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Business Studies Case Study
Over the past years, Boeing has been contracted to make good on American aircraft orders. Recently, however, there has been speculation that these orders are to be delivered by either the Boeing, Airbus or both. American is expected to make an order of around 200-250 aircraft to replace the aging Boeing 757s and MD80s (Michaels et al.). This competition between Boeing and Airbus runs deep as Airbus supplied several A300-600Rs back in the 1980s to American after which Boeing and American signed an exclusive 20- year contract in 1996 which effectively locked out Airbus from business with American (Sanders and Michaels ).
The major problem is the competition that Boeing 737s is facing from Airbus A320s (The Economist September 30, 2010; Drew). The question of whether to simply update or replace the earlier 737 models entirely with the 787 Dreamliner has put Boeing in a very difficult position (Hiltzik 1; Laube). If they choose to simply update the 737s, then the A320s will be considered more efficient. On the other hand, should Boeing choose to replace the 737s with the 787 Dreamliner, the airliner will cost billions of dollars in an over-budget, delays and an overall percentage increase in the sale price that may make them lose some regulars (Ostrower 8, The Economist, January 28, 2012; Airfleets.net.).
Following the Boeing dilemma, there is a consequence for every solution they choose to take. Boeing could curb competition from Airbus by lowering their prices significantly for Americans. This course of action will affect Boeing financially seeing as they have already given American significant discounts (Sanders and Michaels). Additionally, Boeing can resolve to merge with General Electronic (GE). This merger could cut on lease rates, reduce maintenance costs and increase the number of orders (Barboza, Drew and Lohr 2). However, GE also faces competition from other companies (Hamilton 5, Bloomberg 1).
The Economist. “Airbus v Boeing: Plane Poker: Airbus plays the new-engine card.” The Economist. September 30, 2010. 1-2. Print.
“China Wins First Orders for Plane, Breaking Airbus-Boeing Grip.” Bloomberg News, November 16 (2010) p.1-3. Press.
Airfleets.net. “The Secret Price of a Jet Airliner: Discounts of 50% or More Off the Sticker Number Are Common as Plane Makers and Buyers Haggle.” July 9, 2012. Web.
Barboza, David, Drew, Christopher and Lohr, Steve. “GE to Share Jet Technology with China in New Joint Venture.” The New York Times. January 17.10 2011. Web.
Hamilton, Scott. “Boeing’s American Dilemma.” Commercial Aviation Online, Seattle. July 18, 2011. Web.
Hiltzik, Michael. “787 Dreamliner teaches Boeing costly lesson on outsourcing.” Los Angeles Times, Los Angeles, May 16, 2011. Web.
Michaels, Daniel, Susan Carey, and Peter Sanders. “Boeing, Airbus Give AMR Hard Sell.” The Wall Street Journal, July 3, 2011. Web.
Ostrower, Jon. “Makeover of 777 Agitates Boeing.” The Herald/ Associated Press, December 8, 2011. Web.
Sanders, Peter, and Michaels, Daniel. “Winds of Change for Boeing, Airbus: Competition from Upstart Manufacturers Forces Big Airliners to Consider Overhaul of Popular Models.” The Wall Street Journal, March 16, 2010, Web.
Laube, Michal. Chinese 737 replacement. Internal Memo.
Drew, Christopher. “A Dream Interrupted at Boeing.” The New York Times, September 6, 2009.
The Economist. “Boeing: Faster, faster, faster.” January 28, 2012. Print.
“Making Aircraft: Full Throttle.” The Economist. November 26 (2011) p.1. Print.
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