THE 1995 BUSINESS FIGURES for the airliner manufacturers tell many stories. Boeing regained market leadership with an outstanding year, selling 346 aircraft worth some $31.2 billion. Airbus Industrie, which outsold Boeing in 1994, dropped back into second place in 1995, but delivered more aircraft than ever, giving it record revenues. McDonnell Douglas, so often written off by the pundits as an airliner manufacturer, bounced back with, among other things, the successful launch of its MD-95.
The most important story which these figures tell is, however, the continued importance of the most significant jet airliner ever, the Boeing 747, to both Boeing and Airbus. For Boeing, the 747 not only generated a hefty $6 .5 billion in new business, but also acted as the seemingly ideal partner for the 777 in a balanced offering to airlines. For Airbus, the continued success of the 747 underlined just how glaring is the gap at the top of its own range.
This was the first year in which Boeing could show its 747/777 range combination in service against the Airbus A330/340 range: that was important for those airlines which prefer to wait and see an aircraft successfully introduced into service before they will consider buying. On the evidence of the year, the 747/777 has the edge. It was significant that, in the big "headline" orders from Singapore Airlines, Korean Air, Philippine Airlines and South African Airways, no matter which big twin was chosen the 747 was selected as well.
For Airbus Industrie, these results have re-affirmed the need for a 747 competitor - not necessarily a competitor for today's 747, but for tomorrow's proposed re-engineered and stretched 747-500 and 600. The problem for Airbus remains of how to justify the massive cost of launching an expensive new project such as its proposed A3XX against such entrenched opposition.
Technically, Airbus Industrie is more than capable of building such a machine and giving Boeing a run for its money, but the commercial case is less easy to balance.
Airbus has to offer operating costs some 15% lower than those of the 747 to attract business away from that aircraft. It can go a long way towards that figure through building a more efficient structure and aerodynamics than those of the near-30-year-old 747, even allowing for significant improvements in the latest 747s. What is a much more difficult problem for Airbus is being able to match Boeing on production costs, essential if customers are to be tempted with an attractive purchase price.
Boeing long ago amortised the basic development costs of the 747, and must by now have more than recovered the development cost of the 747-400. The costs of developing new derivatives will be much lower than the costs of developing an all-new A3XX, (which are now set at some $8 billion, almost twice as much as was committed to developing the 777).
More importantly, however, the groupement d'interet economique structure of Airbus Industrie restricts the organisation's ability to profit from economies of manufacture in the same way that Boeing or McDonnell Douglas can. Airbus Industrie is, in effect, a co-ordination and sales operation, not a manufacturer. Much of the design and all of the manufacturing of Airbus aircraft, is carried out by the four partner companies and their subcontractors, in rigidly defined proportions. If a partner company makes economies in design or manufacturing, that is reflected not in the asking or selling price of the aircraft, but in the profitability of the partner concerned. Airbus has far less ability to negotiate prices downward with its partner suppliers, than does Boeing with its subcontractor suppliers, or even its risk-sharing suppliers.
That leaves Airbus in a difficult position. There are few questions over its ability to create a world-beating product-line, with world-beating technology, as it proved with the introduction of fly-by-wire to the jet airliner industry. What Airbus cannot do, however, is take a lead on price. While it can and does match market prices, it clearly lacks the same freedom as Boeing to take the initiative in slashing the underlying cost of production and passing that saving onto the customer. Ultimately, it may be a solution to that problem rather the issue of product lines, which holds the real key to the future success of Airbus.
Source: Flight International
