Excess baggage
Airbus-Boeing market share:
More than just marketing
n the hot battle over
I market share, one thing
that is clear (yet which
has gotten very little notice)
is what drives market share
more than marketing or
good aircraft. It’s produc-
tion capacity. Without
capacity, Airbus or Boeing
could have the greatest air-
craft in the world, but the
one with the least capacity
will inevitably be confined
to second place.
Boeing won 60% of the
market for firm orders
through the first six months
of 2005. When including firm
orders and commitments,
Boeing still had a 55% share
through June.
The headlines in the bat-
tle between Airbus and
Boeing focused on the A380,
the A350 and Boeing’s new,
plastic and super-efficient
aircraft, the 787. Indeed,
Boeing has had great success
in obtaining orders and com-
mitments for the 787 since it
was launched more than 18
months ago, receiving nearly
300 through June. (Actual
firm orders amounted to only
87.)
As much as Boeing loves
to denigrate the A380,
Airbus received firm orders
for 10 in the first six months
of this year compared with
three for the 747. And, as
much as Boeing likes to
trash the A340 compared
with the 777, Airbus prefers
to compare the A330/A340
with the 777. Remember
that the A330/A340 was
always positioned as essen-
© Commercial Aviation Report
1 August, 2005
tially the same aircraft way
back in the conceptual
TA9/TA11 days. Using this
standard, Airbus sold 25
A330s/A340s to 20 777s.
Using firm orders and com-
mitments, the lead flips
slightly 65-62 in favour of
the 777.
The runaway contest is
not between the A380 and
747, it’s not between the
A330/A340 and the 777 and –
surprisingly – it’s not
between the A350 and the
787. The A350, as it was
finally defined (after four
tries) captured 50% of the
market for orders and com-
mitments for the first six
months in 2005.
Nope, the runaway con-
test is between the 737 and
the A320 families. Boeing did
well in the first six months:
321 firm orders to 240, or
451 to 337 for orders and
commitments (a 57% share
in each case). Part of the rea-
son is that Boeing’s sales
force has been empowered to
make deals rather than being
micro-managed by a head-
quarters obsessed with prof-
its (which, in fairness, are no
small consideration).
But part of the reason is
also that Airbus’ produc-
tion lines for the next few
years are said to be sold
out. Boeing, on the other
hand, has been revamping
its production lines to
make them more efficient
and it has plans to boost
production rates to 31 737s
a month.
Perhaps not so coinciden-
tally, Airbus indicated last
month it may boost A320
production to 30 a month
soon. Airbus is currently
producing between 25 to 30
aircraft a month of all
types.
Boeing has already said
that with two years of 787
capacity sold out, it may
boost production plans for
this aircraft before the first
one even rolls off the assem-
bly line.
Production capacity
Way back in 1996, when the
merger between Boeing and
McDonnell Douglas was
announced, CAR identified
production capacity as the
biggest threat to Airbus from
the combination; it certainly
wasn’t the 7% market share
that McDonnell Douglas
brought to Boeing in the
form of tired, old derivative
designs. The combined com-
panies had the ability to pro-
duce more than 60 aircraft a
month compared with
Airbus’ ability to produce
only 30.
Let’s see: 60 to 30. That’s
67% for Boeing to 33% for
Airbus.
Boeing hit its production
peak in 1997/98, when it
was delivering more than
600 aircraft a year (more
than 50 a month). Airbus’
peak has been only 320 a
year, less than 30 a month,
a rate that has fluctuated
very little since 2001.
Boeing’s deliveries, howev-
er, fell to less than 300 a
year (as few as about 250,
or somewhat more than 20
a month). Thus, even
though the 747 and 767
lines are limping along at
about one aircraft a month
now and the 757,
McDonnell Douglas MD-11,
MD-80/90 and soon the 717
lines have been closed
down, Boeing clearly has a
lot of capacity in the physi-
cal facilities it already
owns. We estimate that the
active lines – the 737, 747,
767, 777, and the projected
787 line – give Boeing cur-
rent capacity to produce
about 55 aircraft a month.
The Long Beach 717 line,
slated to close in late 2006,
nonetheless has a building
capable of adding to the
Boeing capacity, however
unlikely Boeing is to use it
for commercial purposes.
Thus, with Boeing’s
regenerated sales force going
to town with the 737 and the
hot-selling 787, Boeing is
easily positioned to regain
the market share it gave
away during the last four
years. With the expected
launch of the 747 Advanced
and the continued success for
the 777, Boeing will bolster is
market share. Airbus, on the
other hand, simply does not
have the capacity to main-
tain its lead against on
onslaught of sales by Boeing
in the coming years. Airbus
will have to dramatically
ramp up capacity to keep
pace.
Article contributed by Scott
Hamilton