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AIRBUS
Headquartered in Toulouse, Airbus is owned by EADS, a global leader in aerospace, defence and related services. This group which is comprised of Astrium, Cassidian and Euro copter, in addition to Airbus has a presence on every continent, and employs a total workforce of more than 119,000. Airbus itself is a truly global enterprise of some 52,000 employees, with fully-owned subsidiaries in the United States, China, Japan and in the Middle East, spare parts canters in Hamburg, Frankfurt, Washington, Beijing and Singapore, training centers in Toulouse, Miami, Hamburg and Beijing and more than 150 field service offices around the world. Airbus also relies on industrial co-operation and partnerships with major companies all over the world, and a network of some 1,500 suppliers in 30 countries.
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In the decade between 2000 and 2010 Airbus received 6,657 orders, while Boeing received 6,457. Airbus had higher deliveries between 2003 and 2009, but fell slightly short of Boeing's deliveries, delivering 4,320 aircraft compared to Boeing's 4,412.
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The battle between them is still going on fiercely after the WTO litigation, as we can see in the marketplace like the Paris Air Show video that youve just watched. We will give some more facts on their backgrounds and on how and what Boeing and Airbus have done so far to compete each other.
2. SWOT Analysis
The main differences
European government supported Airbus while Boeing was backed by US Boeing use Just in Time, and Airbus use manufactory
Strengths
It is the largest aircraft manufacturer globally, it has given the most of the orders for aircraft manufacturing and it delivers aircraft to large no. of developed and developing countries. Its rank as defense contractor with different countries is second. Mostly defense fighter aircrafts also manufactured by Boeing. The designs of Boeings aircrafts are efficient. There is no fault in its designs. Its production system is also very efficient thats why most airlines and countries order Boeing to manufacture their aircrafts. The engineers working in Boeing are also efficient, skilled and competent. They are also the reason for Boeings success because without competent workforce no organization can survive. It also has the Strength of product diversification, it not only manufactures commercial aircraft but also manufacture aerospace and defense aircrafts. There is a big difference in commercial and defense aircraft from every aspect. Another reason of its largest manufacturer is that it offers competitive price which is not so high thats why developing countries also order to Boeing. It has strong customer base national and international both. And it has the good reputation regarding quality of the products thats why its products are reliable.
Weaknesses
The corporate governance of Boeing is not good thats why the employees are not happy with its internal policies and procedures which is one of its weakness because when
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employees are not satisfied; their performance would also be affected which also affect the productivity of the workers as well as the productivity of the company as a whole. Cost of developing an aircraft is very high which put burden on the company. It relies on suppliers and component manufacturer so that they can be the reason of loss by delay or end the supply which can also affect the reputation of the Boeing as well.
Opportunities
The rapid advancement in technology will bring advancement in aircraft as well. Through the advanced technology light wait aircrafts can be created. And the defense aircrafts of longer range can also be made through technological advancement. Through the expansion of market it can increase its sale and capture more market share. As the demand for aircrafts is increasing world wide so it would be great opportunity for Boeing to expand its market. In Asia the customers for defense as well as commercial aircraft is increasing rapidly so Boeing has the great chance to capture Asian market before competitors reach there to capture that market. Through the innovation in products it can attract more customers and can increase its sales as well.
Threats
Its main competitor is Airbus which is offering the discount in its products because it is subsidized by European common market. So it can take away its competitors by offering low prices. The competition of Boeing and Airbus is head to head so Boeing has to be alert. It should offer something different to counter attack the discount offered by Airbus. In most areas the focus is on refurnish the old aircraft rather than buy new ones which can decrease the demand as well as sales of the aircraft
3. Subsidies
Subsidies historically were given to Boeing and Airbus to help them lower cost of developing new commercial jet aircraft. In Boeings case, subsidies came in the form of tax credit for R&D spending or Pentagon money that was used to develop military
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technology, which then was transferred to civil aviation projects. In the case of Airbus, subsidies took the form of government loans at below-market interest rates. BOEING ATTACKS In July 2004, Harry Stonecipher, CEO of Boeing at the time accused Airbus of abusing the 1992 bilateral EU-US agreement in regards to large civil aircraft support from governments. Boeing claims that Airbus has violated the agreement in a number of ways. 1. The Europeans haven't repaid the loans or the interest that has accrued on those loans. They have manipulated the accounting that takes advantage of the loopholes and allows them to avoid repayments. 2. They have failed to issue annual progress reports that spell out clearly where and when government money was received and paid back. AIRBUS BITES BACK They point back to Boeing, charging the U.S. company has never fully complied with the other key provision of the agreement, which limits the indirect subsidies Boeing receives from defense and other government research agencies, for instance. In retaliation Airbus argued that the military contracts awarded to Boeing (the second largest U.S. defense contractor) were in effect a form of a subsidy. They claimed that the significant U.S. government support of technology development provided significant support to Boeing, as well as the large tax breaks offered to Boeing were also in violation of the 1992 agreement.
Because many of the worlds airlines are wholly or partially government owned, aircraft procurement decisions are often taken according to political and commercial criteria. Boeing and Airbus seek to exploit this by subcontracting production of aircraft components or assemblies to manufacturers in countries of strategic importance in order to gain a competitive advantage. What Airbus and Boeing have in common here is their willingness to transfer part of their risks to partners, and they are doing so to a much greater extent than before While Boeing and Airbus are both developing heir new line of airplane, their development efforts are kind of different from before. In the past, they were doing almost all the design and engineering in house. These days, they are increasingly outsourcing not only components but also design and engineering tasks to their international partners. In order to do so, they are changing the product architecture and try to have the role of system integrators. Boeing has already outsourced more than 90 percent of the parts for its 787 Dreamliner and it's now outsourcing design and engineering as well. This might make sense in short term when financial issues are important but might not be a nice option for the future. For example, Boeing outsourced an unprecedented 70 percent of the content of the 787 to other manufacturers, most of them based in other nations. In contrast, 50 percent of the Boeing 777 was outsourced, 30 percent of the 767 and only 5 percent of the 707. Boeing has offered longstanding relationships with Japanese suppliers including Mitsubishi Heavy Industries and Kawasaki Heavy Industries by which these companies have had increasing involvement on successive Boeing jet programs, a process which has helped Boeing achieve almost total dominance of the Japanese market for commercial jets. Outsourcing was extended on the 787 to the extent that Boeings own involvement was reduced to little more than project management, design, assembly and test operation, outsourcing most of the actual manufacturing all around the world. Boeing has since stated that it "outsourced too much" and that future airplane projects will depend far more on Boeing's own engineering and production personnel.
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European-based Airbus has decided to increase the outsourcing of parts China. Airbus will buy $60 million worth of components from Chinese companies in 2007 and $120 million by 2010. for example, in 2009 Airbus opened an assembly plant in China for production of its A320 series airliners. With the increase in its outsourcing efforts in the country, the aerospace giant hopes to further integrate the Chinese market in its supply chain and increase sales. The Battle between Boeing and Airbus in China In 1992, Boeings share of the world market for airliners was 70 percent. In competing with Airbus, Boeing had advantages; it was the dominant supplier of commercial aircraft, and its role as a major defense contractor underlined its political importance in Washington. Two-thirds of the aircraft delivered to China in 2004 were from Airbus. But in sales of airliners with a hundred seats or more, Boeing had roughly 70 percent of the Chinese market at the end of 2005. Both Airbus and Boeing still have to prove the new model can work effectively in aerospace, as it has eventually worked in the automotive industry.
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III.
Conclusion
The disputes that have arisen periodically in the aircraft industry between Boeing and Airbus have only lead to adverse effects on both these companies. The long drawn out and complicated litigation, with accusation and counter-accusations being field in the WTO, have lead to an unnecessary waste of resources that have harmed the companys profits and performance. For example, one of the reasons why the shares of the Boeing Company took a downward turn after its merger with McDonnell Douglas was the dispute it had to settle with the EU before the merger could come through. It is in the best interests of everyone concerned to bring an end to these disputes. The company that loses litigation has measures such as fines imposed upon them by other members of the WTO, which raise their costs substantially. This impacts not only the company itself, but also airlines that buy their planes, manufacturers of components, and ultimate the traveller as well. It is in everyones interest to avoid disputes as far as possible, and the only way in which this can be achieved is to reduce the number of subsidies granted in direct or indirect ways, and finally wipe them out entirely. This would increase the levels of competition between Airbus and Boeing, which would ultimately benefit the taxpayers, since subsidies are paid out through the taxpayers money. While the argument in favour of subsidies is that the industry is often unable to remain viable on it own, instead of support from the government, other measures may be sought out. For example, in the production of the newest model, the 7E7, Boeing has shared the risk with the manufacturers who have contracts on the various parts of the airplane. By seeking alternatives, government subsidies could perhaps not lead to costly trade wars in which each company tries to outdo each other in terms of the subsidies received. It has been seen through the example of Airbus and Boeing that the level of competition in a duopoly are very high, and often lead to unfair trade practices which violate of existing norms and agreements. Government usually ever since Airbus outdid Boeing for the first time in 2003. The question of subsidies has been an especially contentious one since then, since Boeing claims that Airbus is now healthy enough to survive on its own without government support. It levies these accusations at Airbus while being granted enormous subsidies on it latest project, the 7E7. If the situation continued in this manner, the international civil aircraft industry would never be free from disputes.
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