Airbus: From Challenger to Leader

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Case Details:

Case Code : BSTR046
Case Length : 14 Pages
Period : 1997 - 2003
Organization : Airbus
Pub Date : 2003
Teaching Note : Available
Countries : USA
Industry : Aviation

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Takeoff Contd...

Each partner in the consortium was assigned specific production and assembly tasks, and the consortium was responsible for coordinating designing, development, financing and production activities of the partners.

Airbus' first product was the A-300-B - a widebody twin-jet plane with a capacity of 226 passengers. The next product was the A-300-B2, a 250-seater. By 1975, Airbus was able to garner 10% of market share, and received first time contracts from Eastern Airlines2 and Thai Airways.3

By the end of 1975, Airbus had orders for 55 aircraft. By 1978, Airbus' orders had increased to 133, and it had a 26% market share by value. It also launched A-310 with a 218-passenger capacity in the two-class configuration.

The A-310 had a two-man cockpit with a six-cathode ray tube display, replacing dials - the first of its kind in the aviation industry.

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In 1979, British Aerospace Systems (BAE Systems) entered the consortium with a 20% stake, and in the same year, Airbus announced that it would launch a single-aisle aircraft with a seating capacity of 130-170; the aircraft was later called the A-320.

In the early 1980s, Airbus experienced difficulties in financing the A-320 project, since all the Airbus partner governments had not approved the program. While the French government had approved the project, both British and German partner governments wanted more time to measure the market potential for the plane. Another problem was that the consortium had not yet made money on products already in the market. By 1985-86, Boeing's market share had decreased to 46%, with Airbus having increased its share to 25%. With Airbus's increasing market share, Boeing began to accuse Airbus of using unfair trade practices by getting heavy subsidies from its European governing partners. The US government too started pressurizing the EU to reduce subsidies to Airbus...

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2] Eastern Airlines was one of the largest airlines in US, which operated on eastern coast routes. It was liquidated in 1991 due to heavy losses.

3] Thai Airways is an airline company, operating from Thailand.


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