Aircraft Manufacturing Giants, place your bets!

Published on Tuesday, 22 March 2011 09:58

By Angus Kintis

It is no secret that the two largest aircraft manufacturers in the world (Airbus and Boeing) have been locked in a fearsome -almost a duopoly- battle for the last two decades in the narrow-body, wide-body and jumbo jet aircraft categories. Prior to that, Airbus was too small to compete with the dominating Boeing and its largest competitor at the time (to be acquired by Boeing in 1997), McDonnell Douglas.

Nowadays, Airbus has overtaken Boeing in terms of aircraft orders (for the last 10 years, apart from 2006 & 2007 when Boeing came out on top) and deliveries (every year since 2003). Airbus had to pull an impressive trick in past December though, collecting some 200 aircraft orders in 1 month (!) and thus maintaining the edge over the resurging Boeing (574 vs. 530 net orders), for yet another year.

The competition amongst the two companies is fierce and both have been accusing each other of receiving unfair subsidies (state aid) from their respective governments. Two separate cases, one of Boeing against Airbus and one of the European Union/Airbus against Boeing have already been ruled upon by the WTO (World Trade Organization) in 2010. Each party as a result of the respective rulings has been claiming ‘victory’ based on their interpretations of specific parts of the associated reports. What is most likely is that since both parties have had some of their main points accepted by the WTO in each case, this will open the road for the two aircraft manufacturing giants to reach a negotiated settlement which will probably foresee what sort of future state aid the companies could accept.

Perhaps however the most defining chapter of all in the long story of the race between the two aerospace giants is that which is unravelling at the moment. This relates to the quite distinct future global aviation market segments that the two companies have chosen to target.

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Airbus have invested greatly in the market segment of linking megacity pairs with the “Super Jumbo” A380, building on the ‘hub and spoke’ model of operation (i.e. linking a major city/airport with smaller ones), providing for savings, mostly in terms of ‘economies of scale’.

Boeing on the other hand have invested in the market segment corresponding to ‘point-to-point’ operations (i.e. avoiding major cities/airports and linking 2 smaller cities, where there is the demand for it) where they foresee an ever increasing demand for travel in a more comfortable/luxurious aircraft which will simultaneously be a financially viable/profitable asset for the airlines operating it. This led Boeing to the design and development of the B787, also known as the “Dreamliner”.

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The two distinct design choices (i.e. the A380 and the B787) backed by the two companies correspond to quite different future global aviation operating scenarios. Both are most likely valid, however the one that will dominate the future aviation industry will probably clinch the race amongst the two giants. The bets have been placed and now both companies are waiting for the result, hoping that their engineers and market experts have got it right and their rivals have not… Some first indications received so far on the outcome, are largely inconclusive...

Airbus recently claimed at the “Asian Aerospace 2011” exhibition that according to their predictions, the Chinese ‘megacities’ (i.e. cities generating in excess of 5 Billion RPK – Revenue Passenger Kilometres) are expected to double by 2029, i.e. from three today, to six, while India will have two such cities by 2029, namely Delhi and Mumbai. Globally Airbus foresees that the nine such megacities today will practically double by 2029 to 17. These megacities are what Airbus expects to drive demand for the A380 aircraft. However, the image of the SuperJumbo aircraft has been smudged quite early on by the Qantas incident and the mid-air explosion of one of its Trent 900 engines. Another two airlines had to ground some of their A380s for days and perform inspections on their engines for analogous oil loss. Working with Rolls-Royce (the manufacturer of the Trent 900 engines), and through appropriate maintenance actions, all aircraft were returned to service swiftly.

On the other side the “Dreamliner” promises the “average Joe” (i.e. an average passenger on a short-haul flight) a more comfortable and enjoyable ‘ride’ at a cost that the airlines can afford. With a much reduced fuel consumption and an extra long range capacity (for its size), the aircraft promises to be a very ‘accommodating’ asset, probably the workhorse for the average future airline, much like the B737 turned out to be until the mid ‘90s. However, the B787 has yet to enter into service due to numerous delays including one as a consequence of an in-flight fire in November 2010 that halted the test flight campaign. In total the programme is some 3 years behind its initial schedule for 1st delivery, now anticipated to take place in the 3rd quarter of 2011.

Whatever the outcome of the race between the two aerospace giants, one thing is for sure: we as passengers of either the B787 or the A380 will be offered a more comfortable/enjoyable, ‘greener’ and safer ride to our destinations...