1) Airbus developed the A380 superjumbo jet in response to the market need for larger aircraft to serve high-traffic routes between emerging markets. 2) Boeing's Sonic Cruiser project was an attempted response to the A380, but it was cancelled due to market pressures favoring more fuel efficient aircraft. 3) Game theory principles like the prisoner's dilemma were factors in the strategic decisions by Airbus and Boeing, as each tried to avoid being left behind if the other moved first to develop very large aircraft.

1. Airbus’s Decision to Build the
A380 and Boeing’s Sonic
Cruiser Response and the
747-8
Syndicate-1
BLEMBA-18

2. BACKGROUND
• “Boeing is the world’s leading aerospace company and the largest manufacturer of commercial
jetliners and military”
• It was established byWilliam Boeing in 1916 in Seattle,Washington. Its international headquarters
now has been located in Chicago, Illinois.
• The major products are commercial airliners, military aircrafts, munitions, space systems and
computer services (Wikipedia, Boeing).
• With respect to its commercial airplanes, this company has launched into the world market such
these models: 737, 747, 767, 777.
• “The European Aeronautic Defense and Space Company EADS N.V. (EADS) is the large European
aerospace corporation” and was founded on July 10, 2000 from the merger among Aerospatiale-
Matra of France, Construcciones Aeronauticas SA (CASA) of Spain and DaimlerChrysler AerospaceAG
(DASA) of Germany (Wikipedia, EADS).
• IThis company mainly focuses on developing and producing the civil and military aircrafts, missiles,
space rockets, satellites and related systems.
• Airbus is one of its important divisions and has penetrated into the global market the five big aircraft
families includingA320 family (A318, A319, A320, and A321), A300/A310 family,A330/A340 family,
A350 family

3. KEY DRIVERS IN AIRLINES INDUSTRY
COST DRIVERS
• Both Airbus and Boeing aim at launching their products into the global market.The initial investment capital for
R&D activities and production of per aircraft is so high.
• The technology used in the aviation industry develops rapidly.The new model of aircraft is given birth always is
followed by the more improved and modern technology.
• Uses the minimum of distribution channels and centralizes in purchasing and supplying of its products to lower its
costs.
MARKET DRIVERS
• Their domestic markets or the “single-country market” including Spain, Germany, France and United States of
America nearly were saturated;
• Airlines cannot provide many opportunities for their growth and be not “large enough for the local business to
achieve all possible economies of scale and scope” (Chatterjee, 2003).
• the emerging markets such as China, India and United Arab Emirates progressively become their big and potential
customers .
• The differences in tastes, preferences, cultures, ethics, geographies and so forth are almost flat in this industry
• Additionally, the brand names-Airbus and Boeing-have been well-recognized by the whole world.

4. GAMETHEORIES –THE PRISONER DILLEMA
150
050
50
120
120 200
0
BOEING
AIRBUSBuildA380 No A380
Jumbo Jet
Sonic
Cruiser

5. ANALYSIS ONTHE DECISION OF BUILDING A380
• Under this interpretation, Boeing was not caught in the Developer's
Dilemma in the first place, because an untapped new market meant
monopolistic profits in the old.
• Airbus even claimed that high profits on jumbo sales allowed Boeing to
subsidize sales of medium-size jets. In game-theory terms, Boeing's payoff
for leaving the new market untapped was positive, Airbus's payoff was
negative.
• Boeing's best interest was to slow development of other jets in the 400-plus
category, while Airbus's interest was to end Boeing's jumbo monopoly.

6. ANALYSIS ONTHE DECISION
OF BUILDING A380 (Cont’d)
• To avoid such losses that are predicted through game theory, Boeing and
Airbus formed an alliance to develop aVery Large CommercialTransport
(VLCT).
• Developer’s Dilema still threatened Airbus because of the possibility that
Boeing would leave the alliance and dominate the superjumbo market using
some ofAirbus’ ideas.
• As a result of Boeing’s lack of commitment in the alliance, Airbus backed
out and decided to develop the “superjumbo” on its own.

7. THANKYOU AND HAVE A PLEASANT FLIGHT!!