Boeing and Airbus have maintained a duopoly in the large jet airliner market since the 1990s, with significant barriers to entry limiting competition from new manufacturers. Both companies have engaged in fierce rivalry, focusing on product differentiation without direct price wars while receiving substantial government support. The aerospace market is also facing challenges from emerging competitors and increased global outsourcing, impacting the strategies and operational efficiency of both giants.

1. BOEING AGAINST
AIRBUS
Abdul Ruhulla, IFF 2-2
Financial University under the Government
of the Russian Federation

3. Background
Airbus and Boeing have been involved in a fierce duopoly in the large jet
airliner market since the 1990s. Airbus began as a European consortium
while the American Boeing absorbed its former arch-rival, McDonnell
Douglas in a 1997 merger
Manufacturers like Lockheed Martin, Convair and Fairchild Aircraft in the
United States and British Aerospace and Fokker in Europe withdrew from
the market as they were no longer in a position to compete effectively
Over the years, competition has been intense; each company regularly
accuses the other of receiving unfair state aid from their respective
governments.

4. Market Share
• The competition between Airbus and Boeing has been characterized as a duopoly in the
large jet airline market since the 1990s.
• In the 10 years from 2004 to 2013, Airbus has received 8,933 orders while delivering 4,824,
and Boeing has received 8,428 orders while delivering 4,458.
• In the fiscal year of 2010,Boeing generated almost 64.31 billion US dollar in revenue
compare to 45.7 billion euros of Airbus.
• And in 2014 Boeing manage to collect 90.8 Billion dollar revenue and Airbus collected
around 60 billion euros.

5. Airbus vs. Boeing: Net Orders Per Year

6. Annual Net Orders Received and Delivered by
Airbus and Boeing

7. Reasons for Duopoly
Prime Reason: Barriers to Entry
Barriers to entry exist for a number of reasons, but the end result is that there is
limited entry into a market or industry because the hurdles that must be overcome are
great, and therefore firms that are already part of the industry or market have an
advantage and are insulated from competition from new entrants.
• Financing: The cost to design, prototype, build, and deliver a new LCA is immense.
Boeing 777 the development costs were estimated to be $10‐12 billon. The new
Airbus A380 had development costs of €12 billion ($16.2 billion).
• Engineering: Aircraft of the size produced by Boeing and Airbus require significant
engineering experience and know‐how in order to successfully design, test, and
produce a viable jetliner. Boeing has only designed eight planes from scratch since
they started building jetliners in 1955. Airbus has only designed four since 1969.

8. Barriers to Entry cont’d
• Technology: Commercial jetliners are behind military aircraft and space flight in
terms of the volume of technological developments. It is how quickly, efficiently,
quietly, comfortably, and safely a plane reaches its destination that matters which
can be achieved only through technological advancement. New entrants can only
expect to be competitive if they are able to produce and bring to market technology
that improves upon the existing jetliners.
• Production & Logistics: Every jetliner contains lakhs of parts, ranging in size from
rivets to seats to overhead compartments. These components must be
manufactured and brought together into one aircraft in one place. The primary
reason for the collapse of Douglas Aircraft was their inability to manage their supply
chain and bring together airplanes at a reasonable cost Boeing’s trouble in the late
1980’s was majorly due to improper supply chain.

9. Porter’s
Five Forces
Model
Competitive
Rivalry
Threat of
New
Entrants
Bargaining
Power of
Suppliers
Threat of
Substitutes
Bargaining
Power of
Buyers

10. Threat of New Entrants : Low
• Humongous costs involved in setting up R&D.
• Scarcity of Resources (Technological resources).
• Capital intensive industry.
• High loyalty to existing brands. i.e., Airbus and Boeing
• Profits start to realize after a long time.
Bargaining Power of Buyers: Low
• Limited choice for buyers as Boeing & Airbus together, hold nearly the entire airplane market.
• The cost involved in switching airplanes (company) is very high due to aftermarket support/service
costs.
Threat of Substitutes : Low
• No alternative for quick long distance journey.
• Future requirements of aircrafts will only increase demand.
• However for regional carriers focused on short distance transportation, threat is little bit higher. They
must focus on convenience, personal preference, time and money
Porter’s Five Forces for Boeing Vs. Airbus (Airplane Industry)

11. Porter’s Five Forces for Boeing Vs. Airbus (Airplane Industry)
Bargaining Power of Suppliers : High
• The airplane manufacture business is majorly dominated by Boeing & Airbus. So there’s no cutthroat
competition and hence these companies have upper hand over the buyers.
• Also, the chances of carriers, opting for vertical integration are very unlikely.
Competitive Rivalry: High
• Bidding for a limited, but very high value of contracts (aircraft orders) witness a very cutthroat
competition between these two rivals
• Fuel efficient engines, cheaper maintenance, prompt services, pricing, etc. are the factors on which
these companies compete.

12. Strategies
• Airbus’ Differentiation Strategy – ‘Hub-and-Spoke-Concept’
• Boeing’s Differentiation Strategy – ‘Direct Point-to-Point-Traffic’
• In duopolistic markets companies are assumed to avoid direct price wars and try to use
non-price methods to differentiate their products such as engaging in technological
‘leapfrogging’ by bypassing each others’ inventions.
• So the competitive strategy used by Boeing & Airbus, is totally based on product
differentiation concept. Differentiating factors are:
1. Shape
2. Fuel Efficiency
3. Engine
4. Internal Design / Facilities
5. Cockpit Commonality

13. Shape
• The 787 Dreamliner, developed by
Boeing, is a long-range, midsized, wide-
body, twin-engine passenger airliner.
• In 2006 Airbus began to consider a wider
body, a larger wing, more powerful
engines, a higher cruise speed and many
other changes to satisfy the airlines. So,
Airbus presented the A350 XWB with
entirely new design.
• The new wider Airbus A350 XWB body
will enable the plane to accommodate
slightly wider economy seats than its
rival. The new design maximizes usable
volume.

14. Shape

15. Fuel Efficiency
• With the price of oil continuing to rise,
airlines are in continuous pressure in
terms of their fuel costs. This in turn it has
become an incentive for the aircraft
manufacturers to develop the most fuel
efficient planes possible.
• Airbus originally had picked up the banner
of fuel efficiency as a means of gaining an
edge over Boeing. As Airbus matured and
gained success, they became risk‐averse.
Unfortunately, fuel efficiency is a relative
to time. That which was considered ‘fuel
efficient’ a decade ago may now be a ‘gas
guzzler’ today.

16. Engine
• As the era progressed, innovations in
engine design earned a substantial
chunk of competitive advantage.
• Boeing with it’s high‐bypass
turbofan engines gained an edge
over Airbus, after losing out to
Airbus for a short while.

17. Internal Design / Facilities
When airlines can choose between
more seats and a gym/cocktail lounge,
out goes the gym and cocktail lounge.
Boeing focused on more seats in 787
Dreamliner while Airbus focused on
more luxurious amenities in A380.
Carriers ordered 159 A380s, and
almost twice as many 787s.

18. Cockpit Commonality
• In 1978 when Airbus was preparing to
launch the development of a new LCA, it
had only one product, the A300. At the
same period in time, Boeing had a diverse
product set ranging from the 727, 737, 757,
767, and 747.
• Airbus had only two offerings so it
differentiated on the basis of cockpit
commonality. Each of Boeing’s planes had
different cockpit configurations.
• Airbus saw an opportunity to configure
common cockpits For airlines, this meant
increased flexibility and decreased
training costs.

19. Challenges to Duopoly
• The global civil aerospace
market has long been a
classic duopoly. The sector
has been dominated by
European company Airbus
and the US giant Boeing, with
only limited competition in
the regional markets.
• The Major Competitors are:
• Bombardier Cseries (Canada)
• COMAC C919 (China)
• Embraer (Brazil)
• Sukhoi Superjet 100 (Russia)
• COMAC ARJ21 (China)

20. • Bombardier Aerospace is a division of Bombardier Inc. The company
competes with Brazilian rival Embraer for the title of the third
largest aircraft manufacturer after Boeing and Airbus. It is
headquartered in Dorval, Quebec, Canada.
• Bombardier is a global transportation company that is present in over
60 countries on 5 continents. They operate two businesses: Aerospace
and Rail Transportation.
• It's high-performance aircraft and services are seen in a number of
different markets including, Business aircraft, Commercial aircraft,
Amphibious aircraft.
• Revenue generated by bombardier in year 2014 was $9.6 billion.
• Number of employees in the company were 38350 in the year 2014.

21. • Embraer S.A. is a Brazilian aerospace conglomerate that produces
commercial, military, executive and agricultural aircraft and provides
aeronautical services. It is headquartered São José dos Campos, São
Paulo State.
• The company currently competes internationally with Canadian
rival Bombardier for the title of third-largest airplane maker after
Airbus and Boeing.
• Embraer has become one of the main aircraft manufacturers in the
world by focusing on specific market segments with high growth
potential in commercial, defense, and executive aviation.
• Revenue generated in 2013 was $5.7 billion.
• Number of employees in the company were 19116 in the year 2014.

22. Worldwide indicators

23. Outsourcing
•Airbus and Boeing increased global outsourcing to Japan, China, India, Middle East,
Eastern Europe. These are growing markets and hence profitable.
•Large Asian and middle eastern carriers are now major customers (Singapore Airlines,
Emirates)

24. Airbus Outsourcing
• New comer in Japan and China
• Difficulty getting orders from Japanese Airlines but has contracted
work with Japanese Suppliers
• Problem - Euro Vs. Dollar - Dollar weaker, manufacturing costs in Euros
but planes sold in dollars.
• China - Sales jumped from 56-219 aircrafts in 2005, overtook Boeing
• Tianjin - First assembly plant outside Europe
• Plan to expand production to India - Presence of engineering talent
• Production of A320s in China - Need to be close to large markets
• Production of aircraft parts to Maghreb - Low cost labour

25. Boeing Outsourcing
• Outsources to multiple places and producers hence parts not perfect fits.
• Complicated supply chain
• Outsourcing of new innovation not existing technology
• Outsourced wing of 787 to Japanese Heavies- Mitsubishi Heavy Industries, Fuji
Heavy Industries, Kawasaki Heavy Industries.
• Boeing lacked know-how about plane construction earlier
• Improved supply chain management by ensuring own employees on the ground
worked with suppliers
• Tiered structure of suppliers - tier 1 assembled parts made by tier 2 and 3- tier 1
did not have enough know how to assemble, Boeing forced to buy one of the tier 1
suppliers (Vought Aircraft industries) to give expertise to other suppliers
• Poor design of contractual agreement

26. Thank you for attention

27. References
http://www.slideshare.net/arjunparekh/duopoly-boeing-versus-
airbus?qid=90919b4f-b341-4d82-8f75-3474f9f15e57&v=&b=&from_search=16