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This is the view of Professor Dr. Tobias Kretschmer, who heads the Institute for Strategy, Technology and Organization at Munich School of Management, Ludwig-Maximilians-Universität München.  Professor Kretschmer teaches a course on Competitive Strategy at Coursera, which we recommend you consider if you have an interest in understanding how and why firms react to competition. Continue reading

Unknown-2Boeing appears to have come around to the thinking that the 747 program has seen its best days in sales with its announcement of a cut in the production rate.  While the industry has a relentless urge to seek better economics, and appears to have spurned four engined airplanes as a result, let’s spare a moment to reflect on the original Jumbo Jet.  It is simply one of the most iconic aircraft made, and its history is still being written. Continue reading

The market for Very Large Aircraft (“VLA”) is very small niche. We believe this market, for aircraft with more than 400 seats, will continue to be stagnant for four-engine aircraft, and will begin to grow again once the 407- seat Boeing 777-9 enters into production.The incumbent aircraft in this sector, A380 and 747-8, are struggling to gain customers, and have shrinking backlogs as deliveries continue.  The outlook for these aircraft has dimmed, and we believe sales will fall well short of manufacturer projections.

The classic argument in favor of VLA aircraft (>400 seats) is that in congested markets, a VLA makes most sense when one has limited slots.  Heathrow is the poster child for this argument, as are others such as Haneda in Tokyo. But this argument has not been holding true, as growth in wide-body twins remains much stronger than for the new jumbos. Continue reading

The British Advertising Standards Authority (ASA) has dismissed a claim by Airbus regarding statements in a Boeing ad.  Airbus protested after Boeing ran an ad claiming that the 747-8 has better fuel burn versus the A380 under certain conditions.  You can read more about this here and here.  The ASA believes that the audience will understand the underlying assumptions.  If that is the case, why would Airbus and Boeing even start to send these weird messages?

What are the facts?

Let’s start with the only airline that flies both aircraft at present. Clearly Lufthansa does not use these aircraft interchangeably. The A380 is an order of magnitude bigger (by more than a third) in capacity terms.  Moreover Lufthansa is well known for its “horses for courses” fleet management philosophy.  According to this data we would say one cannot compare the aircraft evenly.

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Besides here is a chart worth taking… Continue reading

Please start here.  Having the airline CEO make these remarks about the future of the 747-8I even as it took delivery of its seventh last week is a significant message.  Boeing is in the midst of rolling out a refinement on its 747-8 – so the OEM remains committed to the program. There are also rumors of campaigns that could see more orders. But, as always, rumors in this industry are like the weather, constantly changing.

The market has spoken about the 747-8, and it has spoken softly.  The airplane has been getting good reviews from Lufthansa, the only airline flying the passenger version at present.  Indeed Lufthansa has said they find the 747-8I and A380 offer similar economic numbers.  Yet the airline slowed 747-8I deliveries even as it ordered a third tranche of A380s.

Lufthansa therefore has extraordinary impact on the VLA market.  The CEO’s latest words are… Continue reading

A380_MAS_02_

Airbus announced it has delivered its 100th A380.  This is a big milestone in any program and, given the way new airplane programs go these days, a milestone calling for a celebratory moment.  The A380 program seems to have settled into a rhythm with steady progress.  Airbus’ VLA program got off to a rocky start and settled down just as the first in a series of industry hiccups came along; oil price spikes, terror and financial meltdown.   Not a great time to be selling over $300m items.   Airbus also had to deal with a few A380 news items that caught attention; QF32 and the follow on wing structural part that needed replacing.

Yet the program has kept plowing ahead. There have been repeat orders from numerous customers. Big names like Emirates, Singapore and now Lufthansa.  This is clearly an endorsement of the program.  Passengers who have flown the airplane seem… Continue reading