Airbus has struggled in recent years to meet its aircraft production targets. If Airbus had aircraft availability soon, the company could have flipped long-time Boeing customers away from Boeing and gained significant market share, particularly in the high-volume narrow-body market. While Airbus has significantly outperformed its major competitor over the last few years, it should have, realistically, captured even more market share and pressed its advantage. That would have impeded Boeing’s recovery for years. Did short-sighted management at Airbus, led by Guillaume Faury, squander the opportunity? Under Kelly Ortberg's leadership, Boeing is now executing a turnaround strategy that appears to be working during its early stages. While the culture at Boeing will take years, rather than months, to change, the institution of key performance indicators and performance measures is guiding that turnaround. Boeing is poised to close the gap in production rates and move back into the narrow-body market with a significant push once the FAA clears Boeing to increase production rates and certification of the MAX 7 and MAX 10 are completed. Suppose Boeing executes its turnaround strategy, which so far appears feasible. In that case, the lead Airbus has built will diminish over the next three years, moving the duopoly back to near equal shares, with Boeing leading slightly in wide bodies and Airbus leading slightly in narrow bodies. The Opportunity Emerged with Boeing Failures Boeing was a declining company during this century's first two and a half decades. While the 787 program became a market success, it was a developmental nightmare. Boeing took not only the risk of introducing the first carbon fiber composite aircraft but also the risk of building fuselage sections overseas with standards of precision that were difficult to achieve. After a $25 billion initial cost overrun, followed by a safety grounding due to Lithium-Ion battery fires and multiple additional work stoppages due to quality issues related to “shimming” fuselage sections, the program moved forward in fits and starts. However, the 787 is an efficient design and a leader in its market segment, primarily from first mover advantage. Boeing was also caught flat-footed when Airbus introduced the A320neo family. Boeing did not have an immediate answer, but it did convince American Airlines to enable it to provide an alternative to a large pending A320neo order, and it launched the MAX rather than an all-new airplane. That was a disaster as the resulting 737 MAX had a glaring safety problem. The MCAS system was intended to make the MAX fly like its 737 NG predecessors to minimize pilot transition training. Instead, it would take over the airplane with excessive trim, which pilots could not reverse, creating a self-crashing airplane. After crashes in late 2018 and early 2019, the MAX was grounded for 16 months. The results were entirely predictable - nobody wanted to fly in a Boeing MAX, nor did airlines wish to order it. More than 600 orders were canceled, and Boeing faced another aircraft that became a financial disaster. Those 600 airplanes could have quickly become Airbus orders had Airbus had the capacity to increase production significantly. While Airbus established more aggressive production targets, the lack of attention to detail with their supply chain failed to meet those goals, with production targets reduced in the last few years. This is despite expansions of narrow-body production with new final assembly lines in Toulouse and Mobile and the ability to increase throughput in Hamburg and Tianjin. Perhaps Boeing's significant failure was that the MCAS system was unnecessary for the MAX. It would have simply had different flying characteristics at high angles of attack than its predecessor, the 737 NG. However, cockpit commonality was so crucial that Boeing even accepted a $1 million per aircraft penalty if additional simulator training was required for the MAX aircraft destined for Southwest Airlines. Without MCAS, that would have been the case. By contrast, Airbus cockpit commonality among multiple models and easy training transitions continue to be a prominent selling feature of the Airbus product family, enabled mainly by fly-by-wire technology. In January 2024, Boeing experienced a failure on an Alaska Airlines MAX 9 caused by missing bolts on a door plug. This resulted in an explosive decompression, fortunately at an altitude low enough not to lose the aircraft. This sent another chill through the industry, resulting in an executive change at Boeing that brought in outside leadership. With the A320neo, the A321neo as a 757 replacement, and Boeing’s continuing issues with quality and safety, Airbus suddenly, after years of an equal duopoly, was clearly in the driver’s seat. But apparently, Airbus forgot to turn on the navigation system to see where it was headed, failing to meet production targets for multiple years. Airbus Failed to Press its Advantage The grounding of the MAX was an opportunity for Airbus to secure new customers who were avoiding Boeing and dramatically changed the nature of the duopoly for decades to come. Typically, a customer of an aircraft type continues to be a customer, given the commonality in training, maintenance, and the high fixed costs associated with introducing sub-fleets of different aircraft. Winning over traditional Boeing customers could have secured Airbus' long-term market leadership. However, Airbus could not take advantage of this, particularly when the global pandemic hit. While initial cases dated from late 2019 to January 2020 in many countries, the real impact of the pandemic on aviation was passenger traffic coming to a halt in early 2020. Nobody was flying, and government support for airlines kept the industry afloat. Workplaces came to a grinding halt, and the aviation supply chain could not keep up with component demand. Of course, airlines deferred new aircraft deliveries with no passengers, and the industry suffered a significant decline through the remainder of 2020 before recovery began in 2021. Impacts varied regionally. China, the hardest hit and the apparent source of the virus was among the first to close and last to reopen. In the interim, the supply chain suffered from a minimal production level. The impact on suppliers to Boeing was harsh due to strained relations. Boeing’s historic relationships with its supply chain are well-known and not supplier-friendly. The “Partnering for Success” program, implemented in two steps, was a substantial price cut demand from Boeing and has several vulgar nicknames that we will not publish. Boeing suppliers faced dire times under its financially driven strategies. Boeing’s supply chain, suffering under Partnering for Success, would have embraced an approach from Airbus, even to become a smaller volume second-tier supplier. Who wouldn’t have preferred being an Airbus rather than a Boeing supplier during the safety groundings and uncertainty of the long-term future? Nearly everyone would have embraced an invitation from Airbus to join its supplier base. The Missed Opportunity and Production Targets Shortfalls Boeing’s serial failures led to a significant opportunity for Airbus to take control of the duopoly and gain substantial market share at Boeing’s expense. Boeing’s failures included both strategic and execution failures over the last decade. The company failed to replace the popular 757 and serve the middle of the market. Its execution failures delayed the planned 737 MAX 10 until it was years late, and now, FAA exemptions are required to be certified. In the meantime, Airbus A321neo became the market leader in narrow-body aircraft, even outselling the A320neo, filling the niche Boeing created and once owned. Before the pandemic, Boeing’s performance was so unpredictable that suppliers were concerned enough to seek opportunities with Airbus. Airbus failed to take advantage of a situation where it could develop second-source relationships with many industry suppliers. Many Boeing suppliers were barely hanging on and looking for revenue opportunities. However, despite high production targets, those opportunities failed to materialize with Airbus. The company missed its planned targets for several years. In 2024, Airbus twice modified its guidance as it could not meet its delivery goals that began with more than 800 aircraft, as the company could only deliver 754. The opportunity to solidify Airbus's supply chain with additional qualified suppliers was effectively handed to the company on a plate. Unfortunately, Airbus did not take advantage of this opportunity to improve its global sourcing and competitive positioning and meet its production targets. Airbus has final assembly facilities on three continents. But how well did the company develop local supply chains for key components near each FAL? While engines and avionics cannot quickly move to local providers, other components can. In an environment in which tariff threats could lead to further industry disruption, the opportunity to develop local suppliers could have potentially mitigated some potential consequences should Donald Trump carry out his threats. The Bottom Line Boeing appears to have moved through its nadir, as the turnaround has begun with new leadership. Airbus failed to achieve the zenith that included the potential to outperform Boeing and take additional market share from traditional Boeing-only customers. Momentum is slowly switching towards Boeing as another inflection point appears to have been reached. Had Airbus reached its production targets, annual revenues could have been $5 billion or higher, not an insignificant sum. Airbus may have squandered a once-in-a-lifetime opportunity to gain sustainable market leadership in the long term by not expanding its supply chain and failing to meet its aggressive production goals. Airbus should be thriving at its competitor's expense. Opportunities like this occur once in a lifetime. Management’s failure to seize the initiative to expand production rapidly enough and meet those production targets will haunt it over the next decade. As Boeing has demonstrated, investing in the supply chain rather than buying back stock would have been a better use of Airbus' resources.
