Airbus vs. Boeing Case study

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Airbus vs. Boeing Case study
Drivers of value creation and value capture
The drivers of value creation and capture in the airline industry were the sizes, variability, and existing aircraft technology. The planes' operating cost is the primary factor affecting the airlines' performance. Players can create operational cost advantage through fuel efficiency and achieve economies of scale by increasing seating capacity. As represented in (Exhibit 1), both companies focused on the seating capacities and technological advancement in the new model deliveries. The factors such as noise characteristics and comfort and safety were also important in value creation as Airbus focused on these factors for its A300 model. Consumer demand and market changes were the main factors affecting the development of new models. Boeing developed 757 and 767 on the comparative advantage of fuel efficiency after the oil crisis in the 1970s. The industry's major players were focused on developing the seating capacity to accommodate the increasing numbers of travelers, so the size of the air crafts and overall fleet size was the significant factor affecting the Company's value creation capability.
As per (Exhibit 1), Boeing's total seating capacity is far more than the Airbus 4,169 compared to 900, and so was the market share (Exhibit 3) 60% for Boeing compared to 19% for Airbus. Therefore, the size and variety of the fleet were the prime contributors to value creation. Few major players dominate the industry because of high investment and working capital costs. Around 65% of new manufacturing orders were given to Boeing, indicating the market leader's dominance. The high capital and expertise requirement for running the business has created a barrier for entry. The industry had multiple suppliers, but three had long-term relationships with Boeing and did not exercise much power over the larger industry payer. The larger part of value creation belonged to the airline itself. Although the customer had options, Boeing, with 4,169 seats, dominated the industry compared to Airbus 900; most of the revenue share belonged to Boeing.
Performance Comparison Boeing vs. Airbus
Boeing was an old and dominant player in the industry, with its inception in the 1960s. IT had a fleet of 6,600 planes ranging over six models with subcategories (Exhibit 1). Given its years in the industry, it had developed impressive expertise in aircraft manufacturing. The Company was in the maturity phase, with substantial revenues of USD 24,084 million and a 60% market share (Exhibit 3). The Company was operating in different business lines in the aircraft industry and defense industries (Exhibit 4) with stable revenues from each line.
On the other hand, Airbus was a relatively new player in the market whose estimated revenue growth was USD 8,438 million compared to USD 7,647million in previous years, with the new models' development. The Company was in the growth phase. Both companies were getting subsidies in one form or another from their respective governments. For Boeing, the question was of stagnation and saturation of growth after achieving market leader status. At the same time, the future was uncertain for Airbus if it would sustain and e...