Back in its early days, Airbus was just one niche jet aircraft manufacturer amongst many. Underpinning everything was a clear strategic imperative: become large enough to survive. Only once this was achieved could the company target becoming number one.
Fast forward to 2024 and Airbus is comfortably besting its only remaining rival – but now, in the immortal words of King Louie from Disney’s The Jungle Book, “I’ve reached the top and had to stop and that’s what bothering me.”
With the Toulouse airframer undisputedly the King of the Swingers – for now at least – the question for the company’s best and brightest becomes: what next?
A classic business school case study compares the strategies of Kodak and Canon. While Kodak developed the first viable digital camera, it chose not to exploit the technology to protect existing film-based products. Canon, however, opted to cannibalise its own products rather than allowing a competitor to do so.
POOR EXPOSURE
Canon’s embrace of digital imaging may have hastened the demise of the film camera business, but the company thrived. Kodak, meanwhile, floundered, sold off the family silver and finally sought Chapter 11 bankruptcy protection in 2012.
Airbus’s potential Kodak moment, if you will, centres on its response to the puzzle of how to replace the best-selling commercial jet aircraft model of all time – the A321neo – without conceding the strategic initiative in the most important commercial market.
Although the airframer has indicated that it is pursuing both a hydrogen-powered aircraft through ZEROe and a conventional passenger jet under the Next Generation Single Aisle banner, Airbus cannot resource two new traditional programmes in parallel, assuming each will cost $10-20 billion and need thousands of engineers.
Developing a 100-seat hydrogen-burning turboprop must remain a cheap, small volume, experimental programme – or it should be shelved until more efficient and greener fuel cell technology arrives.
If Airbus chooses to, it could move ahead of Boeing in the enabling technologies required for a new narrowbody aircraft – but if it waits too long then its arch-rival could steal a march through the truss-braced wing to be tested on the X-66A demonstrator (which could reduce fuel burn by 30%).
Airbus does have breathing room, thanks to the state in which Boeing finds itself, but delaying until Boeing moves also risks letting Comac into the market.
Strategy is about choices: what you choose to do and what you choose not to do. Since the McDonnell Douglas merger, Boeing has only effectively implemented one strategy: outsourcing almost everything when launching the 787. After this failed, its focus has been less on technology and engineering advances and more on tactics to drive short-term share price gains.
Considering the amount of risk mitigation needed prior to launch, Boeing’s next chief executive will need to express a long term vision for Boeing Commercial Airplanes soon. A new programme is also the best way to embed a new engineering-led culture within Boeing and retain key staff.
The next new Boeing aircraft, for service entry in the mid-2030s, will replace the 737 and aim to cover the around-250-seat segment better than the A321neo.
Boeing will also have to invest in a new production system to replace the 737’s 1960s processes, budgeting $50 billion – or $5 billion a year for a decade – for this purpose.
Nevertheless, Boeing has a strong incentive to replace the 737 as soon as practical: once production rates stabilise, Airbus will still generate over $1.5 billion more narrowbody revenue per month thanks to volume and mix effects.
The technology, configuration and programme challenges to cut fuel burn per seat by 30-40% are immense and new thinking will also be needed to create production systems capable of building 100 aircraft a month.
Which airframer will jump first? It’s hard to say, but – with a nod to King Louie – neither can afford to monkey around for much longer.
Hal Calamvokis is an aviation professional with experience in strategy, finance and leasing, sustainability, airline management and aircraft certification.
