Upload
philippe-honore
View
133
Download
6
Embed Size (px)
Citation preview
Running Head: AIRBUS’ RESPONSE TO COMAC 1
Airbus’s Response to COMAC
Philippe P. Honoré
Palm Beach State College
Author Note
This capstone paper was prepared for the spring 2015 semester of Capstone General
Management, GEB 4935, taught by Dr. Roger Blair.
AIRBUS’ RESPONSE TO COMAC 2
Abstract
The purpose of this research paper was so Airbus, a subsidiary of Airbus Group, could grasp the
danger that might come from its new competitor The Commercial Aircraft Corporation of China
(COMAC). The specific drive was to point at Airbus’ main weakness that could lead the
company into major financial trouble, as they would not respond in a timely manner to this
threat. The means of investigation were based on Airbus internal structure, as well as a
comparison with segment diversification in the automobile industry. The solution offered relies
on the creation of a subsidiary that would compete directly with COMAC. The benefit of this
new brand would be to offer a cheaper alternative closer in price to the Chinese competitor,
while protecting Airbus’ image of innovation and as a high quality aircraft manufacturer.
AIRBUS’ RESPONSE TO COMAC 3
Airbus’ Response to COMAC
Chapter 1: Research Proposal and Introduction
Introduction to the Organization
Airbus S.A.S. (Airbus), located in Blagnac, France is a subsidiary of Airbus Group based in
the Netherlands (Hoover’s, 2015). This global organization operates in thirty countries. They
produce single and double aisle aircrafts transporting between 100 and 800 passengers, eight
configurations of corporate jets, as well as freighter aircrafts (Airbus, 2015).
Corporate name, founding date, founding leaders. Before it became a subsidiary, Airbus
was a consortium created by politicians to become a European aircraft manufacturer (Airbus,
2015). Airbus industry was officially founded on December 18th, 1970 between Aérospaciale and
Deutsche Airbus. Some of its renowned leaders were Felix Kracht, Gunther Scherer and Bernard
Ziegler, although Roger Béteille was considered as the spiritual father of the organization
through the development of the A300.
Essential events and critical incidents. One unforgettable event happened on April 27,
2005 when four Rolls Royce engines lifted the 650-ton largest passenger airplanes ever
manufactured. The A380 has the ability to transport 800 passengers in one class configuration,
and takes off in an incredibly smooth and silent manner. In fact, Bill Saporito stated (2009) that
this mega airplane makes half of the noise at take off as a Boeing 747-400.
Unfortunately, there was also a tragic event that Airbus would like to take out of its memory.
Like Boeing and other airliners, a few Airbus airplanes disappeared from radar throughout
history. June 1st, 2009 was no exception as flight Air France 447 crashed in the Pacific Ocean on
its way to Brazil. A malfunction of three sensors - as big as a thumb - resulted in 228 casualties
(Bremner, 2009). Once again, Mother Nature challenged engineers who did not take into
AIRBUS’ RESPONSE TO COMAC 4
consideration that, in extreme flight conditions such as those met by AF447, frost would stop the
airflow coming inside the speed sensors located outside of the plane. As a result, the autopilot
suddenly disconnected leaving both co-pilots to fight against a massive storm over the Pacific
Ocean, a battle they unfortunately lost.
Products throughout Airbus history:
A300B2: Airbus Industry’s first model made its inaugural flight on October 28, 1972, to
be delivered to Air France on May 10, 1974 (Airbus, 2015). A few years later, the A300
featured the Autoland System CatIIIA, which enabled its first flight with Autopilot on
December 11, 1980.
A300-600: Another important event occurred at the end of the eighties as the first A300-
600 was delivered to American Airlines on April 21, 1988.
A300-600ST: Almost twenty years ago, Airbus launched the A300-600 Super transporter.
The capacity of this oversized freight airliner is such that it can transport a helicopter
with its rotor. The A300-600ST brought more than 40,000 cubic feet of relief supplies to
New Orleans in response to Katrina’s catastrophic event (Fletcher, 2005).
A380: Its inaugural flight occurred on April 27, 2005. A380’s first delivery was in
October 15, 2007. The first flight of the A380 was their most mediatized event.
A350: Comes in three versions. Airbus website claims that this family of planes is 25%
more efficient than its current competitor Boeing (Airbus, 2015).
Industry competitors. Until now, while Bombardier and Embraer were selling smaller
airplanes, Boeing was considered as Airbus’ historic competitor. Chinese airliner manufacturer
COMAC, its new and most feared new entrant, should launch in the new future the C919 that
could shake the supremacy of these two airliner giants.
AIRBUS’ RESPONSE TO COMAC 5
Statement of the Problem
According to Airbus’ mission statement, the airliner depicts itself as innovative using
advanced technologies, as well as focusing on high quality airplanes. While quality has to be the
highest priority of an airliner, this mission statement sounds like Airbus provides expensive
planes solely to airlines that can afford them.
While the two-floor passenger jet A380 was considered as a miracle of technology,
orders are not piling up. The largest airplane transporting passengers on the market today has not
met Airbus’ expectations in terms of firm orders, as well as meeting their target of manufactured
planes (Mouawad, 2014). Additionally COMAC, the once unthreatening Chinese airliner
manufacturer who just launched its first passenger jet, started the production of the C919
(Perrett, 2014) a direct competitor to Airbus A300 series. Expected to be delivered in 2018 after
some major delays (Dennis, 2014), the low-cost C919 might take new market shares occupied by
Airlines that once had to buy used planes. In this article, M. Mouawad also pointed at Airbus’
lack of imagination when it comes to predicting its product’s success. While COMAC is
aggressively engineering new models that will become Airbus’ nightmare, the European firm is
looking the other way, confident that their reputation of high quality makes them a primary
choice for premium airlines.
Airbus has the ability to respond to a Chinese offensive only if it can overcome its inertia.
This study, based on the French automobile industry, investigates the possibility of
manufacturing low cost planes based on existing passenger jet platforms, which could be sold at
a cheaper price to Chinese, South American, and African Airlines. In order to keep Airbus’
image of exceptional products, we advocate the establishment of a new brand within Airbus
Group, directly under Airbus SAS’s subsidiary called LBJets. In tribute to Louis Blériot (Siegel,
AIRBUS’ RESPONSE TO COMAC 6
2009), the first man to fly over the English Channel more than a century ago, LBJets would
reincarnate the aviator’s courage against adversity.
Research Question
Knowing the over-confidence of Airbus Group, will the company take a chance on
creating a low cost brand in direct competition with Chinese airliner COMAC?
Hypothesis
Because of its over-confidence and self-contemplation over its success, Airbus might be
victim of the Icarus Paradox if it does not see COMAC offensive in a timely manner.
Research Significance
This research paper is crucial for the longevity of Airbus so it could face new entrants
into this very competitive market such as COMAC, and would also rejuvenate the innovative
spirit of this organization in order to prepare for the new challenges of tomorrow.
Purpose
Like other global corporations, Airbus constantly thrives to keep its competitive
advantage. Until now, Boeing and Airbus shared this market segment of one hundred and more
passengers, while bombardier and Embraer were fulfilling a niche with smaller planes. Even if
previous battles between these two giants felt like transatlantic flights with major turbulence,
future flights might be bumpier than ever, with a risk of not reaching their destinations. The
purpose of this research shows how Airbus can prepare itself by coming up with a contingency
plan that would strengthen its presence in the segment of middle to massive carrier aircrafts. If
Airbus has been criticized in the past for being off in its prediction, today is the time for this
innovative corporation to show the world that it can come up with alternatives to beat
competitors on their ground. Not only could Airbus, once again, astonish the world with its
AIRBUS’ RESPONSE TO COMAC 7
creativity, but it could also make this journey a success story that would be written in airline
history.
Data Collection/Research Methods
While our data collection will skim over our leading competitor Boeing, we will
concentrate our research on COMAC. As we will not be able to retrieve financial data from
COMAC as it is owned in part by the Chinese government, our research will be mainly
qualitative, relying on data from public sources, such as reports coming from COMAC’s
customers.
Chapter 1 Summary
Our text (Hill, Jones, Schilling, 2015) uses strategic management to provide some
guidance to Airbus so it can successfully attain its goal. One might think that the reason to
implement such strategy is to be able to respond to COMAC’s offensive, although the true
purpose is to maximize shareholders’ profit in the long run. The more Airbus is able to keep its
competitive advantage, the more its shareholders would receive high returns. Although in order
to do that, Airbus has to look outside of the box and provide cheaper products to satisfy the low-
end airline market. While we understand that Airbus’ reputation could suffer from such a
strategy, we believe that, like Renault did with Dacia (Just-auto.com, 2013), the second biggest
airliner of our time can create a reputable brand such as LBJets, making products that are more
affordable, while not compromising quality. If well directed by corporate, functional managers
of this new subsidiary should be able to provide valuable information so LBJets could create
innovative products that would compete with new entrants.
AIRBUS’ RESPONSE TO COMAC 8
Chapter 2: Literature Search
Literature Search
In an era where the answer to success depends on globalization (Griswold, 2009),
organizations have to be open-minded enough so they can redefine themselves if needed. One of
the keys relies on their ability to adapt and reorganize so they can survive in this fierce business
world. There is one main idea in business that tends to prevent them on doing so:
overconfidence, or as Danny Miller (1992) called it the Icarus Paradox. In Greek mythology,
Icarus, the son of Daedalus, ignored his father’s warning who had built two pairs of wings out of
wax and feathers so they could both escape a labyrinth Daedalus designed himself. Flying too
close to the sun, the wax holding the feathers melted, and Icarus perished from his fall into the
sea (Humphries, 1989). Miller uses Icarus as an analogy by pointing out how success blinds
established organizations to the point that they do not see danger coming. This chapter analyzes
the effect of overconfidence on organizations.
Icarus paradox. Like two established emperors guarding their territories, Airbus and
Boeing use their duopoly situation to keep their market shares by raising the barrier of entry so
high that smaller aircraft manufacturers would not dare to challenge. Their power is such that
they both are sitting on their pile of orders, reassuring themselves to the point that they might not
see a storm coming from the East. After all, who could blame them? Like Icarus, Airbus flies in
euphoria whenever it can steal market shares from its historical rival. It happened in 2006 when
Airbus beat Boeing in number of airplanes delivered at year’s end (Company’s Watch – Airbus,
2007), and once again in 2013 by net orders (Davidson, 2013). The problem relies on the fact
that, like Icarus who was so blinded by his bliss, Airbus’ overconfidence keeps it from looking at
the real danger. If Airbus hangs onto looking over its shoulder to make sure that Boeing stays
AIRBUS’ RESPONSE TO COMAC 9
behind, COMAC will eventually grow to the point where Airbus will not have any strength left
to fight.
The risk of overconfidence. Priscilla Cale made an interesting finding in her book Sink
or Swim (2011) where she realized that if overconfidence was a major part of the Titanic
disaster, this effect could also apply to family businesses. Although this premise is also true for
many organizations, no matter what size they are. While confidence remains as a powerful
attribute to successful leaders, too much of it takes their attention away from focusing on their
deficiencies (Schings, n.d.). What applies to individuals working in an organization, applies to
the organization as a whole. Rose Trevelyan (2008) points out the fact that overconfidence
increases biases when it comes to decision-making. In business, it happens when leaders’ overly
optimistic views affect their ability to run a business. In fact, overconfident managers have a
tendency to emphasize the returns on acquisitions while underestimating the risks (Wang, Zhang
& Yu, 2009). Airbus employees can be proud to work for such an organization as this
corporation was always highly innovative, surprising its competitors with new products such as
the massive A380, the kerosene efficient A350, or the giant transporter Beluga. Each success
strengthens a leader’s confidence as well as builds employees’ trust in their management. If we
take Vivendi as another example of overconfidence, we can see that one of its famous CEOs,
Jean-Marie Tessier (Petit & Bollaert, 2011) was so sure of the company’s success, that he
announced in multiple interviews that the firm was doing amazingly well, while it actually was
losing billions of dollars. Messier’s hubris cost him his job, even if he left with a comfortable
$20 million plus severance (James, 2003).
Theory of immortality. Walking down a busy street of any megalopolis in the United
States emphasizes the impression that certain organizations appear to be immortal (Krakovski,
AIRBUS’ RESPONSE TO COMAC 10
2013). It seems impossible to think that one of these famous chains would be gone in a decade or
two. Although if we go back in time, who would have thought that sole proprietorships would
melt like ice under the sun to the profit of chains located in malls (Kall, 2013). The little ones
had two choices, either closing down, or franchising. The truth is that the curve cannot show a
constant growth forever. Like mom and pop companies, giants of today might become the
unknown of tomorrow. Organizations, no matter their size, are as mortal as we are. While
entrepreneurs should not see this as a fatality, they should consider that in order to survive, an
organization has to reinvent itself, or to rebirth through acquisitions or mergers (Nunes &
Breene, 2011) . In 1999, the giant Starbucks acquired sixty Pasqua Coffee stores that were very
familiar to San Francisco coffee fans (Emert & Rubenstein, 1998), and three years later, HP
bought Compaq with a $25 billion check (Lashinsky, 2002). No matter how successful an
organization is, its life expectancy should not be overvalued. Those who carry today their
Skinny-Venti-Vanilla-Latte-Triple-Shot-No-Foam made by the famous green mermaid might
have to run on Dunkin tomorrow. In order to stay afloat, organizations’ leaders should be aware
of any type of competitor that could threaten their well being, especially if they are part of a cozy
duopoly.
Comparative Company Analysis
Fortunately, there is no giant aircraft manufacturer that went bankrupt. The closest
example was Fokker that developed the F100, which was supposed to be in direct competition
with the duopoly. This Dutch aircraft manufacturer - saved many times by its own government
and bought by Daimler later on - did not survive its competitors (The Economist, 1996). Since it
closed its three core units in 1996, Fokker delivers maintenance on its sold aircraft, but further
more is considered as a specialist supplier for the aviation industry, Airbus being one of its
AIRBUS’ RESPONSE TO COMAC 11
customers (Fokker, 2015). Like Airbus, on a different scale, Fokker thought that everything
would be fine as long as the Dutch government kept on chipping in.
Generation Y saw how overconfidence affected one of their favorite organizations. Who
would have thought that customers would rent or buy movies and TV shows from the comfort of
their home? Certainly not Blockbuster’s CEO Huizenga who spent his time acquiring other firms
while he was already flying too close to the sun (Malmendier & Tate, 2007). AMC, MCI,
Compaq, RCA, the list of once worldwide known organizations that have closed down is
endless. Even potential Airbus clients have vanished from the sky. One of them, Pan Am (Pan
American World Airways), has sadly seen its intellectual property revived in fashion, such as by
Marc Jacobs in his limited vintage product line (Pan Am, 2015).
It is doubtful that COMAC would ever go through the same situation, as the Chinese
government puts so much pride in industries it subsidizes, it would be surprising to see this
Chinese company running out of funds. COMAC was created in 2008 and has already
manufactured, tested, and obtained certifications on an airplane in December 2014 (Aerotime,
2014). This means that COMAC has sufficient engineering knowledge, production capacities, as
well as funds to disrupt the well-established duopoly. Although, according to a study about
overconfidence in Asian culture (Seok, 2007), it appears that the Chinese have double the level
of overconfidence as Americans.
Chapter 2 Summary
While Icarus was a myth, its paradox is a reality. Whenever organizations are
concentrating their attention on one or two particular competitors, they tend to forget about the
big picture. Our duopoly might even go beyond and search into any macroeconomic environment
that could impact their business, social forces that could change customers’ habits, demographics
AIRBUS’ RESPONSE TO COMAC 12
that could affect who their customers are, or new technologies that could make them save
money, but it is rare that a giant would look at a future threat. Overconfidence is what prevents a
huge corporation to be threatened by smaller organizations, but as in Charles Perrault’s fairytale
The Dwarf and the Giant (Goldberg, 2003), these small organizations might be more powerful
than one ogre can imagine.
Chapter 3: Organizational Operations and Strategies
Current Company Operations
In this first part of chapter 3, we go over a detailed financial analysis of Airbus SAS with
the help of Airbus Group’s 2014 financial statement. Airbus governance model, human
resources, and labor issues are also touched on, before we move on to various technologies used
by the company. Finally, we address one main threat that could endanger the stability of Airbus,
as well as Airbus Group. The second part of this chapter goes deeply into the organization by
analyzing its corporate and business strategies
Financial Aspects of Airbus. As Airbus is a subsidiary of Airbus Group - also known as
EADS N.V. - the financial aspect of the group will be used in the financial analysis (Airbus,
2015). Airbus Group, who restructured its ownership in December 2012, has almost 73% of its
stocks held by the public, while the rest is still held by three European States. This has a major
impact on the group’s decision capability, as two of the States (France and Germany) involved
before the restructuring, had the majority of votes, as well as shares in EADS. The participation
and control of European countries over EADS was historically due to EADS involvement in its
defense program through its subsidiary Airbus Defence and Space (Michaels, 2013). Figure 1.1
below shows the percentage of shares controlled by various governments as of December 2013.
AIRBUS’ RESPONSE TO COMAC 13
According to the report of the board of directors as of February 2015 (Airbus, 2015) the
year 2014 was remarkable for Airbus division. Despite the fact that the A380 did not meet
expectations, there were 629 other aircrafts delivered in 2014, as well as a net order of 1,456.
Shareholdings. 26.16% of share capital were issued in 2014, which represents a total
of €784,780,585. 1,871,419 stock options were granted to Airbus Group employees.
The French State sold 8,000,000 of its shares in a bilateral agreement with the
German State that should increase its share in proportion. As far as dividends, Airbus
Group was able to distribute a payout ratio of 40%. Due to a few order cancellations
by Singapore Airlines as well as the poor sales performances of the A380, Airbus
Group share (AIR.PA) lost roughly 35% closing at €41.35 on December 31, 2014. As
of the issue of this paper on March 15, 2015, the share finishes at €63.86 (Yahoo
Finance, 2015).
AIRBUS’ RESPONSE TO COMAC 14
Income statement (See Appendix 1). Airbus Group’s consolidated income statement
shows a drastic improvement in gross margin from 2013 to 2014 with an increase of
12.36% reaching a high €8,937 millions. The net income jumped by 58.5% attaining
€2,350 millions by December 31, 2014. Airbus itself saw its revenue increased by
seven percent, thanks to thirty A380 sold that year. The earnings before interest and
taxes (EBIT) of the commercial aircraft division of Airbus Group gained 68%
between 2013 and 2014 while Airbus Defence and Space lost 38% of EBIT.
Balance Sheet (See Appendix 2). Airbus current assets saw an increase of €1,804
million due to the new A350 XWB program which accounts for 79% of the total
increase of current assets. Most non-current liabilities increased in 2014 partially due
to - now resolved - technical issues on the A380. Current liabilities of Airbus group
went up €1,146 millions mainly from trade liabilities from which a part can be
attributed to pension provisions, and once again to the A250 XWB program and a
reclassification of a contract loss provision.
AIRBUS’ RESPONSE TO COMAC 15
Financial Profile of Airbus and Boeing. As we can see in the following table, the
gross margins of both companies are fairly close. However, Boeing’s ROE are much
higher than the European group which means more profitability for the American
firm. Same as for income per employees, where Boeing makes twice as much profit
as Airbus.
Organization Hierarchy, Structure, and Leadership Style
Airbus - being located in Blagnac, France - must reinforce the French code of
governance. Although the CEO of Airbus is appointed by the board of directors, which is located
in The Netherlands, Airbus Group established in The Netherlands has to follow the general
Dutch corporate law. The CEO elected by the board of directors must be a resident as well as a
citizen of a country belonging to the European community. Concerning the executive nomination
and composition, the first thing that one would observe on Airbus management overview is the
overwhelmingly male presence. As of January 2015, there are ten executive committee members,
none of them female. Airbus President and CEO Fabrice Bregier graduated from Ecole
AIRBUS’ RESPONSE TO COMAC 16
Polytechnique and spent seven years working for the French State. This led him to work for semi
private companies such as Matra Defense and EADS later on. A member of Airbus Group
committee, he presented a list of nine other members to be approved by the board of directors as
well as three presidents and one chairman of Airbus subsidiaries in Japan, China, the Middle
East, and the Americas. Allan McArtor (McMillin, 2014), Chairman of Airbus Americas Inc. as
well as Chairman and CEO of Airbus Group, Inc. gives us an idea of his leadership style
described in an interview with The Wichita Eagle. Graduated from the U.S. Airforce Academy
that he left after the death of his eight year old daughter, McArtor also served his government at
the Federal Aviation Administration under Ronald Reagan. According to McArtor, his leadership
style promotes communication as well as team leading.
HR and Labor Issues. Airbus headquarter being located in France, employees working
in the French territory have a multitude of benefits. The most remarkable one, voted in fifteen
years ago, decreases working time from 39 to 35 hours per week (Matthew, 2014). Because most
organizations could not close on Friday at noon, the French government gave then the ability to
credit four hours a week per working week. This means that on top of their five weeks paid
vacation, most full-time employees benefit from an additional two to four week vacation per
year. Unfortunately executives and management employees are exempt employees meaning that
they have as much vacation as employees, but work many more hours per week than the average
worker. Airbus provides also flexible working time whenever possible. Although times are
changing as Airbus and Airbus Defence and Space met with unions around the bargaining table
in order to increase working hours among its managers and engineers which would impact
23,000 employees in France alone (AFP, 2015).
AIRBUS’ RESPONSE TO COMAC 17
Technology and information systems. As expected, Airbus provides turnkey solutions
for the maintenance and engineering of its aircrafts (Airbus, 2015). E-Solutions and AiRTHM,
are two main systems that Airbus has perfected. In order to improve the reliability of its planes,
as well as reduce the cost of maintenance, Airbus offers six E-Solutions to its clients. Among
them, AirN@v that allows maintenance engineer to easily navigate through the endless manual
of each airplane, AirPl@n that creates work packages to reduce maintenance costs, as well as
reduce grounding time, and finally AIRMAN-web that gives airlines the opportunity to perform
unscheduled maintenance.
The advance service of AiRTHM (Airbus Real Time Health Monitoring) provides real time
information to operators flying the giant A380 aircraft, or the new efficient A350 XWB. This
system operates during the pre-departure check, as well as during flight. In addition, trend
monitoring anticipates potential problems by collecting, analyzing, and using data algorithms to
prevent any failures.
Threats to the Organization’s Future Competitive Success. As stated in previous
chapters, COMAC could threat the organization’s future competitive success by introducing the
C919 that would compete directly with the A320 series. Ryanair has already committed to more
than 200 orders of C919 (Frost & Rothwell, 2011) and even if it has not been announced yet, we
can assume that the price tags of the Chinese company will be substantially lower than our
duopoly. According to Airbus press release on January 1st of last year (2014), a new A318’s
average price at $71.9 million. As far as the average price of a C919, Aircraft Value News
(2011) pointed out an airplane of this type being sold at 30% less than an Airbus would
definitely be a competitive advantage for COMAC.
AIRBUS’ RESPONSE TO COMAC 18
Corporate & Business Strategies
Company’s Mission and Goals. “Airbus' mission is to meet the needs of airlines and
operators by producing the most modern and comprehensive aircraft family on the market,
complemented by the highest standard of product support.” As described in earlier chapters,
Airbus has two main goals: excellence and innovation. This is where Airbus might have the most
difficulty when it comes to fighting against new entrants such as COMAC. Its overconfidence in
its products does not allow Airbus to be threatened by anyone, even Boeing (Govindasamy &
Yan, 2013).
Line of Business and Acquisitions. Airbus SAS, a subsidiary of Airbus Group also
known as EADS, follows one simple strategy: to keep competitors from entering its market. Like
Boeing, Airbus sells twice as many planes as it can produce (Sparaco, 2014). This strategy can
only be effective because of this duopoly between these two airliner manufacturers. In the
meantime, because these orders are firm, other companies such as COMAC cannot sells their
own planes even if the orders have not already been fulfilled.
Company’s Strategy. When an organization wants to grow its market share, increasing
its marketing and sales budget might not be its only solution. In fact, Airbus found a clever way
to gain market share through its acquisition of Metron Aviation (2015). Specialized in Air
Traffic Flow Management (ATFM), Metron Aviation is moving the old Air Traffic Management
(ATM) into Next Generation (NestGen) that optimizes traffic flow management. This means that
Metron Aviation has been working with the same clients as Airbus such as airlines like
American Airlines, Delta Airlines, Air Canada, and also FedEx.
Broad Differentiation. Airbus uses a broad differentiation competitive strategy as it
offers a wide number of aircrafts that are specific to customers’ needs. First there is the Beluga
AIRBUS’ RESPONSE TO COMAC 19
Super Transporter considered the largest cargo carrier in the world that is specifically designed to
transport airplane fuselage sections, as well as spacecraft and satellites (Hoovers, 2015). There
are also the A320 Neo family specifically engineered to improve fuel efficiency by 20% over
similar aircrafts of its competitor, as well as the A350 XWB that saved an extra 5% over the
A320 Neo. Finally, the A380 remains the largest commercial aircraft ever built that lift up to 800
passengers in incredible silence.
Main Functional Strategy: Innovations. As stated earlier, Airbus uses its numerous
innovations as a competitive advantage against Boeing its main competitor. The Beluga Super
Transporter, the fuel efficient A320 Neo and A350 XWB, and its giant A380, Airbus keeps on
innovating in order to give Boeing a hard time as its, for now, only competitor. Airbus has also
just opened Airbus BizLab in Toulouse (Airbus, 2015), France that allows young engineers,
entrepreneurs, as well as Airbus employees to gather in a research center to create the
technologies of tomorrow. A second BizLab will be opened in Germany by the end of the year.
Airbus was also the one introducing the first flight-by-wire on a passenger aircraft 35 years ago
which revolutionized the industry. Other innovations took place inside the cabin with mood
lighting that ease the stress of long haul flights, as well as noise-absorbent materials for quieter
flights. As far as silence, the media acclaimed the A380 as the quietest aircraft ever build.
In the continuum of innovation, Airbus created “Smarter Skies” (Airbus, 2015). These
are five innovation concepts that will improve our flight experience by 2050. Eco-Climb uses the
navy assisted take off technology to propel aircraft into the sky. Express Skyways uses birds’
flight patterns in order to save fuel consumption, by creating a V formation of aircrafts. The third
innovation Airbus is working on is a Free-Glide approach and landing that reduces emissions and
noise pollution. Fourth would be to improve the ground operations by using electromagnetic
AIRBUS’ RESPONSE TO COMAC 20
ground vehicles that would bring an aircraft faster and safer to its gate. Finally, Airbus is
working on reducing its footprint by researching alternative technologies that could be more
sustainable in the near future.
Chapter 3 Summary
This chapter reviewed the financial structure of Airbus Group, which clearly
demonstrated that Airbus SAS plays a major part in the group’s financial health. As far as shares,
even if the market was not thrilled about the low performance of A380 sales, the level of shares
is higher than in 2013. The liabilities moderately increased without endangering the group. As
far as governance, we understand that the company must play by the laws and standards of
countries they operate in, we might add that women are nonexistent among Airbus upper
management. We also made a ratio comparison between Airbus Group and Boeing, and realized
that Airbus has a long way to go before it can outcompete Boeing. In the second part or this
chapter, we went over corporate and business strategy. Airbus statement says it all, emphasizing
high quality, excellence, and innovation. We realized that innovation is predominant in Airbus
Group culture and therefore affects positively all subsidiaries of the group. In the next chapter,
we will perform a SWOT analysis in order to clearly define how Airbus might use its internal
strengths and external opportunities to be prepare for the eventuality of COMAC becoming a real
threat.
Chapter 4: SWOT Analysis
Strengths and Weaknesses
Airbus has acquired respect from its customers based mainly on the high quality of its
aircrafts, as well as a multitude of innovations that were offered to them (Luff, 2007). Among
those are Singapore Airlines Suites with real queen size bed configuration, or Etihad $20,000
AIRBUS’ RESPONSE TO COMAC 21
Residence Suites that comes with a dedicated “Flying Butler” for its most exquisite customers
(Yousef, 2014). Airbus has always provided a standard that only private jets were able to offer.
While this company offers a wide range of luxurious configurations, as well as advanced
technologies that increase fuel efficiency, there are other profitable segments that Airbus cannot
reach because of its high priced items. On the end of the spectrum where airlines are reduced to
buy used aircraft, Airbus is unable to meet these low budget customers, who therefore might turn
to a new competitor coming from the East.
Leading. There are two individuals who are making a difference in Airbus among ten
executive committee members of this firm. One is the President and Chief Executive Officer, and
the other is the Chief Operating Officer for Customers. While Bergier, the CEO, is at the top of
the hierarchical pyramid, Leahy could be considered as the capstone of this edifice, as obtaining
new contracts depends on the efficiency of his department.
CEO. According to Isabelle Pacorel (2013) who had the chance to briefly interview
Fabrice Bergier in his office, Airbus Group CEO has a reputation for being firm and
demanding. Native of the region of Dijon, France, Bergier loves the terroir1 especially
a good Cote Rotie, which is an excellent red wine from the North Rhone Valley. If
Bregier might have the reputation to be tough, he knows how to silence his phone on
weekends. A graduate of Ecole Polytechnique, a prestigious university of engineering
also known as L’X, Bregier was taught to lead “military style” (L’X, 2015). While
this type of leadership might not be suitable to mid-size organizations, Bregier has
proven through his experience in various Airbus Group subsidiaries, as well as
1 Terroir: a French word that describes the environmental conditions, such as soil and climate, in which food and wines are grown and produced that gives them a distinctive flavor and taste.
AIRBUS’ RESPONSE TO COMAC 22
through his experience as a government official, that he can effectively run a group of
more than 140,000 employees (Airbus, 2015).
COO – Customers. John Leahy plays an important role as Chief Operating Officer-
Customers. Leahy is also called “the 10,000 airplanes salesman” (Flightglobal, 2015).
In an organization led mostly by European natives, Leahy has successfully brought
Airbus shares from 18% in 2005 to beyond 50% today. Unlike Begier, Leahy and his
team are sales representatives who carry billion dollars contract in their suitcases.
While he was able to sell 100 airplanes to Northwest Airlines, Southwest Airlines
seems to be his oldest challenge as the low cost company has given its loyalty to
Boeing for decades. Leahy’s experience in sales is an enormous strength to Airbus
Group.
Controlling. Control is not only about performance standards, but also about how
employees use information (Hill, Jones & Schilling, 2015). Control helps an organization like
Airbus follows its plan, by making processes as effective and efficient as possible. At Airbus,
everything is about the environmental impact that its product has on our planet (Airbus, 2005). In
order to make sure that every employee follows these principles, Airbus created the ACADEMY,
which is an acronym of Airbus Corporate Answer to Disseminate Environmental Management
System. Among these guidelines are:
EMS: This Environmental Management System gives Airbus the opportunity to focus
on environmental concerns from R&D to production through retirement of their
aircrafts (Airbus, 2015). In order to succeed in this approach, an organization has not
only to focus on recycling aircrafts components, but also to make them environmental
friendly. The main goal is to reduce as much as possible Airbus’s footprint.
AIRBUS’ RESPONSE TO COMAC 23
ISO 14001: Airbus was the first aircraft manufacture to meet these international
standards in 2007, which have been renewed in 2010 and 2013. The company has
succeeded by following the guidelines of REACH, a European regulation that
protects human lives, as well as its environment by reducing to the minimum the use
of harmful chemicals (ECHA, 2015).
Blue5: In order to further reduce Airbus environmental footprint, the company
developed a program that has a goal to drastically reduce its waste production, water
consumption, and water discharge by 2020 (Airbus, 2015). Its brand new facilities
built for the A350XWB project produces more than half of its own energy needs with
the help of more than twenty thousand meter square of solar panels.
Planning. This is where lies the main problem of the company. While Airbus might be
good at innovating, planning is not its strength. So focused on innovation and quality, Airbus has
the tendency to forget about deadlines. In fact, airlines ordering the A380 have to wait two years
before delivery (Lunsford & Michaels, 2007). The good news is that after ten years from its first
flight, the superjumbo should finally break even in 2015 (DGAP-adhoc, 2015), even if some
orders were cancelled due to these extensive delays (West, 2014). The company had the same
issue in 2007 with delays in the delivery of the A350.
This internal weakness would not resist an attack from the outside, as the company would
need to respond as soon as possible. In an environment so oriented toward creativity and high
quality, there is no room for fast decision-making. On February 21, 2014, Airbus announced
through a press release (Airbus, 2015) that the company had signed a Memorandum of
Understanding with COMAC so they could better manage sustainability in air transport. So one
would think that Airbus is trying to build some type of relationship with the Chinese company in
AIRBUS’ RESPONSE TO COMAC 24
order to keep an eye on the competition. After all, the closer they are to their enemies, the better
they can fight back. Although while COMAC has gathered 430 orders of its single-aisle-168-
seats plane (Tan, 2014), Airbus has not reacted to this loss in market shares. While we can admit
that some of those orders were obtained by airlines that could not afford brand new aircrafts,
they probably lost opportunities for orders.
Today, Airbus has the ability to produce 42 A320 per month while Boeing produced only
38 of its 737 last year, but should be able to bring its production to Airbus’s level by the end of
2015 (Hamilton, 2013). So what about COMAC production abilities? Numbers should not
initiate a panic among our duopoly, as only four C919 should come out of COMAC factory per
month (Bechai, 2014). Although the determination of the Chinese government, as well as its
financial means should be taken very seriously by Airbus especially since COMAC was able to
receive firm orders from Airlines.
Organizing. Airbus went through a major restructure in 2007 when the group announced
elimination of 10,000 employees, mainly those working for Airbus aircraft manufacturing (The
Economist, 2007). Unlike Boeing, Airbus did not want to build its aircrafts in developing
countries. Therefore manufacturing costs were higher than their competitors, which led the group
to make drastic decisions. This efficiency improvement was named Power8 (Haines, 2007).
Launched in 2006 by previous CEO Louis Gallois (Daly, 2006), this plan was to secure the
company’s future while Airbus was facing a drop in orders due to a weak U.S. dollar (Airbus,
2007). In the meantime, the company wanted to rethink its processes in all functions of the
company. This new organization helped Airbus go through the unpredicted 2008 turmoil due to
Power8’s three main targets that were to drive growth, reduce costs, and improve EBIT while
AIRBUS’ RESPONSE TO COMAC 25
restoring cash (Airbus, 2009). The ability to reorganize such a group has been a tremendous
strength for this European group.
External Opportunities and Threats
The organizations’ external forces represent an unpredictable and threatening
environment (Colao, 2012). While they bet their outcomes on a global economy, they also have
to deal with forces that may jeopardize their success. In order to understand what Airbus has to
take into consideration in its decision-making, this section analyzes Porter’s five forces model, as
well as macro-environmental forces.
Porter’s five forces model
Bargaining power of suppliers. In an industry run by a duopoly, suppliers take the
risk of losing their main income if they do not comply with their customers’ demands
(Wilkinson, 2013). Therefore, the power of suppliers is fairly low in the aircraft
industry. Suppliers do not have the ability to choose their customers, so the duopoly
squeezes their profit by threatening them to go to the competition.
Risk of entry by potential competitors. Until recently, the risk of entry by potential
competitors was low. Only Bombardier and Embraer were offering single aisle
aircraft and were not trying to compete with the two giants of this historical duopoly.
Today, COMAC is about to enter the market and even though as we saw earlier,
COMAC is not able to produce a lot of planes per month compared to our duopoly,
things might change quite rapidly (Haria, 2012).
Bargaining power of buyers. Knowing that buyers face a duopoly, one would think
that these buyers would have weak power. Nonetheless, they have the freedom to
choose one aircraft manufacturer over another, and they know that their final decision
AIRBUS’ RESPONSE TO COMAC 26
could have a dramatic impact on the company that loses their contract. Therefore,
price war between the two major actors of this industry is fierce, which makes airlines
powerful in their bargaining abilities (PWC, 2013).
Threat of substitutes. One should not put airlines and aircraft manufactures in the
same category. While airlines, especially in Europe, have seen their market shares
taken away by high-speed trains, aircraft manufacturers have no substitutes
whatsoever. Do they? In order not to invest in new airplanes, Air France signed a
contract in 1994 with the French railroad company SNCF (Société Nationale des
Chemins de Fer Francais) so it could transport its clients via high-speed-rail (HSR)
instead of air. This certainly impacted Airbus from gaining firm orders of single aisle
planes, as twelve other companies signed the same agreement (Cholez, 2014).
Although because this is considered as an indirect threat, HSR cannot be considered
as a threatening substitute. The day has not come when an airline will order blimps
instead of aircrafts. Therefore, today the threat of substitute is fairly low.
Intensity of rivalry among competitive firms. The rivalry between these two
competitors has never been as high since Airbus sold 3,257 A320Neo versus 2,219
Boeing 737 Max by the end of last year (Endres, 2014). Once Airbus has
outcompeted Boeing in the number of planes ordered, Boeing announced that it was
the leader in wide-body sales that count for more than 60% of its orders (Ausick,
2015). Basically, both companies are always the best at something, depending on how
we look at the numbers. If we could only imagine what type of rivalry would exist if
Coca-Cola and Pepsi were the only ones in the market of carbonated drinks, we
would have a better picture of what this battle for air supremacy looks like.
AIRBUS’ RESPONSE TO COMAC 27
Macro-environment forces
Global forces. Developed countries tend to focus on sustainable energies, as well as
gravitating toward a more green way of living (United Nations, 2010). Airbus has
definitely taken this into consideration by offering fuel-efficient aircrafts, such as the
A320 Neo and the A350 XWB (Airbus, 2015). Airlines, as well as their customers,
see Airbus has led company efficiency improvement (Mick, 2014), which makes it a
great opportunity for growth.
However, the real cash cows are not located in developed countries. In fact, if
COMAC’s worldwide market shares represent only six percent of total sales (Bechai,
2014), the Chinese manufacturer takes a third position, tight with Boeing, with 22%
of orders in South-East Asia. Still far away from Airbus and its 54% of orders for
narrow body aircraft, COMAC has already taken almost half of Airbus orders. Like
European airlines favor a European aircraft manufacturer (Newhouse, 2007) and
American airlines would favor Boeing, we can easily predict that Asian markets
would favor COMAC.
Demographic forces. In comparison to baby boomers, generation X and millennial
have the possibility to travel more than ever before (Mohn, 2014). This means that
they are becoming more aware of what a particular airplane can offer compared to
another. Those who flew on an A380 have noticed a drastic effort in noise reduction
(Saporito, 2009), as well as increased legroom. These types of features offered on the
A380 makes families travelling with children, as well as the elderly realize that it is
not only the airlines that make the journey comfortable, but the aircraft itself as well
AIRBUS’ RESPONSE TO COMAC 28
(Han, 2010). Airbus understood the importance of differentiation that gives it an
opportunity to gain a competitive advantage toward Boeing.
Political & legal forces. As discussed earlier, environment does count when it comes
to decision making. While airlines would voluntarily use fuel efficiency aircrafts to
differentiate themselves from competitors, the expenses linked to R&D in order to
reach airlines’ desires are dangerously high (Hepher, 2014). The greener Airbus
wants to be, the more expenses would be allocated to R&D. As our future looks
greener, Airbus can take this opportunity to differentiate itself from Boeing and its
new competitor by pursuing its research toward fuel cells, and other fuel alternatives
(Airbus, 2015). Environmental requirements could be perceived as an opportunity if
Airbus prioritizes its green energy development.
Another benefit that protects our duopoly comes from the Federal Aviation
Agency that takes years to give a new aircraft its certification to fly (Larson, 2014).
This means that we are not about to see a COMAC C919 takeoff on U.S. runways
anytime soon. Although, in this global market, many countries do not require a FAA
certificate to fly, which is the case in the majority of Asian countries.
Technological forces and changes. This is a well-known area that Airbus has been
advancing for decades. On top of the game, Airbus knows that the only way to make
a difference with Boeing is by innovating technologies that could offer a real
difference to Airlines. Airbus has acquired the necessary knowledge as well as put
enough resources into its R&D to create these great opportunities (Hepher, 2014).
Social forces. Airbus SAS assembles its planes in France. This country has a strong
history of powerful unionized manufactures (Blanpain, 2005) that could make the
AIRBUS’ RESPONSE TO COMAC 29
company lose millions of Euros. One of its clients, Air France, encountered one of the
worst strikes of its time in October 2014 that cost the airline more than $400 million
(Clark, 2014). Not that there is no bargaining in France, but strikes usually start
before negotiations, and are supposed to help speed the process of coming to an
agreement. These social forces can negatively affect Airbus.
SWOT Analysis Evaluation
Looking over this SWOT analysis, we understand that Airbus internal strengths rely on
leadership, control, as well as its organization. Although because of poor planning, often the
company does not deliver its aircrafts as promised, which could cause the company to lose firm
orders in the long run. After all, how many airlines would be willing to deal with a supplier that
does not deliver as expected? This poor planning also reflects Airbus’ strong confidence as it
does not take into consideration its customers’ satisfaction, thinking its planes are so terrific that
no one would cancel an order.
Concerning external forces, we analyzed Porter’s five forces and their influences on the
company. Until recently, Airbus had to worry about only one major factor, which was to
outcompete its only competitor. Like Boeing, Airbus has to battle with the high bargaining
power of buyers that could always threaten to go with the competitor. Today, a third force
COMAC found a breach in the barrier of entry, making Airbus’ potential future customers
consider the Chinese aircraft manufacturer as a cheaper alternative. Once again, Airbus over-
confidence did not take COMAC into consideration when looking at external threats.
As far as macro-environment forces, Airbus maintains a strong leading position when it
comes to innovation, which allows the company to use technological forces as a powerful asset.
While COMAC might struggle in developed countries to obtain the proper certifications, our
AIRBUS’ RESPONSE TO COMAC 30
duopoly has time to strengthen firm orders with well-established airlines. Although Airbus
should be cautious about global forces coming from new markets that have already ordered many
aircrafts from COMAC. Finally, European social forces that favor unions might cost the
company millions of Euros, which could have a better use in the battle for air supremacy.
Chapter 5: Summary, Recommendations, and Conclusion
Summary
Throughout this research paper, we discovered the strengths and weaknesses of Airbus,
as well as its threats and opportunities that could have an impact on the company’s future
profitability. This research demonstrated that COMAC might become a threat to the duopoly,
especially to Airbus and its A320, much sooner than we think. We also pointed out the lack of
planning, as well as the ability of Airbus to completely ignore a potential future strong
competitor, solely based on its actual manufacturing capabilities. This type of attitude comes
from years of achievements by the young European firm who, like teenagers thinking that
nothing can stop them, tends to feel unthreatened by new entrants. This research proved that
Airbus is not safe from the Icarus Paradox. Its overconfidence could bring the company to a
sudden and abrupt fall, as it would not be able to fight against COMAC if it keeps on looking at
its astonishing records, and does not concentrate on its competitors’ strategies.
China has shown the world its ability to learn from other countries, and has succeeded in
becoming one of the world’s leaders in many industries. As frightening examples, in 2012 China
became the leader in the steel industry by almost eight times our production, and even in high-
tech where China was exporting 2.5 times more than the United States (Stockdale, 2012).
There is no doubt that Airbus leads the aircraft manufacturing industry in term of
innovation, as well as high quality products, and its financial health strengthens its position
AIRBUS’ RESPONSE TO COMAC 31
against Boeing and COMAC. However, Airbus might lose its competitive advantage in terms of
global firm orders if it does not react to COMAC’s ability to sell single aisle aircrafts.
Recommendations
After spending months analyzing this multi-billion dollar industry, and going deeper
within EADS’s subsidiary Airbus, I would have a few recommendations. Before I recommend
any actions, I would like to call three important business principles. One is that no matter how
innovative and profitable an organization is considered, supremacy does not last forever
(Rezazad, 2012). Second, in order to keep its competitive advantage, a subsidiary like Airbus
should not feel protected by its current status. My third and last point states that danger does not
only come where we expect it to be; therefore it is wise to look in all directions when searching
for potential threats.
The first recommendation for Airbus would be to concentrate on its internal weaknesses
instead of contemplating its strengths. This would allow the company to build a moat of
protection to keep its competitors away. Secondly, Airbus should allocate some of its R&D
toward making more affordable aircrafts that could be sold to Airlines attracted by COMAC. In
order for Airbus not to damage its reputation of high quality, the company should create a
subsidiary called LBJets that would be dedicated to making more affordable single aisle aircrafts.
This would give LBJets the knowledge and expertise of Airbus, and if it succeeds, could become
the Airbus cash cow. LBJets image would be based on Louis Bleriot aviator’s success as an
innovative and courageous man (Crouch, 2013). LBJets could have another powerful positive
effect on Airbus weaknesses. By Airbus giving more freedom to its subsidiary in term of the
company’s structure, plan, organization, leadership, and control, it would make LBJets a sort of
AIRBUS’ RESPONSE TO COMAC 32
business guinea pig. This new dynamic subsidiary could give new ideas to Airbus that would
counter act its self-contemplation.
When an organization perceives external threats, there are a few strategic decisions that
can be made. Among them, Airbus could use a related diversification such as LBJets, which
would enable the group to target a new segment of customers, and not tarnish the image of
exception of the brand. This would keep Airbus’s existing customers while attracting new LBJet
customers that could neutralize the presence and financial power of COMAC.
Conclusions
Sometimes the answer to a problem does not come from the industry itself. Alan Mulally
discovered this when he became the CEO of Boeing after spending years at Ford. He realized
that the Automobile industry was selling different products with the same name to different
countries (Miller-Caldicott, 2014). Applying this to the aircraft manufacturing industry would
not make any sense. I based my entire research on the opening case I read in our textbook (Hill,
Jones & Schilling, 2015, pp. 246-247). The French car manufacturer Renault created its own
cash cow called Dacia almost from scratch, which enabled the brand today to not only compete
in a segment that was unknown to the brand, but also bring enormous amounts of cash that give
Renault a competitive advantage against its most truculent competitors Peugeot-Citroen Group
(Hetzner, 2014). I am convinced that LBJets could use Renault’s example to create a brand that
would become Airbus business lab, as well as its future cash cow. This would create a massive
competitive advantage against Boeing that would be left with its agreement signed with COMAC
as its only backup to a potential fatal attack by Airbus in this unexplored market segment.
AIRBUS’ RESPONSE TO COMAC 33
References
AFP. (2015, February 24). Airbus veut augmenter le temps de travail de ces “cadres moyens.”
[Airbus want to increase the working time of those “middle managers.”] Libération
économie [French]. Retrieved from
http://www.liberation.fr/economie/2015/02/24/airbus-veut-augmenter-le-temps-de-
travail-de-ses-cadres-moyens_1208908
Airbus. (2007, February 28). Power8 prepares ways for “new Airbus.” Airbus press release.
Retrieved from http://www.airbus.com/presscentre/pressreleases/press-release-detail/
detail/power8-prepares-way-for-new-airbus/
Airbus. (2009, April 1). Efficiency improvement plan. Retrieved from
file:///Users/philippehonore/Downloads/gif09_efficiencicy_plan_harald_wilhelm.pdf
Airbus. (2014, January 1). New Airbus aircraft list price for 2014. Press center – Airbus.
Retrieved from http://www.airbus.com/presscentre/pressreleases/press-release-detail/
detail/new-airbus-aircraft-list-prices-for-2014/
Airbus. (2015). Maintenance & engineering services. Airbus. Retrieved from
http://www.airbus.com/support/maintenance-engineering/
Airbus. (2015, February 26). Reports of the board of directors. AirbusAirbus. (2015). Early days
(1967-1969) | Airbus, a leading aircraft manufacturer. Retrieved from
http://www.airbus.com/company/history/the-narrative/early-days-1967-1969/
AIRBUS’ RESPONSE TO COMAC 34
Aerotime. (2014, December 31). China civil aircraft industry makes a historical breakthrough.
Aerotime. Retrieved from http://www.aerotime.aero/en/commercial-aviation/commercial-
aviation-news/manufacturers/15230-china-civil-aircraft-industry-makes-a-historical-
breakthrough
Ausick, P. (2015, January 13). Who wins the two-horse race: Boeing or Airbus? 24/7 Wall St.
Retrieved from http://247wallst.com/aerospace-defense/2015/01/13/who-wins-the-two-
horse-race-boeing-or-airbus/
Bechai, D. (2014, December 24). Should airplane manufacturers worry about China’s airplane
industry? Seeking Alpha. Retrieved from http://seekingalpha.com/article/2778335-
should-airplane-manufacturers-worry-about-chinas-airplane-industry
Blanpain, R. (2005). Collective bargaining and wages in comparative perspective: Germany,
France, the Netherlands, Sweden and the United Kingdom. The Hague: Kluwer Law
International.
Bremner, C. (2009, July 1). Fleet may be grounded over Air France disaster. Times [London,
England], Retrieved from http://go.galegroup.com.db19.linccweb.org/ps/i.do?id= GALE
%7CA204332367&v=2.1&u=lincclin_pbcc&it=r&p=AONE&sw=w&asid=34fe44de981
8c821bb07f320fea57399
C919 Order Book Swells As Values Begin to be Assessed. (2011, November 07). Aircraft Value
News, 20(23), 8-8. Retrieved from http://eds.a.ebscohost.com.db19.linccweb.org
/ehost/pdfviewer/pdfviewer?sid=5f68be0a-8c67-4c96-bc16954e2a238a8a%40sessionmgr
4004&vid=8&hid=4205
AIRBUS’ RESPONSE TO COMAC 35
Cale, O. M., & Tate, D. C. (2011). Sink or swim: How lessons from the titanic can save your
family business. Santa Barbara, CA: Praeger.
Cholez, L. (2014, December 8). [French]. TGV AIR: la concurrence n’exclut pas les partenariats
gagnants entre rail et air. [TGV AIR: competition does not exclude winning partnerships
between rail and air]. Tourmag. Retrieved from http://www.tourmag.com/TGV-AIR-la-
concurrence-n-exclut-pas-les-partenariats-gagnants-entre-rail-et-air_a70927.html#
Clark, N. (2014, October 8). Air France puts cost of pilots’ strike at more than $400 millions.
The New York Times. Retrieved from http://www.nytimes.com/2014/10/09/business
/international/air-france-puts-cost-of-pilots-strike-at-more-than-400-million.html?_r=0
Colao, J.J. (2012, April 11). Tax madness: Tips for business owners in an unpredictable
environment. Forbes. Retrieved from http://www.forbes.com/sites/jjcolao/2012/04/11
/tax-madness-tips-for-business-owners-in-an-unpredictable-environment/
Company Watch - Airbus. (2008, January 21). AirGuide Business. Retrieved from
http://go.galegroup.com.db19.linccweb.org/ps/i.do?id=GALE
%7CA175474959&v=2.1&u=lincclin_pbcc&it=r&p=AONE&sw=w&asid=2630a572d1c
59f81c527aed1d1a4389e
Crouch, T. (2013, September 22). Louis Blériot – French aviator. Encyclopædia Britannica.
Retrieved from http://www.britannica.com/EBchecked/topic/69300/Louis-Bleriot
Daly, K. (2006, October 18). Louis Gallois: It is Airbus’s very future that is at stake.
Flightglobal. Retrieved from http://www.flightglobal.com/news/articles/louis-gallois-it-
is-airbus39s-very-future-that-is-at-210032/
AIRBUS’ RESPONSE TO COMAC 36
Davidson, Brian. (2013, October 4). Airbus beats boeing in net orders with more than 1,000
aircraft in the first nine months of the year. AirGuide Business. Retrieved from
http://airguideonline.com/2013/10/04/airbus-beats-boeing-in-net-orders-with-more-than-
1000-aircraft-in-the-first-nine-months-of-the-year/
Dennis, W. (2014, July). C919 first flights face year-long delay. Engineering &
Technology, IEEEXplore Digital Library. Retrieved from http://ieeexplore.ieee.org/stamp
/stamp.jsp?tp=&arnumber=6863791
DGAP-adhoc: Airbus group N.V.: Airbus group achieves record revenues, EBIT* and order
backlog in 2014. (2015, Feb 27).DGAP Deutsche Gesellschaft Für Ad-Hoc-
Publizität.Regulatory News Retrieved from http://search.proquest.com/docview
/1658602860?accountid=39572
ECHA. (2015). Regulations. ECHA – European chemicals agency. Retrieved from
http://echa.europa.eu/regulations/reach
Emert, C., Rubenstein, S. (1998, December 16). Starbucks to buy s.f. coffee chain. SFGate.
Retrieved from http://www.sfgate.com/news/article/Starbucks-to-Buy-S-F-Coffee-Chain-
2972125.php
Endres, G. (2014, October 21). World airliner directory. Airbus v Boeing is a war on two fronts.
Flightglobal. Retrieved from http://www.flightglobal.com/news/articles/world-airliner-
directory-airbus-v-boeing-is-a-war-on-two-405009/
AIRBUS’ RESPONSE TO COMAC 37
Fletcher, S. (2005, December). Whale of an airlift. Popular Mechanics, 182(12), 14+. Retrieved
from http://go.galegroup.com.db19.linccweb.org/ps/i.do?id=GALE%7CA139034221&
v=2.1&u=lincclin_pbcc&it=r&p=AONE&sw=w&asid=4c252853d865c84c13f517f0e24c
d2ac
Flightglobal. (2015). John Leahry – Airbus. Flightglobal aviation connected. Retrieved from
http://www.flightglobal.com/interviews/year/13/john-leahy/interview/
Fokker. (2015). History – From operator to specialist. Fokker. Retrieved from
http://www.fokker.com/company/history/1996-from-integrator-to-specialist
Frost, L., Rothwell, S. (June 21, 2011). Ryanair considering 200-plus orders for China’s C919
plane. Bloomberg business. Retrieved from http://www.bloomberg.com/news/articles/
2011-06-21/ryanair-explores-0rder-for-200-plus-c919-jets-from-china-s-COMAC
Govindasamy, S., Yan, F. (2013, October 2). Delayed take-off: China cautious on large aircraft
program. Reuters. Retrieved from http://www.reuters.com/article/2013/10/02/us-china-
aerospace-COMAC-idUSBRE99117I20131002
Griswold, D. (2009). Mad about trade: Why main street American should embrace globalization.
Washington D.C.: Cato Institute.
Goldberg, C. (2003). "The dwarf and the giant" (AT 327B) in africa and the middle east. The
Journal of American Folklore, 116(461), 339-350. doi:10.2307/4137795
Haines, L. (2007, May1). Airbus detailed restructuring plan. The Register. Retrieved from
http://www.theregister.co.uk/2007/03/01/airbus_power8/
AIRBUS’ RESPONSE TO COMAC 38
Hamilton, S. (2013, October). Production wars coming: Airbus v. Boeing. Leeham News and
Comments. Retrieved from http://leehamnews.com/2013/10/13/production-wars-coming-
airbus-v-boeing/
Han, P. (2010, July 13). Is the Airbus really that different? CNN. Retrieved from
http://www.cnn.com/2010/TRAVEL/07/13/airbus.a380.singapore.airlines/
Haria, R. (2012, June 1). China is biggest emerging threat, says Boeing’s Albaugh. Aviation
week. Retrieved from http://aviationweek.com/awin/china-biggest-emerging-threat-says-
boeings-albaugh
Hepher, T. (2014, May 21). Dash for cash drives Airbus versus Boeing jet revamps. Reuters.
Retrieved from http://www.reuters.com/article/2014/05/21/us-airbus-boeing-strategy-
idUSBREA4K0FA20140521
Hetzner, C. (2014, November 3). VW, Renault, GM, others bet big on megaplatforms.
Automobile News Europe. Retrieved from http://europe.autonews.com/article
/20141103/ANE/141109996/vw-renault-gm-others-bet-big-on-megaplatforms
Hill, C., Jones, G., Schilling M. (2015). Strategic leadership: Managing the strategy-making
process. In Strategic management: An integrated (11th Ed.) Mason, OH: Cengage
Learning.
Hoovers. (2015). Airbus S.A.S. [Company profile]. Retrieved from http://www.hoovers.com/
Hoovers. (2015). Description - Airbus SAS. Retrieved from http://www.hoovers.com.
Humphries, R. (1989). The flight of daedalus and icarus. The English Journal, 78(3), 23-23.
doi:10.2307/819441
AIRBUS’ RESPONSE TO COMAC 39
James, A. (2003, October 17). Investors berserk over messier perks. Daily Variety, 281(10), 6.
Retrieved from http://go.galegroup.com.db19.linccweb.org/ps/i.do?id=GALE
%7CA110311722&v=2.1&u=lincclin_pbcc&it=r&p=AONE&sw=w&asid=e32ba21535a
01dc5e1fc901b4ad49de1
Just-auto.com. (2013, January 18). France: Renault steps up its international development. just-
auto.com. Retrieved from http://go.galegroup.com.db19.linccweb.org/ps/ i.do?id=GALE
%7CA315473817&v=2.1&u=lincclin_pbcc&it=r&p=AONE&sw=w&asid=3d1e191e4fc
1ac94ca22f23f40258c4d
Kall, R. (2013, January 9). “Too big” is hollowing the middle class, killing the American dream.
Huffington Post. Retrieved from http://www.huffingtonpost.com/rob-kall/killing-the-
american-dream_b_2440638.html?
Krakovski, M. (2013, May 31). Charles O’Reilly: Why some companies seem to last forever.
Stanford of Business. Retrieved from https://www.gsb.stanford.edu/insights/charles-
oreilly-why-some-companies-seem-last-forever
Larson, C. (2014, November 12). With 2 new jets, Chinese manufacturer may become global
contender. The New York Times. Retrieved from http://www.nytimes.com/2014/11/13
/business/international/with-2-new-jets-chinese-manufacturer-may-become-global-
contender.html?_r=0
Lashinsky, A. (2002). The defiant ones: doomed? Hardly, say the backers of the hp-compaq
merger. Fortune, 145(1), 70+.
Luff, P. (2007). Recent developments with Airbus: ninth report of session 2006-07: Vol. 2 Oral
and written evidence. London, UK: TSO (The Stationary Office).
Malmendier, U. & Tate, G. (2007, July 17). Who makes acquisitions? CEO overconfidence and
AIRBUS’ RESPONSE TO COMAC 40
the market’s reaction. Journal of financial economics. Retrieved from
http://eml.berkeley.edu/~ulrike/Papers/OCmergers_Final_JFEformat_20feb2008.pdf
Matthews, C. (2014, August 28). French workers aren’t as lazy as you think. Fortune. Retrieved
from http://fortune.com/2014/08/28/france-workers-work-week/
McMillin, M. (January 19, 2014). A Conversation with Allan McArtor, new CEO of Airbus
Group. The Wichita Eagle. Retrieved from http://www.kansas.com/news/business
/aviation/article1131894.html
Metron Aviation. (2015). The science of harmonizing traffic. Retrieved from
http://www.metronaviation.com/
Michaels, D. (2013, March 26). EADS means to break free of government influence. The Wall
Street Journal. Retrieved from http://www.wsj.com/articles
/SB10001424127887323466204578384443006189014
Mick, J. (2014, December 22). Airbus A350XWB passenger jet takes off, first unit delivered to
Qatar Airlines. Daily Tech. Retrieved from http://www.dailytech.com/Airbus+A350+
XWB+Passenger+Jet+Takes+Off+First+Unit+Delivered+to+Qatar+Airlines/
article37016.htm
Miller, D. (1992, January-February). The icarus paradox: how exceptional companies bring
about their own downfall. Business Horizons, 35(1), 24+. Retrieved from
http://go.galegroup.com.db19.linccweb.org/ps/i.do?id=GALE
%7CA11874512&v=2.1&u=lincclin_pbcc&it=r&p=AONE&sw=w&asid=900c6d10f5b9
711d8bf80bc872543ed9
AIRBUS’ RESPONSE TO COMAC 41
Miller Caldicott, S. (2014, June 25). Why Ford’s Alan Mulually is an innovation CEO for the
record books. Forbes. Retrieved from http://www.forbes.com/sites/sarahcaldicott
/2014/06/25/why-fords-alan-mulally-is-an-innovation-ceo-for-the-record-books/
Mohn, T. (2014, November 8). The rising wave of millennial travelers. Forbes. Retrieved from
http://www.forbes.com/sites/tanyamohn/2014/11/08/the-rising-wave-of-millennial-
travelers/
Mouawad, J. (2014, August 9). Oversize Expectations for the Airbus A380. The New York
Times. Retrieved from: http://www.nytimes.com/2014/08/10/business/oversize-
expectations-for-the-airbus-a380.html?_r=1
Newhouse, J. (2007). Boeing versus Airbus: The inside story of the greatest international
competition in business. New York: A.A. Knopf.
Nunes, P., Breene, T. (2011, January-February). Reinvent your business before it’s too late.
Harvard business review. Retrieved from https://hbr.org/2011/01/reinvent-your-business-
before-its-too-late
Pacorel, I. (2013, April 7). [French]. Que trouve-t-on dans le bureau du patron d’Airbus? [What
do we find in the office of Airbus’s boss?]. Challenges. Retrieved from
http://www.challenges.fr/galeries-photos/france/20130403.CHA7879/que-trouve-t-on-
dans-le-bureau-du-patron-d-airbus.html
Pan Am. (2015). Pan am explorer handbag. Pan Am. Retrieved from http://www.panam.com
/shop /pan-am-bags/pan-am-explorer-pan-am-blue.html
Perrett, B. (2014). Assembly approaches | Certification for China’s narrow body is now targeted
at 2018. Aviation Week & Space Technology, 176(24), 92.
Petit, V., & Bollaert, H. (2012). Flying too close to the sun? hubris among CEOs and how to
AIRBUS’ RESPONSE TO COMAC 42
prevent it. Journal of Business Ethics, 108(3), 265-283. doi:10.1007/s10551-011-1097-1
PWC. (2013, December). Aviation’s second golden age: Can the U.S. aircraft industry maintain
leadership? Retrieved from
http://www.pwc.com/en_GX/gx/transportation-logistics/pdf/pwc-commercial-aircraft-
industry-future-report.pdf
Rezazad, M. (2012). The model entrepreneur: Becoming the next business titan. Bloomington,
Ind.: Xlibris.
Saporito, B. (2009, November 23). Can the A380 bring the party back to the skies? Time.
Retrieved from http://content.time.com/time/magazine/article/0,9171,1942959,00.html
Schings, S. (n.d.). Can a leader be too confident? SIOP. Retrieved from http://www.siop.org
/media/news/overconfidence.aspx
Seok, B. (2007). Change, contradiction, and overconfidence: Chinese philosophy and cognitive
peculiarities of asians. Dao, 6(3), 221-237. doi:10.1007/s11712-007-9014-0
Siegel, N. (2009, September). A Frenchman conquers the English Channel. Aviation History,
20(1), 13. Retrieved from http://go.galegroup.com.db19.linccweb.org/ps/i.do?id= GALE
%7CA203532213&v=2.1&u=lincclin_pbcc&it=r&p=AONE&sw=w&asid=0dfff7f0af54
128812d0ce621822d792
Sparaco, P. (2014). A new airbus group. Aviation Week & Space Technology, 176(19), 19.
Retrieved from http://search.proquest.com/docview/1646469843?accountid=39572
Stockdale, C. , McIntyre, D. (2012, January 24). Eight industries the U.S. has lost over China.
24/7 Wall St. Retrieved from http://247wallst.com/special-report/2012/01/24/eight-
industries-the-u-s-has-lost-to-china/3/
Tan, C. (2014, November 11). China planemaker gets new orders in fight with Airbus, Boeing.
AIRBUS’ RESPONSE TO COMAC 43
Bloomberg Business. Retrieved from http://www.bloomberg.com/news/articles/2014-11-
11/china-planemaker-gets-new-orders-in-fight-with-airbus-boeing
The Economist. (1996, Jan 27). The lesson in fokker's fall. The Economist, 338, 55-56. Retrieved
from http://search.proquest.com/docview/224120475?accountid=39572
The Economist. (2007, Feb 28). Grey days airbus. Economist.Com / Global Agenda, , 1.
Retrieved from http://search.proquest.com/docview/208719497?accountid=39572
Trevelyan, R. (2008). Optimism, overconfidence and entrepreneurial activity. Management
Decision, 46(7), 986-1001. Retrieved from http://dx.doi.org/10.1108
/00251740810890177
United Nations. (2010). Trends in sustainable development. Retrieved from
https://sustainabledevelopment.un.org/content/documents/
15Trends_in_sustainable_consumption_and_production.pdf
Vasigh, B., & Fleming, K. (2013). Introduction to air transport economics from theory to
applications. Burlington, VT: Ashgate.
Wang, X., Zhang, M., & Yu, F. (2009). Managerial overconfidence and over-investment:
Empirical evidence from china. Frontiers of Business Research in China, 3(3), 453-469.
doi:10.1007/s11782-009-0022-2
West, K. (2014, Sunday 28). A380’s failure to take off puts future of the “queen of the sky” in
doubt. The Guardian. Retrieved from http://www.theguardian.com/business/2014
/dec/28/airbus-a380-future-in-doubt
AIRBUS’ RESPONSE TO COMAC 44
Wilkinson, J. (2013, July 24). Supplier power (one of Porter’s five forces). The strategic CFO.
Retrieved from http://strategiccfo.com/wikicfo/supplier-power-one-of-porters-five-
forces/
Yousef, D. K. (2014, November12). Etihad Airways’s $20,000 super-luxury A380 suite
complete with flying butler has already sold out. Financial Post. Retrieved from
http://business.financialpost.com/news/transportation/etihad-airwayss-20000-super-
luxury-a380-suite-complete-with-flying-butler-has-already-sold-out
AIRBUS’ RESPONSE TO COMAC 45
Appendix 1
Income Statement Airbus Group 2013 – 2014
AIRBUS’ RESPONSE TO COMAC 46
Appendix 2
Balance Sheet Airbus Group 2013 – 2014