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OPERATION
MANAGEMENT
(Case Study Boeing VsAirbus)

2. SUBMITTED TO :
ProfZia-ur-Rehman
Prepared By :
RanaShahzaib 249
ZubairAhsan 248
MudassarIqbal 219
Zia Ishaq 252
GhulamNabi 209
JunaidMuzaffar 237
Semester 8th
B-com (hons)
Section ‘C’ Morning
Case Study Airbus VS Boing
There is a long running rivalry between Boing and Airbus which has only been
increasing in pastfew years. This casestudy shows how Airbus Snatches the share
from Boing and become a dominated leader in the aerospaceindustry.
This case study finds that Airbus currently controls the market share that are
previously owned by the Boing 717, 737 , 757 also the A330/3340 families of
Airbus crafts especially over took the market of wide bodyaircraft market. This

3. case study clearly supports the claim that the Airbus creates its dominancy in
aerospaceindustry.
Industry Background
Competition in the aircraft industry has attracted attention not just because of the
controversy surrounding subsidies, but because of the industry’s unusual structure.
It has extremely high barriers to market entry, due to the economies of scale and
scopeand the huge capital requirements, making it extremely difficult for
newcomers to compete successfully. Another characteristic is the long investment
cycles; large numbers of aircraft are needed to be sold to recover R&D and
production costs. Theuncertainty surrounding the success orfailure of developing
new aircraft combined with the large amount of capital invested means
manufacturers tread a fine line when developing new products. The industry also
has high exit barriers, due to financial considerations and the fact it is difficult to
use investments already made for alternative purposes (Deutsche Bank Research,
2007). The efficient industry theory suggests that if an industry looks particularly
attractive, then companies will seek entry, while unattractive industries will see
more companies leaving. However, this often does not take into account industries
which governments consider strategic; the value and numbers affected in the US
by aircraft manufacturing only serve to highlight the necessity of state support,
affecting the attractiveness and number of companies exiting. Furthermore, airline
operators worldwide have enjoyed much the same state sponsorship as
manufacturers due to similar reasons. Most of the US airline operators have been
in bankruptcy (and subsequently Chapter 11 protection) at least once. One could
say that bankruptcy court judges are as essential to keeping planes in the air as
pilots. Even manufacturers are not immune to failure. The industry is littered with
examples such as Lockheed and Convair in the USA, and Dornier and Fokker in
Europe, pulling out of civil aviation manufacturing after disappointing sales and
continual economic problems.Changes in the industry dynamics have been
dramatic. During its early days, the industry was characterised by competition
among a large number of sophisticated, entrepreneurial firms. Survival risk was
low becauseof guaranteed access to national airlines and a rapidly expanding

4. market. Technological advances were often financed by states in deference to their
defence industries. Since WWII, however, the industry has transformed into an
oligopolistic production structure, extremely high survival risks, and intense
competition for sales in a global market (Irwin &Pavcnik, 2004). Technological
advances have extended development lead times, increased launch costs,
complicated marketing, and lengthened the time between initial research and
revenue earning (Irwin &Pavcnik, 2004). During the 1940s and 1950s, a return-on-
investment cycle required four to five years for new products;by1992 the return
on investment timeframe had expanded to 10 to 15 years (Golich, 1992). The value
of the industry is also staggering. Since the late 1950s, aerospacehas been the
leading industrial contributor to US export earnings and since 1982, aviation
exports have increased at an average annual rate of US$1 billion per year (Gresser,
2004); small wonder the governments sees the returns from state sponsorship. The
exact current value of the industry is difficult to ascertain; airplanes are among the
most valuable export products of international trade, but some have forecasted a
US $2 trillion export market over the next 20 years (Gresser, 2004). Former
American Airlines president Robert Crandall made the observation that civil
aviation was the largest component of the travel and tourism business, which at US
$21.2 trillion annually was considered the largest industry in the world by 1990
(Golich, 1992), although questions can be raised as to how that amount was
quantified. Civil aviation is the largest export industry in the US (Meier-
Kaienburg, 2005). Boeing controls nearly 100% of the civil aviation manufacturing
industry in the US, while Airbus occupies much the same spacein Reference
:http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web
Department of Commerce. Including suppliers and defence, the industry directly
employed 818,000 people in 2009 and supported more than 1.8 million jobs in
related fields. This industry is quite different compared to other major industries
such as automotives. With the aviation industry considered a strategic industry and
the spill-over to military ties, there will always be government interest shaping this
industry's structure. With controls on market access, ownership, various legal
outlets to avoid bankruptcy, and state aid, the civil aviation industry will never be
fully liberalized.

5. -Historical Background-
Boeing
Historical Flashbacks :
 1903: William Boeing pursued opportunities with the northwest timber
industry, which grew into a small airplane manufacturing company.
 War Years (1940s): Building B-17s at a very rapid rate in responseto the
Army’s requests. Women rapidly built airplanes.
 Post-War: 70,000 employees lost jobs due to the military canceling orders.
 Cold War: Invention of analog computers guiding missiles, an
intercontinental ballistic missile system, and spaceshuttles.
 1970s: Recession causes the company to go 18 months without a single
domestic order. The workforce also was cut from 80,400 to 37,200 between
1970 and 1971.
Reference
:http://www.boeing.com/assets/pdf/news/releases/2013/q1/130130_nr.pdf
 1992: Production of stealth bombers, joint strike fighters, and satellite
boosters. Boeing also became the prime contractorfor the first International
SpaceStation.
 1996: Merger with Rockwell International Corporation’s aerospaceand
defense units.
 1997: Merger with McDonnell Douglas Corporation.

6.  2001: Boeing is focused on 787 Dreamliner
 Boeing lost ground to Europe’s Airbus and lost its
position as market leader in 2003.
 2006 sets another new Boeing
 2006 sets another new Boeing record for
total commercial orders in a single year.
Founder Of Boeing Company
Boeing’s origin dates to 1916 when the American timber merchant William E. Boeing founded
Aero Products Company shortly after he and U.S. Navy officer Conrad Westervelt developed a
single-engine, two-seat seaplane, the B&W. Renamed Boeing Airplane Company in 1917, the
enterprise built “flying boats” for the Navy during World War I, and in the 1920s and ’30s it
successfully sold its trainers, pursuit planes, observation craft, torpedo planes, and patrol
bombers to the U.S. military. In the late 1920s Boeing Airplane expanded into airmail services,
and in 1928 William Boeing formed Boeing Airplane & Transport Corporation.
Competitors

7. The following arethe main competitors of BoeingCompany :
Commercial AircraftManufacturers
 Airbus
 European Aeronautic Defense and Space Company
(EADS N.V.)
Defence Contractors
 Lockheed Martin
 Northrop Grumman
Boeing Commercial Planes
 Boeing 737
 Boeing 747
 Boeing 767
 Boeing 777
 787 Dreamliner
 BBJ-VIP
-Competition-

8. Boeing Company has direct competitor that is European Company “ Airbus” . In
recent few decades Airbus significantly emerges a leading aircraft manufacturing
company whose main target is to decrease the market share of Boeing that in the
past enjoys a sole king of aircraft industry. So there for our main focus is on Airbus
and its strategies.
History of Airbus
 1970 Airbus was formed as European Consortium of French and German
companies .
 Spanish companies joins the consortium.
 1979 : British Aerospace joined Airbus Industries
 Each of the four partners operated as national companies.
 Airbus developed a deserved reputation
 2001: Airbus became a single fully
integrated company
 2004: company had overtaken its main
rival
 In January 2005 the world’s largest and
most advanced
 passenger aircraft appeared, the A380
 Sold more then 10000 air crafts and
delivered 6500 crafts since its creation
 Yearly revenue in 2010 is 29.9 billion
Euros
 Airbus is one of the world’s leading
aircraft manufacturers.
The A300 became the world’s first twin-
engine wide-body jet, entering airline service
in 1974.This was followed in the early 1980s by Airbus’ shorter-fuselage A310
derivative, and was joined later that decade by the single-aisle A320 – which
developed into one of the most successfulaircraft families in history with the
A318, A319, A320 and A321. The 1990s saw Airbus introduce its long range
A330/A340 jetliner Family, and a new era of airline travel started in 2007 when the

9. 525-seat A380 began commercial operation.Looking to the future, deliveries of
Airbus’ long-range twin-engine A350 XWB are expected to commence in 2013,
while its military productline is expanding to include the A330 Multi-role Tanker
Transportand the A400M.
Airbus Board Of Directors

10. Airbus Family Of Air Crafts :
Its includes four major departments :
 Passenger Air crafts
 CorporateJetliner
 Freighter Aircrafts
 Military Aircrafts
Passenger Aircrafts includes the following jets :
o A320 Family (100-220 seats )
o A330 Family (220-330 seats)
o A340 Family (300-400 seats)
o A350 XWB (270 -350 seats )
o A380 Family (525 seats)
CorporateJetliner includes the following aircrats ;
o ACJ Family (launched in 1997 and accommodates 19-50 passengers )
o VIP wide bodies ( Accommodates 60-120 passengers )
o Air Bus Corporate Jet Centre (Provide top quality cabins ,outfitting and
associated services)
Freighter Aircrafts includes the following jets :
o A330-200F (Mid size long haul freighter )
o A380F (3 deck cargo facility )
o Beluga ( world’s largest cargo )
Military Aircrafts includes the following aircrafts :
o C212 (For any type of military mission )
o CN235 (The lost costtactial airlifter )
o C295 (For any type of armed force mission)
o A330 MRTT (New generation tanker )
o A400M (To meet logistic needs )

11. Reference:
http://www.airbus.com/company/environment/documentation/?docID=10262&eID
=dam_frontend_push
Production Systems Of Boing

12. Production System Of Airbus
Str
The air bus craft’s production is divided among various countries these includes :
 AIRBUS – FRANCE
 AIRBUS – DEUTSCHLAND
 AIRBUS – UK
 AIRBUS –ESPANA
 BELAIRBUS
Supply Chain Of Boeing And Airbus
Procurement Structure
Procurement has organized into Six departments that are :
 Aerostucture
 Material

13.  Equipment And System
 Propulsion System
Boeing Supply Chain :
Boeing supply chain consist of the supplier selection and certification than supplier
engagement in the design development and than consult the design with the
technical engineers who technically analyze the design and pass it if it is correct
for production.
Airbus Supply Chain :
First of all supplier engagement in design development than committed to long
term mutually beneficial , reliable and stable relationship is developed with the key
supplier. Eco-Friendly jets are the main priority of Airbus so the evaluate each
supplier whether they are meeting the environment friendly criteria. Airbus has
more than 30 partners who share the risk and covers about $3.1 Billion of risk.
How Airbus Manufacture its Crafts ?
In the pastAirbus uses department process in which the plane is to move from one
department to other for different process but now a days Airbus is using centerlized
production system which means that each and every process ofmanufacturing is
done under one roo.
Reference:
 http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&
cd=1&cad=rja&ved=0CC0QFjAA&url=http%3A%2F%2Fwww.dartmouth.
edu%2F~npavcnik%2FResearch_files%2Fairbus.pdf&ei=eAjDUc_7B4HD4
AO8vICYDw&usg=AFQjCNF9gtrwOUZW0LsP38hs65Et-
y1_ew&sig2=rG1GdBtLNrxYdgXoE0G_sQ&bvm=bv.48175248,d.dmg

14. Comparison Of Airbus VS Boeing
Market Position
Boeing Positioning Strategy
Boeing strategy to be in the market depend upon four factors that are :
1) Short distance and low capacity: Many
2) Short distance and low capacity: Many
3) Long distance and high capacity: Some
Reference :
http://www.unc.edu/~eennis/boeing.pdf
Boeing 2010 2011 2012
No oforders
taken
610 884 1338
Revenue 68.3 $b 64.3 $b 81.7 $b
Market share 43% 36% 34%
Airbus 2010 2011 2012
No of orders
taken
824 1419 833
Revenue 33.9 M
Euro
29.9 M
Euro
55.8 M
Euro
Market share 57% 64% 66%

15. 1-Short distanceand low capacity:Many
the most of Boeing’s commercial airplane buyers will require planes that are more
effective at flying short distances with a low capacity. The reason for choosing this
position as Boeing’s many clients is based mainly on two reasons. Firstly we can
note from the major products and services section that Boeing’s most delivered
products to date has been its 737 family, with deliveries of over 4500 planes. The
737 family are particularly low capacity designed planes, incorporating seating
capacities of between 110-189 seats and are also relatively short distance planes
with a maximum range of up to 3365 statute miles which is considerably less than
some of the companies other products. Fromthis information it would appear that
Boeing’s planes which are suited for low capacity short distance travel are where
its current many segment lies.
The second reason why we decided that this segment was where Boeing’s many
clients are is because if we look at today’s airline industry postSeptember 11th we
can note that many airline operators are bankrupt or close to being bankrupt and
that the successfulairlines are mainly low-cost airlines operating from point to
point routes on a short distance low capacity strategy, Airlines such as Continental
Airlines in the United States and RyanAir in Europe. Incidentally both companies
have a large fleet of Boeing planes, mainly from the 737 family. The current trend
in customer demand is entirely non-stop serviceuntil ones ultimate destination.
2-Short distance and low capacity: Many
We believe that Boeing’s non existent clients albeit there may be one or two, are
short distance operators who use high capacity planes. The reason why we chose
this segment as the None segment is because when airline companies are operating
a short distance route the need for loading the plane with passengers is nonexistent.
Essentially if the company wants to transport more passengers from one route to
another the plane can simply refuel and return. With high capacity airplanes the
travel time is increased. Besides for the companies themselves it’s more profitable
to carry lower capacities for short distance routes in a quick and repeated motion.

16. 3-Long distance and high capacity: Some
Some of Boeing’s clients will be part of this segment. This segment is the
complete opposite to the first segment which was where Boeing had many
clients. There will always be a need for long distance travel unless the market
was controlled fully by multiple short distance airline companies, however for
transatlantic flights and other significantly long overseas travel these types of
clients will continue to exist.
Products in this segment include Boeing’s 777 family which have both bigger
fuel loads for longer distance travel and a higher capacity than some of
Boeing’s other planes. The 777 family can carry up to 451 passengers in a
typical two class seating configuration for up to a maximum range of 11,029Km
or alternatively to travel from one hemisphere to the next without refuelling.
Ironically for Airbus this is the companies many clients segment.
4- Long distance and Low capacity: Niche
The final segment for Boeing is its niche segment. This segment of clients is
unusual as generally when travelling long distances it’s more logical to use a high
capacity plane. When travelling long distances operating costs are dramatically
higher for Boeing’s corporateclients, through the use of high capacity planes these
costs can be reduced greatly. The typical client in this segment is anyone who finds
it essential to undertake long distance travel whilst at the same time not being
concerned about operating costs, perhaps clients who like travelling in comfort.
Therefore we can conclude that the clients for this segment are governments or
governmental agencies, private individuals, organisations, companies offering
business flights, Boeing business jet operators. In this segment the Boeing
Business Jet epitomizes a typical productoffering both long distance capabilities
and low capacity; with a capacity for between 8-50 passengers the plane can travel
halfway across the globe.
Targeting

17. Factors That Influence Sale Of Boeing
There are several factors that influence the sale volume of Boeing crafts. Here I
discussed someof them
i. PoliticalFactors :Policy and regulatory decisions by governments can also
have a dramatic impact on the demand for civil transport aircraft. The high-
level political intervention also has an important impact on the sales of
aircraft. Different buyer’s decisions of spending sucha huge amount of
money always rely partly on the political reasons since the supportand
interference of government could affect the future of buyers.
Currently China is the biggest market for Boeing and it is expected to
remain so for the next 20 years. In fact, China, through its considerable
purchases of Boeing planes, has managed to gain a lot of political leverage
in the U.S
ii. Economic Factors :Aircraft manufacturers rely heavily on subsidies.
Recently, Boeing and Airbus are on the debate of unfair subsidies.
Likelihood of increasing fuel costs, congestionand other environmental
restrictions, as well as the prospectofhigher security and insurance costs to
reflect the risk of terrorism. With several airline companies closing down
and the global tourism industry in recession, aircraft prices are down by
around 20 per cent. Airbus had quoted around 15 per cent less than Boeing
for the IA contract during the bidding earlier in the year.
iii. SocialFactor:Anti-US feeling feelings generated by the events of the past
two years had adversely impacted on Boeing's sales, especially in West
Asia, which is a lucrative market for the industry.
iv. TechnologicalFactor:Boeing has utilized this technological advancement
by building a new model, the Boeing 777, by using computer technology to
build a prototype. This is tremendously costeffective because the company
does not have to absorb the costof the prototypethat they normally would
have to build.
v. Failure Of ManagementDecisions:Since the Second World War, the
Boeing company still operates under a management style in which the

18. employers makes decisions on their own with little or no input from
employees. This does not fit in the modern management and for this reason;
Boeing has several problems in management when it practices racial
discrimination, tussles with its union workers, and then lets its executives
flee the scene to avoid accountability.
vi. LabourProblems :When production problems delayed delivery, Boeing
was forced to increase its work force, working in three shifts, to complete
the planes. This inexperienced work force created additional problems and
the costper plane is increased substantially. Moreover, the inexperienced
workforce found the aircraft design too complex to implement. The
managers ordered forced overtime: 50-to-60-hour workweeks became
common. The problems affected other Boeing airplanes and complaints from
customers began to mount. The Federal Aviation Administration (FAA)
ordered special inspections of all Boeing jetliners produced since 1980 to
look for defects that might affect safety. The strains of the forced overtime
contributed to a 48-day strike in the fall of 1989 that hurt Boeing
financially.
vii. Dependency On US Govt :Boeing mainly gains the benefit from the US
which is 65 % of the company total annual sales. Moreover, Boeing is being
criticized by Airbus for the subsidy contracts as well as foreign and domestic
supportall amount to aid for Boeing’s 7E7 model that is double what was
available for the new Airbus A380
Reference
:http://www.airbus.com/company/environment/documentation/?docID=10262&eI
D=dam_frontend_push

19. Boing Orders VS Airbus
0
200
400
600
800
1000
1200
1400
1600
ORDER
BOEING AIRBUS

20. Boing Delivery VS Airbus
0
100
200
300
400
500
600
700
DELIVERY
BOEING AIRBUS

21. Study On Revenue Of Boeing
Reference :
http://www.stock-analysis-on.net/NYSE/Company/Boeing-Co
0
10
20
30
40
50
60
70
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
51.1
58
53.8
50.3
52.553.6
61.5
66.4
60.9
68.3
64.3
68.7
revenue ( $ in billion)

22. Why The Sale Of Airbus Increases
Airbus’s variety and stylish designed aircraft snatches the market share from the
older Boing . Several reasons are behind this success someare discuss here :
i. Price Effect
This could be explained by comparing the prices of both the competitor’s aircrafts
A318 $65.2 737-600 $56.9
A319 $77.7 737-700 $67.9
A320 $85.0 737-800 $80.8
A321 $99.7 737-900ER $85.8
A330-200 $200.8 747-8 $317.5
A330-200* $203.6 747-8* $319.3
A330-300 $222.5 767-200ER $144.1
A340-300 $238.0 767-300ER $164.3
A340-500 $261.8 767-300* $167.7
A340-600 $275.4 767-400ER $180.6
============================================
Airbus Model Price Boeing Model Price
============================================
A350-800 $236.6 777-200ER $232.3
A350-900 $267.6 777-200LR $262.4
A350-1000 $299.7 777-300ER $284.1
A380-800 $375.3 777* $269.1
787-8 $185.2
787-9 $218.1
ii. Interior Of Aircrafts
Another reason that counters in increasing the sale of Airbus planes in its interior.
It is very important tool to attract the buyer. That’s why Airbus gives maximum

23. attention to it as a result the interior of Airbus Planes are more attractive than
Boeing’s crafts.
iii. Fuel Consumption
Airbus crafts may use slightly extra fuel than of Boeing but this issue is soon
resolved but for the time being it is present but the buyer accept it as there are
several other reasons that count for like in Airbus A380 there is :
a) capacity of 555 passengers
b) greater flexibility in setting prices
c) only 20% more fuel use than Boeing
d) special features for customers –
a. casino
b. virtual presentation room –
c. boutik
d. more comfortable flight
Environmental Policies Of Boeing &
Airbus
Boing towards Responsible and Eco-Efficient Enterprize
Boeing is consider as a Pioneer in the Environmentally Progressive Technology.
Boeing introduces the new fuel efficient planes such as787 Dreamliner , The 747-8
and 737 Max with the significantly smaller amount of carbon footprints than the
older planes that are replaced. Also developing a air traffic solutions that offer
substantial near term environmental improvement .Boeing is also engangingin
Renewable Energy Sourcessuch as bio fuel , fuel cells and solar energy .

24. Airbus towards Responsible and Eco-Efficient Enterprize
Airbus also going ahead in eco efficient solutions throughout life cycle ,
minimizing environmental effects. Airbus is the first aerospace company that gets
ISO 14001 certification .Airbus introduces RobustEnviromental Management
System (EMS) that monitoring and minimizing the environmental impacts of
Airbus planes.
Research And Development Of Boeing &
Airbus
Boeing hired more than 2500 employees in its R&D deptt that consistently
improve the efficiency of Boeing jets.They make researches in fuel efficiency ,
recycling and Eco-friendly procedures. R&Defforts for each liter of fuel that isn’t
burned it means that not emitting 3.2 liters of carbon dioxide CO2
Conclusions
The decision by Airbus and Boeing to put new high efficiency engines on their
planes will provide airlines with upgraded products that have a reputation for
dependability. Although Bombardier, COMAC, and Irkut are building narrow-
bodies that represent a more radical departure from the 737 and A320, their
programs are inherently riskier and have not yet demonstrated that the promised
benefits can be delivered. Many airlines may decide to stay with aircraft that they
know. It is too soonto know whether the newcomers will succeed. Bombardier and
Embraer have established themselves as successfulaircraft manufacturers and the
Chinese appear to be determined to build a civil aviation industry that competes
directly with Boeing and Airbus. Whether the Russians will succeed in building
civil aircraft capable of competing in international markets remains to be seen.

25. For now, the real competition is between Boeing and Airbus. Neither company
appears likely to walk away from the segment of the commercial aviation industry
that accounts for almost half of revenues. Although the Boeing/Airbus duopoly in
small commercial jets is clearly under challenge, it is not obvious that the civil
aircraft market is large enough to sustain as many as five additional competitors.
Nevertheless, all of the challengers to the Boeing/Airbus duopoly believe that their
ability to compete in the narrow-body segment will be critical to the creation of
successfuldomestic aerospaceindustries. It is clear that the United States, the
European Union, Russia, China, Japan, Brazil, and Canada all consider the
aerospaceto be commercially and militarily strategic.
References:
 http://www.dartmouth.edu/~npavcnik/Research_files/airbus.pdf
 http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&
cd=1&cad=rja&ved=0CC0QFjAA&url=http%3A%2F%2Fwww.dartmouth.
edu%2F~npavcnik%2FResearch_files%2Fairbus.pdf&ei=eAjDUc_7B4HD4
AO8vICYDw&usg=AFQjCNF9gtrwOUZW0LsP38hs65Et-
y1_ew&sig2=rG1GdBtLNrxYdgXoE0G_sQ&bvm=bv.48175248,d.dmg
 http://www.unc.edu/~eennis/boeing.pdf
 http://www.boeing.com/assets/pdf/news/releases/2013/q1/130130_nr.pdf
 http://www.airbus.com/company/environment/documentation/?docID=1026
2&eID=dam_frontend_push
 http://www.airbus.com/company/environment/documentation/?docID=1026
2&eID=dam_frontend_push