Source: http://img.airliners.de/2009/12/emirates
MBA IM 2015 ● Project Management ● Muytoy Nancy / Izquierdo Alfonso / Wenzler Jürgen / 22.04.2014
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Source: http://www.airbus.com
MBA IM 2015 – Project Management
CASE AIRBUS A380 –
BUILDING THE WORLD‘S
LARGEST COMMERCIAL AIRCRAFT
Muytoy Nancy
Izquierdo Alfonso
Wenzler Jürgen
AGENDA
1. Historical background of the Airbus Company
2. Airbus competitor Boeing
3. Diagnosis of the project business plan and future prognosis
4. The project execution
5. Airbus and the A380 today
6. Future competitiveness of Airbus
7. Conclusion
8. Discussion
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1. Historical background of the
Airbus Company (1)
• Airbus Industries began as a
consortium of European aviation firms
to compete with American companies
such as Boeing, McDonnell Douglas,
and Lockheed in 1970
• British (20%), France (37.9%),
Germany (37.9%), Spain (4.2%)
• Headquarter: Toulouse, France
• In 2000 Airbus made the transition
from a consortium to a fully functioning
private entity
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1. Historical background of the
Airbus Company (2)
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1. Historical background of the
Airbus Company (3)
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1. Historical background of the
Airbus Company (4)
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2. Airbus competitor Boeing (1)
Company Profile of
• Found in the year 1916 in the Puget Sound region of
Washington state
• Market leader in the industry of military and commercial
aircraft manufacturing
• Customer base and support in 150 countries
• Employee strength of 165.000 around the globe
• More than 12.000 commercial jetliner engaged in aviations
services
• The commercial jetliner (SBU) total revenue earned during
the period in 2013 stands at 52.9 bn USD
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2. Airbus competitor Boeing (2)
Commercial Aircraft Product Line
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2. Airbus Competitor Boeing (3)
Evolution Competition Airbus - Boeing
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2. Airbus competitor Boeing (4)
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2. Airbus Competitor Boeing (5)
Managing New Product Development and Supply Chain Risks:
The Boeing 787 Dreamliner Case
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2. Airbus Competitor Boeing (6)
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2. Airbus competitor Boeing (7)
Dreamliner Outcome
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2. Airbus competitor Boeing (8)
NTCP-Analysis
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2. Airbus competitor Boeing (9)
• Lesson 1:
Assemble a management team with requisite expertise
Traditional Supply Chain
Dreamliner Supply Chain
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2. Airbus competitor Boeing (10)
• Lesson 2:
Supply chain visibility should be improved to ensure
issues are addressed on time
• Lesson 3:
Cost estimation of a project should follow a full
understanding of all the underlying costs
$7.3 billion
• Estimated
costs
(conventional
outsourcing)
$4.2 billion
• Estimated
costs (new
outsourcing
model)
$15 billion
• Actual costs
• Lesson 4:
Improve Tier-1 supplier training and selection process
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3. Diagnosis of the project business
plan and future prognosis (1)
3.1 The Airbus A3XX:
•
1990: why not a super jumbo?
•
Basic design finalized in 1999
 passenger & cargo models
•
550 Passengers (VLA)
•
Could cover the same routes
of the Boing 747 + extended
• Full passenger decks and a third deck
capable of accomodation baggage, cargo,
and/or passenger amenities (cocktail
lounge, exercise room and showers)
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3. Diagnosis of the project business
plan and future prognosis (2)
3.1 The Airbus A3XX:
•
More space per seat and wider aisles  attract passengers
•
Same fly-by-wire tech, flight deck design & performance
characteristics (Airbus family)
•
Higher list price than 747, but increased capacity and reduced
costs
•
Operating cost +12% but
+35% capacity
•
Plane‘s size  complications
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3. Diagnosis of the project business
plan and future prognosis (3)
3.2 The diagnosis:
•
•
List price of $216 million
Cost of development: $13 billion
Planned investment by year ($ million)
$150
$250
$2,200
$300
$350
$2,200
$300
$350
$2,200
•
$50
$1,320
$1,100
2001
$200
$50
2002
2003
R&D Expediture
2004
2005
Capital Expediture
$880
$660
$440
2006
2007
2008
Working Capital
Funding:
•
$3.5 billion from vendors
•
$3.6 billion of „launch aid“ from the partners‘ national governments
•
$5.9 billion Airbus partners
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Avg. Annual RPK
2.0
1.0
0.0
3.0
4.0
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Europe – Pacific (1.5)
Canada – Europe (1.5)
USA – South America
(1.7)
South America – Europe (2.0)
USA – Central America
(2.0)
8.0
Domestic
Japan (2.1)
Intra Asia (2.1)
Domestic P.R. China (2.1)
Africa – Europe (2.7)
Domestic Europe (2.9)
Europe – Asia (4.6)
Asia – USA (6.6)
Intra Europe (7.0)
Europe – USA (13.0)
Domestic USA
(25.7 %)
Growth (%) 1999 - 2019
3. Diagnosis of the project business
plan and future prognosis (4)
Was there sufficient long-term demand to justify industrial launch?
9.0
Average Annual RPK Growth (%)
(1999 – 2019)
7.0
6.0
5.0
Airbus Industrie 1999 Global Market Forecast
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3. Diagnosis of the project business
plan and future prognosis (5)
3.3 Project expectations:
• Delivery starting in 2006
• Hope to secure 50 jets as many
as 5 major airlines.
• When it reached full production
capacity (4 planes/month) in
2008  price $225 million
& operating margins 15-20%
• Effective tax rate = 38%
(French rate including „social
contribution“)
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3. Diagnosis of the project business
plan and future prognosis (6)
3.3 Project expectations:
• Annual growth rate of 4.9 % (passenger traffic)
• Annual demand for new aircraft of each 10,000 passengers
routes linking almost 2.000 airports
• Forecast demand:
• 14.661 new passenger aircraft and 703 new freighters
over the 20-year period through 2019
• 727 new aircraft seating from 400 to 500 passengers
• 1550 new aircraft seating +500 passengers
• Sales = $350 billion
• Finantial success & aviation industry leader
• Approx. costs of $13 billion (not consider $700 million that
would have been expended in 2000)
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4. The project execution (1)
Example of an Aerospace Project Network (Multiple Intersecting Iterative Loops)
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4. The project execution (2)
4.1 General data of the project:
1. 19. Dec. 2000 - voted to launch a $13 billion
programm to build the A3XX  A380
2. Early 2001: The aircraft configuration was
finalised
3. 23. Jan. 2002: Manuf. the 1st wing box
component
4. The development cost had grown
$3 billion when the first aircraft was
completed
5. First flight: 27. April 2005
6. It entered commercial service: October 2007
7. 200 orders up to the year 2009
8. Committed customers cost reductions (fuel)
Source: Singapore Airlines
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4. The project execution (3)
4.2 Complications:
1.
2.
3.
4.
5.
6.
7.
At the beginning of the project:
The plane’s size, noise, emissions, turnaround time, taxiway
movements, evacuation
2005: ICAO – Separation row (heavy aircrafts)
3 delays announced in 1.5 years
MAIN Causes:
a) Electrical systems and structure (complex cabin wiring)
b) Use of different engineering methods at different Airbus
sites  wiring incorrectly design to manufacture
c) Late weight reduction design changes
2006: change of Airbus CEO & program director
2006: spend $2 billion more than the budget
2010: Qantas Flight 32  uncontained engine failure
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4. The project execution (4)
4.3 The main failure:
Fall 2006: assembly stage in Toulouse (France)
• Preassembled wiring harness produced in Hamburg failed to fit
in the airframe
• Design software incompatible (CATIA)
Consequences:
• Ability to share design specifications between the 2 plants was
compromised
• Hundreds of miles of cabin wiring failed to fit
• Postpone deliveries for 2 years & redesign the wiring system
• Cost expected to exceed $6 billion
• When the delay was announced, the stock lost 1/3 of its value
• June 2008: Copresident accused (sell stock before make public)
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5. Airbus and the A380 today (1)
5.1 Restructuring-program „power8+“ (2007-2014):
•
•
•
•
•
Preparation to stay competitive in future
No double production structures
Reduction of 10.000 workplaces
Intended sale of plants in France and Germany
Intended cost reduction: €2,1 billion p.a. from 2010
(create free cash flow)
• Engineering sector: intended cost reduction 15%
• Administration sector: intended cost reduction 30% (until 2010)
e.g. by reduction amount of suppliers
 Predominant success (targets 2010 were beaten)
 Ability to compete was achieved due to „power8+“
 But: factories could not be sold (Premium Aerotec)
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5. Airbus and the A380 today (2)
5.2 Actual situation and focus:
•
•
•
•
•
Currently ca. 69.300 employees (Boeing: 165.000)
Sales: €42 billion p.a. (Boeing: €41 billion)
EBIT 1.8 % p.a. (Boeing: 1,71 %)
2009: „Airbus Military“ was founded
In August 2013 the 8.000th aircraft (A 320) was delivered to
Malaysian Air Asia (Boeing: more than 12.000)
• Technical problems (2014: material fatigue wings;
2013: fractures in the body; 2012: hairlines in the wings)
 but BOEING also has problems with the „Dreamliner 787“
• EADS: loss of order for 42 aircrafts for the Indian SpiceJet
in 03/2014)  (Boeing 737 Max, $4.4 billion)
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5. Airbus and the A380 today (3)
5.2 Actual situation and focus:
• Airbus A350XWB: set to redefine the standards of tomorrow,
4 flying test aircrafts
• Capacity for the best-selling single aisle aircraft A320neo-Family
shall raise from currently 42/month to 46/month in Q2/2016
 Currently 60 % market share for A320neo-Family (2.610 orders)
 Strategy of strengthening the „star“ to stay competitive
 Demand on civil aircrafts until 2030: 
• In Feb. 2014 the „ACJ319 Elegance“ was shown at Abu Dhabi
show (aircraft for VVIP) 
 Strategy of diversification
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6. Future competiveness of airbus (1)
6.1 Short-term future:
•
•
Development of capacities
Global interobility: Airbus and Commercial Aircraft of China
(COMAC) – Memorandum of Understanding (Feb. 2014)
• Increasing share from 20 to 25 % of an joint-venture: Arbin Hafei
Airbus Composite Manufacturing Centre (HMC); Feb. 2014
• Airbus reinforces its presence in India (subsidiary: Airbus India)
• Massive development of relationship in Singapure
• Aeroflot (RUS): first airline with sharklet equipped A320 (Feb. 14)
• Invests in robotics-project FUTERASSY in Spain (Feb. 2014)
• Agreement with M.I.T. to explore the use of digital
manufacturing in aerospace (Dec. 2013)
 Good promotion on R+D
 Good positioning on actual and future markets
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6. Future competiveness of airbus (2)
6.2 Long-term future - Airbus‘s vision for „smarter skies“:
• Annual report about the future of aviation (in 2050)
• Basis for Airbus Concept Plane: A380
• Future depends on the challenge how to solve the energyproblem
Impressions (video):

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6. Future competiveness of airbus (3)
6.3 Summary ideas:
• Seats with sensors, that adapt to your body
• Recycable materials made of plant fibres, self-cleanable
• Glass-cabins (partially)
•
„Social rooms“: virtual golf court, lounge
• Oil of an alga istead of kerosine
• Artificial intelligence, self-repairing materials
• Vertical take-offs for gaining space in cities
• For long-distance flights: flying aircraft carriers
 work on implementation of some visions already nowadays
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7. Conclusion
• Competition between Airbus and Boeing: duopoly in the large jet
airliner market since the 1990s
• The A380 emerged from the estimated necessity of a VLA: more
capacity (550 passengers), more comfort, also to reduce Boeing's
market share
• Some successful restructuring programs assure the ability to
compete nowadays. Nevertheless the project A380 was so far an
expensive failure:
• The problems that Airbus experienced during the development of the
project A380 resulted in significant cost overrun (3 billion), schedule
delays (3 in less than 1.5 years) a firm crisis (change of Airbus CEO,
A380 PM)
• Technical problems with the A380 during the last years: necessary to
search new approaches and new technologies to stay competitive.
Airbus has here very good, but ambitious imaginations
 ambitious visions are necessary for breakthroughs
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Source: http://www.avioners.net
MBA IM 2015 ● Project Management ● Muytoy Nancy / Izquierdo
Alfonso
/ Wenzler Jürgen / 22.04.2014
Source:
http://www.airbus.com
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Discussion
Source: http://www.austrianaviation.net
Source: http://www.aerotelegraph.com
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The Airbus A3XX Project – proposal for solution
Technology
Current style
Super-high tech
Required style
High-tech
Medium-tech
Low-tech
Array
System Assembly
Complexity
Novelty
Derivative
Regular
Fast/competitive
Time-critical
Blitz
Pace
Platform Breakthrough