Airbus vs Boeing Commercial Aviation

TEAM CLARO!
CHAVES GUILLERMO, GOMME,

JOHNSON, LANGKAMMER,
LPEZ RIVERA, PAPADELLIS
Competing in Commercial Aviation for the

Airlines
Case in point : Airbus A380 vs. Boeing 787
Operations and SCM
GMBA+ BLENDED 2
GLOBAL OPERATIONS AND SUPPLY CHAIN MANAGEMENT
PROFESSOR
LUIS EDUARDO SOLS GALVN
1. Industry Context and Competitive Environment
Company Overviews
Headquarters: Chicago Headquarters: Toulouse, France
Business areas: Manufacturer of commercial jetliners and military Business areas: Aerospace and defence related
aircraft. Additionally, designs and manufactures rotorcraft, electronic services.
and defence systems, missiles, satellites, launch vehicles and
advanced information and communication systems.
Global Reach Provides products and support services to customers in Global Reach: Fully-owned subsidiaries in the United
150 countries. States, China, Japan and in the Middle East. More than
150 global field offices.
Employees: Boeing employs more than 170,000 people across the
United States and in 70 countries Employees: 59,000 globally.
Supply Chain: Hundreds of thousands more skilled people working for Supply Chain: Has a network of 1,500 suppliers in 30
Boeing suppliers worldwide. countries
2012 Net income: $3.9 billion 2012 Net income: $1.59 billion (parent company
EADS)
2012 net orders: 1203
2012 net orders: 833
Market Share: 59%
Market Share: 41%
Team Claro! Chaves Guillermo, Gomme, Johnson, Langkammer, Lpez Rivera, Papadellis Page 2
Primary customer for Boeing and Airbus is global airline industry. To understand their market
position we need to establish the current state of the global Airline business.
Strong Prospects for Growth

Demand in the airline industry generally correlates with global economic activity which drives spending on
air travel.
The growing global middle class and increased levels of urbanization are generating sustained levels of
demand.
Passenger traffic rose 5% between 2011 and 2013 and this trend is expected to continue in the long term.
Boeing predicts that there will be 35,000 new aircraft in circulation in 20 years.
The majority of this growth will be driven by emerging markets.
Fuel Price Driving innovation

One of the most important considerations for the airline industry is fuel price
(represents 30% of global airline operating costs)
Technological advances are making aircraft much more fuel efficient and cheaper to run.
As a result, airlines everywhere are looking to replace older planes and update their
fleets.
Combined with enhanced demand, this is good news for manufacturers like Boeing and
Airbus. Are looking at sustained long-term market growth and a boom in sales.
The Airbus A380 and the Boeing 787 Dreamliner, represent efforts to take the initiative
and tap into the demand for more efficient models.
Threat of substitute products Rivalry among existing competitors Threat of new entrants
Extremely low. No direct substitutes to Industry is currently in a state of duopoly. US-

based Boeing and European Airbus dominate The sustained growth in the industry is
air travel.
the global market. starting to attract new entrants.
High speed rail cannot compete
Extensive rivalry exists between these two However risk of entry is very high due to
players. high level of investment required to
A380 vs 787 Dreamliner is the latest undertake the necessary R&D and
embodiment of this rivalry. production.
Strong barriers to entry:
i. High costs involved
ii. Takes time to build product long
time before sale
iii. Large degree of technical expertise
required.
Bargaining power of suppliers Bargaining power of buyers
Manufacturers engage a huge variety of

Again, the duopolistic nature of the
subcontractors to develop end product
industry at present does not present
The power of the supplier depends on the
airlines with a great deal of choice or
nature of the component being supplied.
influence.
Suppliers of rare resources, such as carbon
However bargaining power is
fibres, or highly specialized techniques have
increasing due to emergence of
a certain degree of influence
more manufacturers a combination
Ultimately the power rests with the
of more manufacturers.
duopoly.
2. Key Corporate Objectives - Airbus
Vision: Creating the Best and Safest Aircraft

Mission Statement:
Meet the needs of
airlines and operators
by producing the most
modern and
comprehensive aircraft
family on the market,
complemented by the
highest standard of
product support
Airbus Industrie Headquarters: Toulouse, France
Long Term Goals: Key Objectives:

Deliver strong results in a Further internationalization
sustained manner Focus on Key Geographic Markets
Market Share: at least HALF Expand Customer Service Offering
of the world commercial Restore Competitive edge
aircraft over the long term Flexibility
Efficiency
2. Key Corporate Objectives - Boeing
Vision: People working together as a global enterprise for aerospace leadership
Mission Statement:
Be the leader among
the premier industrial
concerns in terms of
quality, profitability
and growth
Boeing Headquarters: Chicago, Il, USA
Objective: Attain the following Core Competencies:
Customer Knowledge and Focus

Large Scale system integration on a global level by outsourcing
Lean Enterprise
3. Marketing Strategies - Airbus
Strategy: Airbus wanted to break Boeings stronghold in long range, big capacity Airplanes
with the new A380 and new technology
Airbus believes in Hub-and-Spoke

o Airbus expects high traffic between international hubs
o Large airports with constraints of airport slots
o A380 maximizes yields per slot for connecting flight
Delivers efficiency through economies of scale

o Large airplane offers economies of scale (-20% cost per
seat than Boeing 747)
o New seat 840 seat configuration cuts cost by 70%-80%
o Most luxurious cabins in the industry; adds to the

image of high quality airlines
o I+D: Risks and Innovation
3. Marketing Strategies - Boeing
Strategy: Boeing wanted to meet its need to have a product to compete in the market
for mid-long range air transport
Boeing bets on Point-to-Point Model
o The plane travels directly to a destination, rather than
going through a central hub
o New market segment: long-haul aircraft but average size
o Secondary airports with no facility to accommodate large

aircrafts
o Make it simple and cost-effective for airlines to operate
Delivers economy through technological innovation

o B787 Dreamliner competes in the mid-long range aircraft
o Fuel-efficient twin engines
o Lightweight composite materials
o Availability of different cabins for different classes:

Moodlight function allows differentiation of cabins without
physical walls
4. Order Qualifiers and Order Winners
Order Qualifiers Order Winners
Performance (65%)
Reliability Do better than the rest, with less fuel
The Company has to be as reliable as their aircraft. Boeing
and Airbus sell multi-million dollar products to their civil
aviation customers. Airlines base their operations in this
aircrafts and reliability is expected.
Conformance
Product conformance is a must in the civil aviation Serviceability (20%)
industry. Safety standards and Aviation regulatory bodies Make it easy for my operations and give me support
establish very clear rules that have to followed. in time, every time
Perceived Quality
How the product is perceived is very important in this
industry. Current events are a clear example
Dependability (Delivery Time) Durability (15%)

So much as it might sound weird... Yes, it is a qualifier. Oh yeah!! And it has to last
5. Main Transformation Process - Boeing
Organizational Transformation: Global

Supplier Coordination through Supply
Chain Management
Boeings supply chain had to be transformed to
accommodate management of suppliers through four
continents. Timing is critical, and so are specifications and
technical coordination when we talk about tolerances of
up to 1/5000th of an inch.
Operational Transformation:
o From integrating separate designs to
design with suppliers
Components had to be built from scratch, and Boeing Suppliers, from four continents to Everett, WA, USA
compatibility had to be gained from the design
phase.
o From manufacturing for customers to
manufacturing with customers
Customers were asked to come onboard during the
assembly process. Insight is gained on both sides.
Technical Transformation : From Aluminum

to Composite
The hardest change. Weight reduction means one thing: General Electric Genx Engine, Created for and with the 787
Aluminum alloys, the lightest aircraft manufacturing metal
is just too heavy for the 787.
5. Main Transformation Process - Airbus
A380 Parts, on their way to Toulouse, France

Organizational Transformation: European-
centered Supplier Coordination
Construction of Port facilities
Development of new roads
Oversized road convoys
RORO fleet ship and barges
Operational Transformation:
o Design
A3XX project / Not just a copy paste product
Double digit operating cost reduction
More range, quieter and more cargo volume
o Production
Main fuselage, wings, fins and control surfaces
manufactured all over Europe. Assembly takes
place in Toulouse, France. Interiors & further
testing in Hamburg, Germany.
Technical Transformation
Systems Integration
Control / System redundancy Timeline, A380
Size / Performance
Active load alleviation
Digital mock up systems
Advanced composite materials
Central wing box
Smoothly contoured wing cross section
6. Major Infrastructure Dimensions of the Operation Strategies - Airbus
1.500 suppliers in 30 countries

Five spare part centers
120 field sites
Three training centers
Six Center of Excellence (CoE)

Streamline and unify design and production processes
Reinforce cross-national relationships

o Operations: Six CoE are responsible for
manufacturing components and final assembly
o UK: Wings in UK
o Germany: Forward, tails and fuselage
o France: Pylon and Nacelle
o Spain: Horizontal tail
o Toulouse / Hamburg: Final assembly
o US: A350
Information systems to First-tier suppliers are involved in

streamline communication within concept and product development
the network
New R&D capabilities &

Chose suppliers on financial backing
best-value basis
Efficient and
integrated
Full supplier Globalization (spread
supply chain financial risks, open new
responsibility
markets)
Supplier portal to share RFID technology to trace

documents & specifications and to parts, make maintenance
manage inventory levels and orders easier
Supply Chain risk sharing partnerships

Significant risk for Airbus of economic crisis or
terror attacks on airplane demand
Risk bearing-contracts a central tenet of Airbus
growth strategy
Risk-sharing partnerships with 30 key supplier
3.1 US $ / approximately 25% of non-recurring
costs of A380 covered by suppliers
Risk of loosing competitive edge

Suppliers are less willing today to take risks
After 9/11 many suppliers cut back their risk sharing
agreements
Difficult to efficiently manage its overall supply chains
Long-term risk of loosing competitive edge
6. Major Infrastructure Dimensions of the Operation Strategies - Boeing
The entire Boeing supply network includes some 28,000

suppliers
783 million parts are procured each year
The Company also has 6 R&D centres and relationships

with over 50 international universities.
There are more than 500,000 people caught up in the

supply chain
Supply chain management is therefore a vital part of Boeings

operations. They have invested heavily in establishing close relations
with suppliers and infrastructure that involves constant dialogue and
feedback.
Web portal developed exclusively Hold an annual Supplier of the

for suppliers to give them Year ceremony where all suppliers
Stanley Deal constant access to evolving come together and best performers
Vice President and General Manager
Supply Chain Management & standards & developments are recognized for their efforts
Operations
The 787 brings together more than 40 diverse suppliers

more than any other model in Boeings history.
Air Cruisers Escape slides Kawasaki Heavy Industries Fixed trailing edge, forward fuselage
Alenia Aeronautica Centre Fuselage, horizontal stabilizer Kidde Technologies Fire protection system
Bridgestone Tires Korean Airlines Wing tips, stringers, nose wheel well
C&D Zodiac Windows, Doors Safran Labinal Wiring
Dassault Systemes Tools/software Latecoere Passenger doors
Delmia Corp. Software Messier-Bugatti Electric brakes
Diehl Aerospace Main cabin lighting Messier-Dowty Landing gear structure
Donaldson Air purification system Mitsubishi Heavy Wing box
Monogram Systems Water & waste systems
Eaton Aerospace Pumps, valves, hydraulics etc.
Moog Flight control actuation system
Esterline Flight deck control panels
Panasonic Cabin services system
Fuji Heavy Industries Centre wing box
Parker Aerospace Hydraulic subsystem
GE Aviation Landing gear actuation and control system, etc
PFW Metallic tubing and ducting
GE Engines Engines
PPG Aerospace Dimmable windows
GKN Aerospace Composuite mat for wing ice protection
Displays, pilot control systems,
Goodrich Engine nacelles, numerous systems Rockwell Collins
communications
Auxilliary power unit, environmental control Rolls-Royce Engines
Hamilton Sundstrand
systems Saab Cargo doors
Honeywell Navigation Securaplane Emergency lighting systems
Intercim Software Forward fuselage, flight deck, engine
Spirit Aerosystems
Intertechnique & Avox Oxygen systems pylons etc
Ipeco Flight deck seats Toray Prepreg composites
Jamco Lavatories, galleys, bar units etc Ultra Electronics Wing ice portection
Wing tip Centre Fuselage Tail fin

Picture of a Korea Italy Washington, US
Truly Global
Aft Fuselage
Supply Chain Wing Charleston, US
Japan Stabilizer
Italy
Engines
UK & Ohio, US
Cargo access doors

Sweden
Moveable trailing edge
Australia
Forward Fuselage
Kansas
Landing Gear
UK
Passenger entry doors Forward Fuselage
France Japan
Ensuring Quality in the Supply Chain
Boeing have implemented infrastructure that

guarantees the highest standards throughout their
supply chain
In order to become a Boeing supplier, organizations must

certify that their production systems meet Boeings Quality
Management System requirements an extensive set of
international standards and criteria covering almost every
aspect of their operations.
All suppliers must also have their systems approved by the

Federal Aviation Administration before Boeing will accept
them as a supplier.
Suppliers are audited regularly, undergoing full site visits by

Boeing audit teams.
Boeing personnel are embedded within supplier organizations

globally to monitor quality, work with suppliers on process
improvements, and ensure adherence to Boeing standards and
schedules
Diligence in Handling Design Changes

Design changes to commercial airplanes such as the 787 Dreamliner often have to be made to improve efficiency or
performance, meet new regulations or address evolving customer demands.
When they required to make design changes, Boeing follows a very rigid process to ensure that the overall integrity of
the aircraft is not compromised. This redesign is a process that involves participation from representatives throughout
Boeings operations and its supply chain.
When the need for a product change is identified, representatives

from throughout the entire of Boeing come together to analyse the
potential change options.
When a solution is decided upon a change proposal is drafted

which must then be approved by management. All groups who the
change will affect are duly notified
Senior engineers for all different parts of the aircraft go over the
proposal to determine how the proposed change it will affect their
section.
Develop change Obtain program Develop Execute Certify

proposal approval plan change change
7. Companies Culture and Values - Airbus
Companys Culture: Airbus day-to-day operations are AFCs, Airbus Key Competencies,
guided by a strong commitment to integrity, transparency a set principles within Airbus
that encapsulates the mission
and professionalism across its operations: each and every statement of the organization.
employee is committed to defending high ethical standards The skill of Airbus employees
in business relations inside as well as outside the company. are cultivated through regular
workshops and training,
ultimately leading to career
advancement and staff
retention.
ISO 14001Certified.
Environmental awareness and
responsibility permeates the
procedures and processes
associated with R&D.
Suppliers and vendors must

adhere to the CSR philosophy of
Airbus. Regular audits occur to
check compliance.
Values: The Airbusway
Deliver Customer Value

Develop Oneself and Others
Drive Improvement and Innovation
Practice Teamwork
7. Companies Culture and Values - Boeing
Companys Culture: Proud, but not satisfied.

Continuous innovation, aspiration and imagination
Our Values: At Boeing, we are

committed to a set of core values that
not only define who we are, but also
serve as guideposts to help us become
the company we would like to be. And
we aspire to live these values every day
1. Leadership
2. Integrity
3. Quality
4. Customer Satisfaction
5. People Working Together
6. A Diverse and Involved Team
7. Good Corporate Citizenship
8. Enhancing Shareholder Value
8. Major Capabilities Developed - Supply Chain Management
The Organizational Transformation has led to

improvements in the Supply Chain
Management
o Information Control
Currently, throughout the production process,
performance, operations, financial aspects and
strategy are continuously monitored, which provides
extremely important information on all levels of the
supply chain
Airbus Managed Inventory: Automated Component Replenishment
o Better management of infrastructure,

facilities and work flows
Clear improvements support the complete process
related to material, logistics and suppliers, thanks to a
flexible value-adding material management service
that fits with customer needs.
Airbus Beluga: Air Transport of large A380 fuselage components
8. Major Capabilities Developed - Technical and Operational
Operational Transformation has led to Improved

Services to Customers :
o Offering Telemetric Services for their Aircraft

See the performance of your Aircraft real time, all the time.
Immense advantage for airlines in terms of operation efficiency.
o Offering a more comprehensive After-Market Service
Full service during all the Aircraft lifecycle has been improved due
to all the eventualities found during the development of these
projects
Boeing Gold Care Program: Lifecycle maintenance and consulting
Technical Transformation has led to mastery of

complicated new techniques
o Solving Composite Structural Problems

Many unforeseen problems occurred after the design phase.
Engineering took care of it through test after test.
o Developed Worker Expertise and Internal Know-how
Both Companies have learnt the fast and hard way
o Environmental Advances
Emissions and Noise standards are more stringent.
Boeing Everett: Assembly of Composite main Structures
9. Level of Alignment
Order Winners
- +35% seating - Cheaper and efficient airplanes
- +49% more floor space - -20% less fuel & -10% costs/seat
- -15-20% cost per seat - -20% operating costs
Performance (65%)
- -13% less fuel - -30% maintenance costs
- Adds capacity for bottleneck - -30% airframe maintenenace

routes
- Interchangable engines easier to maintain
- Downtime because of safety
Serviceability (20%) - Downtime because of saftey issues
issues
- Use of 25% composites - Use of >50% composites

- High quality standards - High quality standards
Durability (15%)
- Severall safety issues with fuel

leaks and battery fires
- Engine blowout Quantas in
2010 - July 2013 787 fuselage fire in
Order Qualifiers Heathrow, London, UK
9. Level of Alignment - Orders and Deliveries
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total
Orders 78 0 34 10 10 24 33 9 4 32 19 9 0 262
Deliveries 0 0 0 0 0 0 1 12 10 18 26 30 9 106
First time in 2011 delivered according to schedule / As of July 2012 three aircraft per month
Selling price as of 2013: $403 Mn
Production cost will be equal to selling price at 2015
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total
Orders 56 235 157 369 93 -59 -4 13 -12 82 930
Deliveries 0 0 0 0 0 0 0 3 46 17 66
Up until 2009 announced 5 consecutive delays / 787 was first certified in August 2011
Selling price as of 2012: $206.8 Mn (787-8) and $243.6 Mn (787-9)
Production cost at 2013: $200 Mn
10. Future Challenges
Internal:
o Safety Standards
As of late, there have been noticeable lapse in the enforcement of safety standards.
Which reduces brand reputation and customer confidence
o Supply Chain Management Outsourced
In the future, the efficiency of outsourcing the various parts of a these aircraft may
no longer be as cost efficient . The cause might be the increasing competitiveness
of external manufacturers due to the advent of globalization and changes within
the global economic landscape
Internally, domestic sentiment may compel Airbus/Boeing to produce greater

manufacturing capabilities within Europe/the U.S. in direct contrasts to the current
manufacturing trend.
o Vanishing Technological Advance
Other manufacturers may catch up to the technological advances that Boeing or

Airbus currently provide to end-customers, thereby reducing their competitive
strengths within the market. They must keep the internal progress of R&D.
External:
o Tight margins and capital intense projects

negatively affect the economic performance of Boeing. Boeing relies
more on market efficiencies to translate its value propositions
o Fuel price
Although fuel prices are purchases on margins, the cost of fuel has
increased in volatility
o CO2 quota reduction

Rising awareness in regards to environment fronts requires Boeing to Comac, Chinese Aerospace Manufacturer
allocate significant R&D to comply with increased standards of
environmentally friendly aircraft
o Politics:
Cut budgets to defense purchases threaten the jobs markets of local
communities where Boeing offices are located.
o New Competition:
New market entrants may vie to compete with Boeing on a quality and
technological front while reducing prices to increase its viability in the
market.
CO2 emission reduction initiatives will gain greater public support.
Competing in Commercial Aviation for the TEAM CLARO!
CHAVES GUILLERMO, GOMME,
Airlines JOHNSON, LANGKAMMER,
Case in point : Airbus A380 vs. Boeing 787 LPEZ RIVERA, PAPADELLIS
Operations and SCM
Thank You!!
GMBA+ BLENDED 2
GLOBAL OPERATIONS AND SUPPLY CHAIN MANAGEMENT
PROFESSOR
LUIS EDUARDO SOLS GALVN
Main Sources
http://www.srr.com/article/aerospace-industry-overview-and-update-fall-2011
http://travel.cnn.com/explorations/life/boeing-747-8-and-airbus-a380-death-match-152563
http://www.boeing.com/boeing/commercial/cmo/
2. Key Corporate Objectives

Airbus vs. Boeing: Strategic Management Report - Sacha Mayer, 2007
3. Marketing Strategies
http://www.airbus.com/aircraftfamilies/passengeraircraft/a380family/
http://www.boeing.com/boeing/commercial/787family/index.page
4. Order Qualifiers and Order Winners
5. Main Transformation Process

Boeing: The Dreamliner Quiet Revolution, Smithsonian Air & Space, July 2012 http://www.airspacemag.com/flight-today/The-Quiet-Revolution.html?c=y&page=1
Airbus: http://www.airbus.com/innovation/
6. Major Infrastructure Dimensions of the Operation Strategies

The Airbusway http://www.airbus.com/work/why-join-airbus/our-culture/
7. Companies Culture and Values

Boeing: http://www.boeing.com/boeing/aboutus/culture/#vision
Airbus: http://www.airbus.com/company/people-culture/company-culture/
1. Major Capabilities Developed
9. Level of Alignment

http://www.boeing.com/aboutus/environment/environmental_report_09/carbon-dioxide-emissions.html , Boeing,Carbon Dioxide Emissions
http://www.eci.ox.ac.uk/research/energy/downloads/jardine09-carboninflights.pdf, Calculating The Carbon Dioxide Emissions Of Flights
http://www.faa.gov/news/updates/media/2013_02_22_10_00_10.pdf, Official U.S. Government Notice of Budget Cuts

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Airbus vs Boeing Commercial Aviation

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TEAM CLARO!

CHAVES GUILLERMO, GOMME,

Competing in Commercial Aviation for the

Headquarters: Chicago Headquarters: Toulouse, France

Strong Prospects for Growth

The majority of this growth will be driven by emerging markets.

Fuel Price Driving innovation

Extremely low. No direct substitutes to Industry is currently in a state of duopoly. US-

Bargaining power of suppliers Bargaining power of buyers

Manufacturers engage a huge variety of

Vision: Creating the Best and Safest Aircraft

Airbus Industrie Headquarters: Toulouse, France

Long Term Goals: Key Objectives:

Vision: People working together as a global enterprise for aerospace leadership

Boeing Headquarters: Chicago, Il, USA

Objective: Attain the following Core Competencies:

Customer Knowledge and Focus

Airbus believes in Hub-and-Spoke

o Large airports with constraints of airport slots

o A380 maximizes yields per slot for connecting flight

Delivers efficiency through economies of scale

o New seat 840 seat configuration cuts cost by 70%-80%

o Most luxurious cabins in the industry; adds to the

o I+D: Risks and Innovation

o New market segment: long-haul aircraft but average size

o Secondary airports with no facility to accommodate large

o Make it simple and cost-effective for airlines to operate

Delivers economy through technological innovation

o Fuel-efficient twin engines

o Lightweight composite materials

o Availability of different cabins for different classes:

Order Qualifiers Order Winners

Dependability (Delivery Time) Durability (15%)

Organizational Transformation: Global

Technical Transformation : From Aluminum

A380 Parts, on their way to Toulouse, France

1.500 suppliers in 30 countries

Six Center of Excellence (CoE)

Reinforce cross-national relationships

o Germany: Forward, tails and fuselage

o France: Pylon and Nacelle

o Spain: Horizontal tail

o Toulouse / Hamburg: Final assembly

Information systems to First-tier suppliers are involved in

New R&D capabilities &

Supplier portal to share RFID technology to trace

Supply Chain risk sharing partnerships

Risk of loosing competitive edge

The entire Boeing supply network includes some 28,000

783 million parts are procured each year

The Company also has 6 R&D centres and relationships

There are more than 500,000 people caught up in the

Supply chain management is therefore a vital part of Boeings

Web portal developed exclusively Hold an annual Supplier of the

The 787 brings together more than 40 diverse suppliers

Wing tip Centre Fuselage Tail fin

Cargo access doors

Ensuring Quality in the Supply Chain

Boeing have implemented infrastructure that

In order to become a Boeing supplier, organizations must

All suppliers must also have their systems approved by the

Suppliers are audited regularly, undergoing full site visits by