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The Global Large Aircraft Market

The Global Large Aircraft Market. Outline. Objective Industry History Boeing Corporation Airbus Industrie Industry Competition Large Aircraft Competitive Analysis Strategic Recommendation. Objective.

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The Global Large Aircraft Market

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  1. The Global Large Aircraft Market

  2. Outline • Objective • Industry History • Boeing Corporation • Airbus Industrie • Industry Competition • Large Aircraft Competitive Analysis • Strategic Recommendation

  3. Objective • Analyze and recommend a competitive strategy for Boeing within the large aircraft market (500+ passenger seats) • Boeing’s Options: • Maintain current product • Develop and produce an improved 747 • Design a completely new aircraft

  4. Industry History • Wright Brothers’ first flight in 1903 • First half of the century, rapid development of industry • Aeroplane Co., Bae/Aerospatiale, Bell, Boeing, Curtiss, Grumman, Lockheed, Martin, Messerschmitt, and Pratt & Whitney • Second half of the century, consolidation of manufacturers • Boeing and Airbus remain

  5. Boeing Corporation • History • Commercial production began with 707 in 1954 • Pan Am inaugural transcontinental flight in 1958 • First 747 rolled off the production line in 1968 • Current Business Units • Commercial Aviation • Military Aircraft & Missile Segment • Space and Communication

  6. Boeing Corporation • Largest aerospace manufacturer in the world • Over 13,000 commercial aircraft delivered • Represent 65% of world’s air transportation market • 1999 Financial Performance • Revenues $58 Billion • Net Operating Income $4.7 Billion • EPS of $2.49

  7. Airbus Industrie • Owned by consortium • European Aeronautic Defense and Space Company • BAE System • Created an Airbus Integrated Company to manage the commercial sector • Utilizes production facilities across Europe • Allows efficient use of specific skills by division

  8. Intensity of Competition Highly Competitive (Unfavorable) Industry Competition • Availability of Substitutes Limited Substitutes (Favorable) • Bargaining Power of Buyers Limited Quantity/Interdependency (Neutral) • Bargaining Power of Suppliers Limited Quantity/Interdependency (Neutral) • Threat of New Entrants High Barriers (Favorable)

  9. Large Aircraft Competitive Analysis • Projected Demand • Strengths and Weaknesses • Economic Risk

  10. Market Forecast2000 through 2019 Deliveries$1.5 trillion (22,315) A340 A330 777 Intermediate Twin-Aisle 757 400-500 seats 767 747 Large A3XX 500+ seats Single-Aisle A320 Smaller Jets 717 737

  11. Projected Demand • 20 year market forecasts vary greatly

  12. Strengths No capital expenditure Weaknesses Limited range Limited capacity Reduced efficiency Inferior technology Strengths & WeaknessesMaintain Product (Option 1)

  13. Strengths Enhanced performance Commonality of ground crews No additional training of service crews or pilots Existing airport facilities Competitive operating efficiencies Meet noise level guidelines Seat-mile cost savings (3-5%) Weaknesses Limited range Limited capacity Inferior technology Operating Efficiencies Strengths & WeaknessesImproved 747 (Option 2)

  14. Strengths Equivalent to Airbus (technology) Weaknesses High investment Strengths & WeaknessesNew Aircraft (Option 3)

  15. Economic Risk • Maintain Current Product • Requires no investment • Develop and Produce an Improved 747 • Requires limited investment of $4 Billion • Breakeven of 170 aircraft • Design a Completely New Aircraft • Requires significant investment, approximately $14 Billion • Breakeven at 528 aircraft

  16. Strategy Recommendation • Medium Term (Through 2005) • Commit to competing in the Large Aircraft Market • Focus on producing and selling next generation 747 • Highest projected return on investment • Long Term (Beyond 2005) • Further evaluate market based on orders • Proactively monitor demand • May need to produce a new Large Aircraft to stay competitive

  17. Lets Take Off…!

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