Airbus A380PRODUCT, INDUSTRY AND CUSTOMER ANALYSISRUCHI THAPAPGDMM 2013-2014
Topic
ProductAirbus A380
Market Segment Airliner
Industry Aircraft
Major Competitor Boeing 747
Agenda• Introduction to Aircraft Industry• Industry Forecast• Types of Aircrafts• Market Share• Boeing vs Airbus: Duopoly
Industry
• Types of Airliners• Market Share• 2032 forecast for the category• The Product: Airbus A380• Current Market Scenario• Question faced by Airbus for the category• Category perceptual map• Airbus’s answer
Product
• Customers• Customer segments• Understanding the Customer• Porters Five forces
Customer
Aircraft Industry
Introduction to Aircraft Industry
Aircraft industry manufactures various kinds of aircrafts, like
• Jumbo Jets• Fighter Jets• Business Jets• Helicopters• Cargo Planes
Main customers of these industries are
• Airlines for Jumbo Jets• Billionaires for Business Jets and Helicopters• Cargo companies for Cargo Planes• Defense for Fighter aircrafts and Helicopters
Estimated Industry Revenue: $ 150-200 Billion *
* Estimated using Market share and revenue of Boeing and Airbus
Industry Forecast for next 20 years
Demand for air traffic will grow at 4.7% annually
This will require 29,200 new passenger and freight aircrafts
Total value US$ 4.4 trillion
Passengers will double from 2.9 billion to 6.7 billion by 2032
Asia-Pacific will lead the world in air traffic overtaking North America
10,400 aircrafts will replace older aircrafts
Source: Airbus website
Aircrafts Industry has many products
We will focus on Airliners
Aircrafts Industry
AirlinersNarrow Body
Wide BodySmall wide body
Medium wide body
Large wide body
JetsLight Jets
Medium Jets
Business Jets
Helicopters
Boeing has almost 50% active fleet share in US
Globally, Boeing and Airbus are the two biggest players - Duopoly
Source: CAPA – Centre for Aviation
Although Boeing has largest active fleet (i.e. historical sales), Airbus has caught up in Market Share (i.e. present day sales)
Source: CAPA – Centre for Aviation
Demand in North America and Europe is stagnant,Asia Pacific and Middle East are driving growth
1 9 8 1 1 9 9 1 2 0 0 0 Fe b 2 0 1 3
12.50 18.00 22.50 17.505.00
10.0010.00 14.00
3.75
10.0012.50
24.50
3.75
2.00
5.00
14.00
Revenue by RegionNorth America EuropeAsia-Pacific Middle East and Others
30 year Historical Trend 20 year Forecast
Source: CAPA, Boeing website
Airbus A380
Airbus A380 is a large wide body airliner
Aircrafts IndustryAirliners
Narrow Body Wide Body
Small wide body
Medium wide body
Large wide body
Jets
Light Jets Medium Jets
Business Jets
Helicopters
Airbus A380 is a large wide body airliner
What is narrow-body and wide-body airliner?
What is a narrow-body airliner?
Unit Cost: $100 Million
Airliner Configuration Seating capacity: 85 to 230 6 seats per row in economy
class Single Aisle
Boeing 737 Airbus A320
What is a wide-body airliner?
Unit Cost: $250 to $400 million
Airliner Configuration Seating capacity: upto 525 8 to 10 seats per row in economy
class Some aircrafts have two decks with
6 seats per row in upper deck Twin Aisle
Three subtypes Small wide body Medium wide body Large wide body
Boeing 747Airbus A380
Demand forecast is only 760 new airplanes by 2032
Airbus A380 is a large wide body aircraft
Source: Boeing website
More about Airbus A380 Largest passenger airliner
Double Deck Wide body Upto 850 passengers
Designed to challenge Boeing Market share in large wide body Airports have been upgraded because of A380’s size Production Capacity: 3 aircraft/month As of March 2014
Airbus has received 324 orders Airbus has delivered 128 orders Emirates has ordered for 140 Airbus A380
Current Market scenario
Currently Airbus A380 has helped Airbus captured the large wide body airliner segment
Boeing has announced Boeing 747-8 and Boeing 777 as new wide body airliners
So what should Airbus do?
Implications of Duopoly in Aircraft Industry
There are two major sellers: Boeing and Airbus The decision of the sellers is not independent of each other The change in price and output by one seller affects the other
seller who reacts to the change The customer, Airline companies, have large switching costs from
one seller to other It is difficult to grow the market of airliners, as the total demand of
airliners is determined by air passengers demand
Market Share gained by Airbus = Market Share lost by Boeing
Airbus A380 is still the largest airliner
A380 is largest
Even future Boeing versions are not as big
Even future Boeing versions are not as big
Airbus’s Answer Airbus has announced three future variants of Airbus A380
Improved A380-800: Better take-off weight thus providing better payload/range to Airlines
A380-900: Increased seating capacity to 900
A380F: Cargo plane
Customer
Customers
Customers Airline companies that provides air transport for
travelling passengers and freight
Airline companies can be divided into 4 segments International National Regional Cargo
Customer Segments
InternationalAirlines
NationalAirlines
RegionalAirlines
Revenue $1 billion to $40 billion
$100 million to $1 billion < $100 million
Seating Capacity 200+ 200+ 100-150
Fleet Size 300 to 1500 75 to 200 < 50Destinations 100 to 400 80 to 150 < 40
Customer segments made after analysis of airlines data available publically
Understanding the Customer The airline industry exists in an intensely competitive market
Airport capacity, route structures, technology and costs to lease or buy the physical aircraft are significant in the airline industry
Other large issues are Weather, Fuel cost and Labor
Fuel costs in particular have risen very sharply in recent times
Understanding the Customer
Economic Value = Lifecycle cost (Airbus A380) – Lifecycle cost (Boeing 747)
B o e in g 7 4 7 A i r b u s A 3 8 0
Price Price
Installation Installation
Usage and Main-tenance Usage and Main-
tenance
Lifecycle cost and Economic Value
Understanding the CustomerAirbus A380 Purchase price ($414 M)
Technical Support Costs (Airbus Technical support)
Training Costs (Pilot + Maintenance staff training cost)
Operating Costs (Fuel + Pilot Wages +Airport Fees +Handling)
Disposal costs
Maintenance cost (Maintenance supplies + Ground staff wages)
Inventory costs (Depreciation + Amortization)
Transaction Costs (Bank Loans and Lease)
Porters Five Forces Analysis
Threat of New Entrants: Negligible• High entry and exit barriers• Some Asian companies trying with government funding
Power of Suppliers: Variable• Most suppliers have low bargaining power• Very few specialized suppliers like Rolls Royce, GE (jet engine manufacturer) have high bargaining power
Power of Buyers: Very low• Duopoly structure means buyers have only two alternatives• Also, their switching costs are very high
Availability of Substitutes: None• Due to safety regulations, airline companies have to stick with approved airliners
Competitive Rivalry: High• A high rivalry like Pepsi and Coca-cola is expected
Thank You!