It’s no secret that Airbus and Boeing are running a modern-day duopoly in the airplane manufacturing
industry. These two companies account for 99% of large aircraft orders around the world,
serving more than 4 Billion air travelers annually. Their dominance over the market has
been a common trend throughout history and the future shows implications that it can continue.
Want to know about it?
Well, stay tuned to the video And watch the video till the end.
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Will DOMINATE Boeing In The Future.” So without any further ado, Let's begin.
When it comes to aircraft choices,
Airbus and Boeing dominate the market and have done so for decades. How did this duopoly come
to be, and how have Boeing and Airbus taken on the competition over the past years? The story of the
rise of this duopoly is one of the successes of two companies, with very different origins,
combined with the downfall, or takeover, of several other companies. Airbus versus Boeing is
one of the great rivalries in business today.
Like Coca-Cola versus Pepsi, Ford versus GM, McDonald's versus Burger King. These days,
if you fly, it'll probably be either an Airbus or a Boeing. You might assume that
it was always this way, but that's actually not the case. Just a few short decades ago,
the world of commercial aviation was filled with big names like McDonnell Douglas,
BAe, Saab, Lockheed, Fokker, and even Convair, alongside the legacy Boeing. Boeing held
considerably more market power until 2003, when, through financial support from European
governments and loan forgiveness, Airbus overtook Boeing as the leading airline manufacturer in the
world.
The conflict between Boeing and Airbus heightened in complexity when the United States brought a
case to the World Trade Organization and argued that EU member states provided illegal subsidies
to Airbus. In response, the EU filed a claim that US government subsidies provided to Boeing were
given in significantly larger amounts. Both cases were thoroughly investigated and the results were
alarming. Boeing forayed into commercial aviation by launching its first aircraft,
the B&W Seaplane, in 1916.
The company went on to develop several small passenger and military aircraft in the two
decades that followed, becoming a frontrunner in all-metal aircraft construction. Boeing introduced
its first commercial jetliner, the 707, in 1958. The launch of a 747 long-range airliner with a
much larger seating capacity than other commercial aircraft in 1970 further strengthened Boeing’s
position in commercial aviation. Rival Airbus had a modest beginning with the launch of the A300B,
which is based on the A300 wide-body jetliner.
Airbus received its first order for the A300B from Air France in 1970. As the worldwide
travel market expanded from just over 400,000 travelers in 1973 to 3.96 billion in 2016,
Airbus and Boeing fought to gain market share in the rapidly growing industry,
competing at every level over who would get the largest slice of the rapidly-growing pie.
Today, both companies are using every advantage they can find, driving innovation and efficiency.
Boeing and Airbus each control around
half of the global aircraft market, and analysts anticipate the booming travel industry needing as
many as 39,000 new planes over the next 20 years. With a value of over $6 trillion over two decades,
even small differences in market share add up to big business, so it is no wonder competition is so
fierce. One of the main ways Airbus has clawed valuable ground away from Boeing has been the
success of mid-range models like the A340 and A320Neo, the latter of which currently enjoys
a 59% market share in its class.
This leads us to the first way the rivalry of these two companies and the new aircraft
technologies they are developing are reshaping the air travel industry. That is, the changing
shape of airline fleets themselves, and the types of planes you are likely to fly on. In the early
years of the new millennium, many airlines as well as Airbus thought the key to lower costs in the
future would be the size. Boeing’s 747 was the queen of the skies, oil was cheap and passenger
numbers were steadily increasing.
Larger airplanes would allow carriers to get the most out of their precious take-off and landing
slots at crowded international hubs and the more passengers they could fit into each plane,
the more profitable they would be. This was the theory behind Airbus’ huge, double-decker A380
superjumbo, designed to shuttle travelers between global hubs in large numbers. Two main factors are
the reason why Airbus and Boeing’s dominance over the airplane manufacturing industry:
money and history.
With both of these factors on their side, Airbus and Boeing can easily maintain their positions
as the top companies. Manufacturing airplanes requires significant costs. The high barrier to
entry includes costs associated with not only the parts, but customer support, maintenance,
technology, and more. These two companies have dominance over domestic and international demand,
but large overhead has even allowed them to buy into regional leaders,
including Bombardier and Embraer.
The early entry into the manufacturing market has allowed the companies to develop close
relationships with their respective government and organizations affiliated with the regulation
of the industry. Boeing, for example, is the 2nd largest spender on lobbying in the US, with more
than a quarter-billion dollars spent. The deep history of success for the two manufacturers
has solidified their reputation as the go-to airplanes in the industry. Airbus’ revenues are
better diversified and are from markets that have high growth potential such as the Asia Pacific,
especially China.
The company earns more revenue from Asia Pacific (36.6%) than Europe (27.9%) and the
two regions together contribute approximately 65% to its gross revenue. Although Boeing too
earns a similar chunk of its revenues (70%) from just two geographic areas namely the US (44.2%)
and the Asia Pacific (25.6%), its revenues are more concentrated in the US, unlike Airbus,
which has a better diversification.
Airbus also earns higher revenue from the Asia Pacific, which Boeing too recognizes to be a
crucial market for its future growth. While the quick growth of Airbus can be attributed
partly to the boom in commercial aviation, the feat wouldn’t have been possible without state
benefits, which the US claims are unfair. The geographical distribution of revenues
of the two companies is evidence of just how much Airbus benefits from state support.
Boeing’s revenues are concentrated
in North America, whereas Airbus is benefitted from European state support. North America has
been dominated by Boeing for a long time, with the majority of its revenues coming from the US
(44.2%) alone, whereas its counterpart earns just 17.5% of revenues from North America.
Europe to Airbus is what the US is to Boeing.
European revenue contribution for Airbus (27.9%) is more than double compared to Boeing (12.8%).
Incidents such as grounding due to serious technical issues could mar the reputation
and sales of commercial aircraft manufacturers. Airbus’ entire global fleet of 737 Max aircraft
was grounded in March 2019, following two fatal aircraft crashes. The company had an order book
of 4,636 units worth $600bn of the 737 Max family at the time of the grounding and continues to face
order cancellations from several airlines.
Both Boeing and Airbus are plowing billions into research and development to try and
gain an edge, pioneering new forms of air transportation and propulsion in the process.
Airbus’ E-Fan all-electric prototype aircraft completed a demonstration flight over the English
Channel in 2015. Not to be outdone, Boeing is investing in electric aircraft startup Zunum.
Airbus has also been issued a patent for a
new hypersonic jet in the mode of the now-defunct Concorde, which would be able to fly from London
to New York in just over an hour by moving at 4.5 times the speed of sound. While it might be
years before we see any of these projects come to fruition, if they prove viable at all, these
aerospace giants and the ongoing rivalry between them will be changing the nature of air travel for
airlines and consumers for years to come.
They have already helped give travelers more frequent services, more destinations,
and more flexibility determining routes, all while lowering costs and reducing noise and pollution.
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