Oliver McGee is professor of mechanical engineering at Howard University. He is an aerospace, mechanical, and civil engineer, and author of six books on Amazon. He is former United States deputy assistant secretary of transportation for technology policy (1999-2001) in the Clinton Administration, and former senior policy adviser in the Clinton White House Office of Science and Technology Policy (1997-1999).
High-stakes flying over Paris’ Le Bourget field is a strategic bet on innovation, as $107B of aircraft orders was won by Boeing and Airbus. Photo Credit: Vietnam Airlines crew performing a “near vertical takeoff” of a Boeing 787-9 Dreamliner at the 2015 Paris Air Show.
Successful business strategy is about actively shaping the game you play, not just playing the game you find.” – Adam M. Brandenburger, Professor at Harvard Business School, and Barry J. Nalebuff, Professor at Yale University School of Management
Game on at Paris’ Le Bourget Center, because as summarized in this piece, if Boeing and Airbus did not make their top-line revenue targets and customer orders, as the 2015 Paris Air Show today closes an exciting week, then it is challenging for these advanced transportation technology juggernauts to make their annual bottom-line earnings targets for their shareholders and Wall Street and Euro-Asian market analysts. Fortunately, they did!
Photo Credit: British Airways crew landing at Le Bourget field in an Airbus A380 during the 2015 Paris Air Show.
European Airbus’ Competitive Strategy at Paris’ Le Bourget Center.
During the 51st International Paris Air Show, held June 15-21, 2015 at Le Bourget Exhibition Centre a few kilometers from Paris, European Airbus won US$57 billion worth of business for a total of 421 aircraft, according to the multinational aircraft manufacturer. “The deals consist of firm orders for 124 aircraft worth US$16.3 billion and commitments for 297 aircraft worth US$40.7 billion” (see company press release, summarizing Airbus’ aircraft orders (Appendix A) obtained in Paris).
All eyes were on the Airbus A350 XWB – Airbus’ competitive response to the Boeing 787 Dreamliner technology – during its flight presentations at the Paris Air Show. This video clip takes you inside the next-generation jetliner for one of the A350 XWB’s exciting flying displays, with special commentary provided by the pilot.
Correspondingly, in response to Boeing’s 787-9 “near vertical takeoff” preemptive performance gone viral on social media prior to Paris, Airbus decided to go with its Airbus A350-900 (reinforcing its leading position as the world’s most modern, advanced wide-body aircraft). Or better still, Airbus also decided to go with focusing on its market leading Airbus A320 Family, which garnered an impressive 366 endorsements (comprising 103 firm orders and 263 commitments) worth US$41.4 billion.
Airbus took in 31 orders for A350-900s at the 2015 Paris Air Show. At an average list price of about US$305 million in 2014, Airbus took in about US$9.5 billion (or nearly US$10 billion) for its 31 orders of A350-900s at Le Bourget Centre with air carrier, Garuda Indonesia (in Jakarta), requesting 30 A350-900 orders and the other one going to Air Lease Corporation (NYSE:AL), based in Los Angeles.
John Leahy, Airbus’ Chief Operating Officer, Customers said: “Our latest forecast for 32,600 planes in the next 20 years is being proved correct. The orders and commitments at this year’s Paris Air Show demonstrate three things; Asia is powering the growth, we are leading in single-aisle and wide-body and our A321neo is the aircraft of choice in the middle of the market.”
Photo Credit: Vietnam Airlines crew, landing a Boeing 787-9 Dreamliner at Le Bourget field during the 2015 Paris Air Show.
American Boeing’s Competitive Strategy at Paris’ Le Bourget Center.
Rival aircraft manufacturer Boeing won US$50.2 billion worth of new business for a total of 331 Boeing commercial passenger airplanes. A summary of the American airplane producer’s business windfall is posted on the Boeing Orders & Deliveries website, including 21 Next-Generation 737s for unidentified customers (see company press release, summarizing Boeing’s aircraft orders (Appendix B) obtained in Paris).
Boeing also took in 30 orders for 787-9 Dreamliners at the 2015 Paris Air Show. At an average list price of about US$257 million in 2014, Boeing raked in about US$7.7 billion (or nearly US$8 billion) for its 30 orders of 787-9 Dreamliners at Le Bourget Exhibition Centre with air carrier, Garuda Indonesia, based in Jakarta, amounting to all 30 of the Boeing 787-9 orders.
Boeing Test Pilot Chad Lundy steps us through the breathtaking Vietnam Airlines Boeing 787-9 Dreamliner, “near vertical takeoff” and flying display at the Paris Air Show on June 15, 2015. Lundy explains how Boeing’s expert crew positions the Boeing 787-9 Dreamliner to “best show off its maneuverability and grace, highlighting the operational and environmental benefits” of the technological innovation built into this extraordinary airliner.
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“Innovation is the heart of our strategy,” said Boeing Vice Chairman, President and Chief Operating Officer Dennis Muilenburg.
“It is what differentiates us not only from existing competitors but also from the competitors of the future. We have more research, development and capital projects underway and are bringing innovation to market faster than at any time in our history. That innovation is helping to drive our customers’ success and we were able to demonstrate that with the products we brought to the show.”
Boeing has also released a follow-up to its popular 787-9 Dreamliner demonstration video, gone viral on social media last week, but now bringing the public into the flight deck as Boeing’s expert crew rehearsed for the 2015 Paris Air Show (see Appendix C below).
The new video offers the full flight routine and a new experience. “Viewers can choose between camera angles to seamlessly see the full airplane and the pilots inside the flight deck. Boeing is among the first to use YouTube’s experimental technology, known as Choose Your View, which provides a more immersive and interactive video experience,” according to Boeing.
“Our first 787-9 demonstration video was extremely popular and we’re pleased to allow viewers around the globe to experience the exciting performance of the Dreamliner,” said Sean McCormack, vice president, Communications, Commercial Airplanes. “Boeing is proud to be among the first companies to partner with YouTube on this innovative new technology.”
Photo Credit: British Airways crew taking off from Le Bourget field in an Airbus A380 during the 2015 Paris Air Show.
Choosing a Competitive Strategy in the Boeing-Airbus Duopoly at Paris’ Le Bourget Center.
In the global market for commercial passenger aircraft, the lone producers – Boeing and Airbus – are actually in the “small numbers” circumstances relative to the scale and scope of these huge manufacturers, competitively speaking, where relatively small scales (of US$7.2 billion) separated the tens of billions of dollars in total aircraft orders, secured by Boeing and Airbus at the Paris Air Show. This has huge economic consequences on the aircraft manufacturing firm’s bottom-line and Wall Street and Euro-Asian market analysts’ projections of the close race between these two juggernaut advanced transportation technology firms.
In these “small number” scenarios, a crucial aspect of executive decisions is anticipating how these two rivals may react this year and in the next few years, particularly in pricing, investments in advanced technologies and “know-how”, sunk costs into new facilities, capital reserves, and so forth.
A penetrating way in which the Boeing and Airbus boards and executives decide and make strategic judgements in this high-stakes game is to “get inside the minds” of each other, figure out what is in their “self-interest.” And then, maximize economic profit for their company’s shareholders accordingly.
Boeing and Airbus boards and executives, nonetheless, are extremely smart at making choices in this multibillion dollar game. Boeing’s optimal choices will oftentimes depend on their assessments of Airbus’ expectations of what Boeing intends to do, which, in turn, depend on Airbus’ assessment of Boeing’s reassessments about what Airbus intends to do next.
Photo Credit: Steep takeoff from Le Bourget field of a Bombardier CS300 during the 2015 Paris Air Show. Montreal, Quebec Canadian Bombardier CS300 is a single-aisle 160-seater, which sold no planes at the 2015 Paris Air Show, is a direct competitor to single-aisle Boeing 737s and Airbus A320 Family of airliners.
Putting the huge aircraft orders and billion dollar amounts aside for the moment, high-stakes competition took to the sky over Paris, as Boeing and Airbus strategically maneuvered their Boeing 787-9 and Airbus A350 aircraft innovations through stunning near vertical takeoffs and flight maneuvers over the Le Bourget field in Paris to pull airline customers to the contract order table.
Among the various tools Boeing and Airbus corporate board and executives have to gauge their competitive rivalry and strategy, economic scenario analyses and decision games are most beneficial in obtaining insights into the way Boeing and Airbus interact in specific events, like the 2015 Paris Air Show. Conducting revenue and economic profit analyses and assessing “win-win” or “win-lose” decision games are required in anticipation to establishing each company’s annual earnings and shareholder value for the year.
The board must be willing and able to recognize whether or not the company has a winning strategy – and, if not, to urge corrective actions … depending on the particular circumstances of the company and the industry in which it is operating.” – National Association of Corporate Director’s Blue Ribbon Commission on The Role of the Board in Corporate Strategy.
Pulling all of this together differently, Boeing and Airbus needed to decide whether the aircraft manufacturers are going with either technical innovation and “know-how”(Boeing 787-9 Dreamliner vs. Airbus A350-900) or market stronghold (Boeing 737 vs. Airbus A320), as their competitive promotional advantage at the 2015 Paris Air Show.
Naturally, both Boeing and Airbus prefer going with their market strongholds, since this strategic move has the greatest amount of potential customer orders for their aircraft products.
However, Boeing and Airbus prefer not to go head-on against each other by both choosing to go with market stronghold or technical innovation and “know-how” only, since that strategy in the Boeing-Airbus duopoly game would then create really higher pricing pressures on each aircraft manufacturer to stay committed to the competitive game of efficient aircraft manufacturing economics.
Photo Credit: Steep takeoff from Le Bourget field of an Airbus A380 during the 2015 Paris Air Show.
Appendix A: Airbus win US$57 billion in aircraft orders in Paris
“During the 51st International Paris Air Show, held June 15-21, 2015 at Le Bourget Exhibition Centre a few kilometers from Paris, Airbus won US$57 billion worth of business for a total of 421 aircraft. The deals consists of firm orders for 124 aircraft worth US$16.3 billion and commitments for 297 aircraft worth US$40.7 billion.
In the wide-body market, Airbus kicked-off the show with the announcement of the first operator for the new A330 Regional, with Saudi Arabian Airlines taking 20 on lease from IAFC, a leading lessor in the Middle East. The A330 Regional will enable airlines to serve fast-growing domestic and regional routes at least cost and maximum efficiency.
The A350 XWB continues to attract new business with commitments for 31 A350-900s, reinforcing its leading position as the world’s most modern, advanced wide-body aircraft.
Airbus’ most modern, comfortable, efficient and reliable range of wide-body aircraft won 55 orders and commitments worth US$15.6 billion, comprising 31 A350-900s, 20 A330 Regional and four A330-300s.
In the single-aisle sector, the market leading A320 Family garnered an impressive 366 endorsements (comprising 103 firm orders and 263 commitments) worth US$41.4 billion. Of these, 323 are NEO’s, taking total orders and commitments for the A320neo Family beyond 4,000 since launch in December 2010.
Boosting the longevity of the best-selling A320 Family, Airbus announced a new freighter conversion program in partnership with EFW and ST Aerospace. This broadens Airbus’ portfolio of innovative solutions, meeting the requirements of customers in all market segments.
Airbus is the world’s leading aircraft manufacturer of passenger airliners, ranging in capacity from 100 to more than 500 seats. Airbus has design and manufacturing facilities in France, Germany, the UK, and Spain, and subsidiaries in the US, China, India, Japan and in the Middle East. In addition, it provides the highest standard of customer support and training through an expanding international network.”
Photo Credit: Vietnam Airlines crew, performing a steep turn above Le Bourget field in a Boeing 787-9 Dreamliner during the 2015 Paris Air Show.
Appendix B: Boeing wins US$50.2 billion in aircraft orders in Paris
“At the 2015 International Paris Air Show at Le Bourget Exhibition Centre, Boeing won US$50.2 billion worth of new business for a total of 331 Boeing commercial passenger airplanes. A summary of the business windfall is posted on the Boeing Orders & Deliveries website, including 21 Next-Generation 737s for unidentified customers.
Boeing and the government of Qatar announced the signing of an agreement to purchase four more C-17 Globemaster III airlifters. These aircraft will join the Qatar Armed Forces’ (QAF) existing fleet of four and help meet their ongoing airlift requirements.
Boeing’ newest commercial jetliner, a 787-9 Dreamliner for Vietnam Airlines, was a highlight of the flying display. A video featuring air-to-air footage of its air show rehearsal has received nearly 10 million views on YouTube alone.
Also on display at the show were a Qatar Airways 787-8 and a China Airlines 777-300ER with its award-winning cabin interior. A virtual 3-D tour of the airplanes powered by a Google Box 360 application attracted many visitors.
The U.S. Department of Defense corral featured a P-8A anti-submarine and anti-surface warfare aircraft (shown for the first time in Le Bourget), CH-47F Chinook and AH-64 Apache helicopters and an F-15E Strike Eagle fighter.
Boeing is focused on execution and remains on track to deliver between 750 and 755 airplanes in 2015, a new industry record. Upcoming commercial development program milestones scheduled before the end of this year include factory rollout of the 737 MAX and firm configuration of the 777X.“
Appendix C: Interactive Video Experience of Boeing 787-9 Dreamliner “Near Vertical Takeoff”
“Performed by Boeing test pilots to prepare for the air show, the routine showcases the many capabilities of the 787-9 in Vietnam Airlines’ livery and demonstrates maneuvers never seen in typical flight. The first video from the practice sessions, which received well more than 10 million views worldwide in less than a week, included a condensed version of air-to-air footage. Today’s release includes the full 7.5-minute routine and answers the questions so many viewers have noted in their comments about what it is like in the flight deck during a demonstration flight. This video is best experienced from a desktop/laptop computer. Mobile users may have limited functionality.
“We’re thrilled to see what Boeing has created using the multi-angle technology from YouTube. The video gives viewers a unique perspective into a flight demonstration, creating a viewing experience that’s incredibly interactive and immersive for fans,” said Mike Miller, director, Business & Industrial Markets, Google.”
Photo and Video Credits: The Boeing Company, Airbus, 2015 Paris Air Show
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