complete.
Based on research though, an estimate can be made about how the structure will be set up. A
graph representing the new structure can be seen on the previous page. As usual, the CEO is at
the top of the structure. Directly below are the functions of the company. For Airbus, those
functions include Customer, Engineering, Programmes, Production, Finance, and Human
Resources.
As a result of Airbus’s restructuring, a functional structure works better. A
multidivisional division no longer serves Airbus well because Airbus has streamlined into one
unit. Airbus is also unlikely to chose a matrix structure. Matrix structure are best for fast growing
companies such as those in the tech industries. At the moment, Airbus has chosen the right
structure for the industry it wishes to compete in and how it hopes to compete.
(6) Airbus vs. Boeing
One of Airbus’s main competitors in the commercial-jetliner industry. For the past few
years though, they have differed greatly in key areas such as strategies, competencies, and
performance. Below is a table comparing the two companies on those key areas.
Comparison of Strategies
As mentioned above, one of Airbus’s corporate-level strategies is restructuring. Airbus
has recently changed directions from expansion to downsizing. This was brought on by a failed
merger with BAE. Airbus’s goal is to downsize so its commercial-jetliner unit is its only unit.
Since then, they have been selling business units off and turning others into subsidiaries.
Boeing, on the other hand, is focusing on diversifying its products (Mocenco, 2015).
They begun with the development of aircrafts, but have since created a mail delivery system and
maintenance services for airports. Boeing also has multiple new divisions such as Boeing
Scientific Research Laboratories, Division Aerospace, and Boeing Computer Services. In 2014,
Boeing signed agreements with the Royal Netherlands Air Force (RNLAF) and Fokker
Technologies to look into advanced maintenance options for Dutch rotorcraft and improve
Netherland's reputation as a regional center for military and civilian aircraft support services
(Boeing, 2014). In addition to creating new products and divisions, Boeing also looks to enter
strategic alliances with numerous companies.
Many of Boeing’s alliances have to do with research programs with institutions such as
NASA and FAA. For example, Boeing has partnered with General Electric and Hughes Aircraft
Co (Mocenco, 2015) to design and build the Viking Mars probe. The purpose of it will be to
collect data on the surface features on Mars. Boeing is in the same place Airbus was in before
2013 and the BAE merger. They are looking to expand in numerous industries in a swift and
controlled manner.
On a business-level strategy, Airbus’s main strategy is a differentiation strategy. All of
their aircrafts provide value to their customers through cost minimization and luxury
(Illangakoon, 2011). In comparison Boeing has a hybrid strategy. Boeing chooses to focus on
low prices for their products and differentiation in terms of speed and efficiency (Illangakoon,
2011). Airbus does some business with a low cost strategy, but not on the same level as Boeing.
Comparison of Competencies
As mentioned above, one of Airbus’s competencies is its strong product portfolio. Airbus
designs and manufactures numerous types of commercial jetliner including passenger aircraft,
corporate jets, and freighter aircraft. These products also come in three different product lines
include single aisle, wide body, and very large aircrafts. Even though Airbus is downsizing, its
commercial jetliner unit is diverse and strong enough to successfully carry the entire company to
success.
Airbus also exceeds in creating energy efficient aircrafts. Airbus has succeeded in doing
so by improving the structure of its aircrafts. For example, its A320 aircraft has a decreased fuel
consumption of 15%, reduced NO emissions of 50%, and reduced operating costs of 8% because
of the addition of a new part, the winglet. Airbus has made energy efficiency a priority that it has
created the blue five initiative. The blue five initiative will focus on saving energy and water as
well as reducing waste, CO​2​, and VOC
In comparison, Boeing’s largest competencies is its strong research and development.
Boeing focuses on innovative technologies, improved processes, and the creation of new
products (Marketline, 2016). It is important that Boeing’s products are pushing the boundaries of
the industry. As such, Boeing has spent $3 billion the past three years in research and
development (Marketline, 2016).
Boeing does not limit its innovations to outside of the place. It research numerous
features inside the cabin that allow airlines to brand inside the cabin such as integrated sound and
light (Marketline, 2016). Such features allow the airlines to present information to passengers in
a unique and efficient fashion. Boeing understands that the airlines have their own customer sto
please. Improving the efficiency of the aircraft will only matter so much if the interior is not
enjoyable for passengers.
Boeing, as well, succeeded at process innovation. Boeing bases its process on lean
manufacturing policy that focuses on the efficient use of its resources while achieving high
quality products. Boeing is successful in implementing new innovations into its manufacturing
and production in a swift manner. If Boeing was not able to implement the new changes well, it
would be a waste to spend billions of dollars on research and development. As such, Boeing is
committed to not only push the boundaries of the aerospace industry through innovation, but
bring those innovations to their customers in an efficient manner.
Recent Performance of Boeing and Airbus
Both Airbus and Boeing had a slow year in 2016. Airbus received a net total of 731
orders and Boeing received 668 (Bhaskara, 2017). 2016 was the slowest year, order-wise, for
both companies since the recession in 2009 and 2010. In eight of the eleven years since 2005,
either Airbus or Boeing received a net total of 1000 orders (Bhaskara, 2017). That difference of
300 orders speaks volumes about the slow year for the aircraft manufacturers as a whole. Airbus
was able to outperform Boeing, order-wise, in both the categories of widebodied and narrow
bodied aircrafts. Boeing was able to deliver more completed aircrafts than Airbus in 2016.
Airbus only delivered 688 compared to Boeing’s 748 deliveries (Bhaskara, 2017).
From a financial standpoint, Boeing has the advantage over Airbus. Boeing, last year,
pulled in $96,114 million in revenue compared to Airbus’s $71,493 million (Fortune, 2017).
Boeing’s revenue increased by 5.9% from last year. Airbus’s revenue decreased by 11.2%.
Currently Boeing’s stock price is 184.83 (Fortune, 2017). It has increased by 37.11% over the
past year. Airbus’s stock, on the other hand, is worth 74.23. Its stock has increased 30.13% over
the past year (Fortune, 2017).
(7) Recommendation for Airbus
Based on our findings, we have three recommendations for Airbus. The first is to create
airplanes with the passenger experience in mind. The second is to revamp its Six Sigma program
to improve deliveries and reduce the number of defects. The third is to continue to focus on the
restructuring and avoid any acquisitions or joint ventures for the remainder of 2017.
As the younger generation such as the Millennials begin to enter the workforce, their
disposable income will increase. They will be able to purchase more items such as vacations and
plane tickets. Their travel preferences are quite different than their grandparents or even parents.
They are more willing to spend more on amenities within the cabin. As such, airlines are going
to start looking for aircrafts that have these amenities as to improve the passenger experience and
increase their profit margin.
If Airbus continues to build aircrafts without those additional amenities in mind, they
could lose aircraft orders to competitors. Airbus needs to consider the needs and desires of the
passengers. Some of those desires include extra leg and head room, Wifi capabilities, and outlets.
Airbus will need to innovate its cabins with accessories to please the ever-changing population
and continue its relationship with airlines such as Lufthansa, Qantas, United Airlines, and British
Airways.
Over the past decade, Airbus has struggled with operational defects and inefficiencies. A
common and effective method to reduce defects is Six Sigma. Airbus, from 2007-2010, had a Six
Sigma contract with Oakland Consulting to assist performance in Finance, HR, IT, Procurement,
Quality, Facilities, Marketing, Customer Services, and Manufacturing and Design. We were
unable though to find any evidence of a Six Sigma program since the failed merger in 2013 and
restructuring this past year. As such, we suggest Airbus reaches out to Oakland Consulting or
another firm to revamp its Six Sigma program and work to reduce defects.
It is important that Airbus reduce its defects in the years to come because if not, Airbus
will ruin its reputation with airlines and passengers. A reputation is difficult to rebuild, especially
when it comes to safety of a product. Airbus already has enough to focus on with its
restructuring. It would hurt the restructuring process if some of Airbus’ resources had to be used
to fix its reputation instead. Implementing a Six Sigma program is a proven, efficient method.
Airbus would benefit immensely in the long-run through a Six Sigma program.
Finally, Airbus should continue to focus on its restructuring and hold off on any new
joint ventures or alliances for the rest of 2017. Airbus is presently selling off its business units
and creating other into subsidiaries. It recently moved its headquarters to a new location and
eliminated duplicate positions within corporate. Instead of expanding, Airbus should gather data
and feedback to ensure that the restructuring was successful.
It is important that Airbus takes its time with restructuring and is deliberate with its
choices. This is the time for Airbus to create a strong foundation for the future of the company.
Airbus must ensure the present strategy is successful since the restructuring affects every portion
of the company. Gathering data and feedback will also inform the company on the successes and
failures of their strategy in case Airbus needs to restructure in the future. It is vital Airbus
focuses on its current strategy and sees it through before starting a new one.
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