Aircraft Industry: Boeing Versus Airbus

Boeing vs. Airbus

Airbus and Boeing have created a duopoly in the aircraft industry in which only two companies dominate a market. This market dominance started after Airbus entered in the market as a consortium of France, Germany, later Spain and Great Britain; a significant competition started between the two companies striving to gain market share. As a result of the rigorous competition, existing competitors such as Lockheed Martin and British Aerospace failed to sustain their position in the industry, either becoming aircraft parts manufacturers or acquired by one of the two companies. Boeing had enjoyed a certain degree of monopoly power until the 1980s before Airbus strategically entered the industry to put a curb on Boeing's monopoly power and to gain market share that has significant impacts on national economic growth. Airbus took a strategic move in its early stages; it could achieve current success mainly due to heavy investment in R&D and new technology for design and advanced product offerings surpassing its competitors even Boeing. The achievement of Airbus marked it as a viable competitor of Boeing.

There is a logical explanation for the duopoly in the aircraft industry; the aviation market requires significant and consistent investment in capital assets and the global aviation market only able to support few firms that can achieve economies of scale with sufficient source of investment for R&D. Government subsidies have played an important role in the aircraft industry. Without subsidies, companies couldn't sustain their positions in the industry that demands high R&D expenditure and has great risks associated with launching a new airplane; other manufacturers couldn't

The importance of an aircraft manufa...

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In the airline industry demand for single aisle is increasing as point-to point airlines such as Southwest winning the market. The aircraft industry is not effectively structured because of the subsidies that both companies are receiving from governments. They have taken these help for granted for a long time. They both fail to integrate productions activities and suppliers that are located in dispersed areas, increasing transportations costs and causing the delivery delays when products were launched;. Development pattern with a wide range of product offerings without consistency they both took is hard to realize cross subsidizing in productions that increased setup costs and . If outsourcing is managed tightly, outsourcing can bring significant advantages but seemingly it creates as many problems as it brings benefits.