Boeing and Airbus Financial Performance

Introduction – Boeing and Airbus
Airbus mission and vision: Airbus is commonly known to be the most popular commercial aircraft headquartered out of Toulouse France. With small and huge airliners, that can seat 100 to 500 passengers, the company has a global human resource of over 50,000 and aircraft strength of over 16,000. Being over 4 decades old, it has a loyal customer base that lays the foundation for its mission and vision – i.e. global presence with a personalized touch.
Boeing mission and vision: Boeing is the biggest competitor for Airbus in the airline industry however it expands its workload in other domains like the design and manufacture satellites, defence weapons along with commercial airlines as well as information and communication systems. The company’s mission and vision includes the production and provision of performance-oriented logistics for the commercial airline manufacturers including competitors like Airbus.
General Strategy – Boeing and Airbus
Airbus: the initial strategy was to increase the overall international network for this airline. The aim was to give the optimal level of customer support through this expansion. Being in the industry for over 4 decades was a key determinant in the success of this strategy aa it helped align most of the decisions necessary for this strategy with ease across the global structure. The reason to expand was primarily to aim an increase in the backlog of the company . Yes, the service level would need to improve and more landscape would need to be bought for this strategy which means more financial capital spent initially but in the long run higher backlog will mean increased investment and demand. This strategy was a success because the aim to create the backlog was a success and the industry was expected to have business for at least another decade.
Boeing: the initial strategy for Boeing was to increase the growth margin in revenue while simultaneously neutralizing the operational costs. This was achieved through the employment of experts in the operating sector. No major changes were implemented for the routes, flight selection or overall company size but primarily the HR department went through an overhaul with experts in the areas of finance and operations being hired with great packages and regular sessions or managerial conferences held to continuously upgrade knowledge and operational strategies. The overall strategy proved to be financially burdensome initially as hiring experts meant increase in allowances of employees but it paid back in dividends as now Boeing has not inly achieved the aim and completed the strategy but it is now known for its proficiency in the operations sector.
Airline Performance & Financial Analysis – Boeing and Airbus
The interesting thing about both Boeing and Airbus is that they understand their end users more than any other competitor in the market which is why we see that the fares they provide on a regional basis for each class and consumer is fairly appropriate and does not necessarily need to change. The airfares are appropriate by both for their target markets and that is even more obvious when one analyses the amount of business each is getting respectively across the years. The two airlines are by far the heaviest contributors to the financial market as compared to all other airline manufacturers.
The growth for both Boeing and Airbus was off a strong foundation. They were both able to break even and make profits from the beginning of their launches. The reasons for this success right off the bat include the following: knowledge of the industry – both airliners knew their market and how they were to tackle its demands; secondly and more importantly they catered to the missing niche in the market i.e. providing commercial airliners that gave good service and could carry large number is passengers across the world. This latter reason whereby both airliners were able to cater to an unfulfilled niche was the secret to their immediate and sustained success.
There seemed to be steady growth for both airliners across all 4 quarters last year. However, there was a major jump in the overall sales and revenue for Airbus in the last quarter of 2017 as it made quite a few contracts and deals with its expanded consumer base to provide a much higher number of planes than Boeing. This made a significant upward arc in their revenue for the last quarter of 2017 and their overall profits so far in the first quarter of 2018.
The load factor and on-time performance variables for both Airbus and Boeing are very good. Airbus and Boeing both have updated aircrafts that perform at the optimal level and generally don’t have issues of time management or delayed deliveries. The age of the aircrafts used by both airliners is also quiet good and modern which enables the load factor to not be a hindrance or cause of concern either. The liquidated value for both Airbus and Boeing is easily in the range of multi million dollars with Airbus amounting to $9,500 for the quarter ending in September, 2017 and Boeing amounting to over $10,000 in the quarter ending December 2017. The main routes for both Airbus and Boeing revolved around the Americas and Europe with Boeing taking the advantage of additional routes to Asia and Australia hence giving it the extra return on investment in each quarter for the year 2017 (Annual Report, 2017; Boeing Official Website, 2017). When analysing the ASM, RPM, Load Factor, Yield, RASM, and CASM for both Airbus and Boeing, we see that Boeing takes the lead again across all due to its environmentally friendlier approach, smart reinvestment of capital finds as well as increased market share in Asia and Australia. Furthermore, we see that this lead might exchange hands with Airbus due to its increased business contracts and agreements in the last quarter of 2017 which has created tremendous backlog for the airliner. Hence, the edge that Boeing is enjoying currently could slip away in a year or two based on the efficiency of service and the performance level that Airbus is able to provide with all the new business it is generating.
Things changed drastically for Airbus in the 3rd and 4th quarters of 2017 once the implementation of the strategy to increase its international network was in full flow. The backlog created by Airbus remains unmatched by Boeing and thus the overall service level is functioning at a superior rate too. What remains to be seen is whether the efficiency in the performance can be sustained by Airbus in the years to come. As for Boeing, expanding into its specific niche for satellites might be a good competitive strategy even more so now. Considering the above, we see that Cash flow management for both Airbus and Boeing seems to be on the upward spiral as the overall revenue generated seems to be reinvested in smart capital ways to ensure top quality and sustained performance from both. The primary strategy thus used by both airliners to manage cash flow was reinvesting profits into business acquisitions and expertise.
SWOT - Boeing
Strength: A focus on expanding the product line and sustainable fuels – competitive advantage
The biggest competitive advantage that Boeing has is also its biggest strength – the expansion and investment on using and producing sustainable fuels and simultaneously working on reducing harmful emissions. Boeing is using a more environmentally friendly approach and it seems to be paying dividends in the initial stages (Boeing Official Website, 2017).
Weaknesses: Suppliers have bargaining power:
Boeing’s dependency on the supply of certain key raw materials makes the suppliers have a very strong hand in the overall performance that is generated by the airliner as well as the profits gained in each quarter (Boeing Official Website, 2017).
Opportunities: Growing aerospace and defence market:
The aerospace and defence market has been growing at a tremendous pace within the past 5 years which makes it opportune for Boeing to cater to this unfulfilled niche with its past experience in the market (Boeing Official Website, 2017).
Threats: Fixed Priced Contracts:
Fixed priced contracts provide Boeing the advantage of ensuring efficiency and decreased costs, it threatens the company to experience decreased margins and gence negatively impact its financials (Boeing Official Website, 2017).
SWOT - Airbus
Strengths: New aircraft models with higher fuel efficiency.
Using Boeing’s fuel efficiency models, Airbus has designed 320 neo which burns fuels at 23% decreased ratios while simultaneously seating more passengers which makes it a force to be reckoned with (Annual Report, 2017).
Weaknesses: High costs of production and operations
Overall costs at Airbus to maintain its production demands and operations are considerably high and increasing on a yearly basis (Annual Report, 2017).
Opportunities: Better economic conditions
Three new emerging economic factors (end of the recession, growing middle class, and increased employment rates) have made air travel more popular, hence increasing opportunities of growth for commercial airliners like Airbus (Annual Report, 2017).
Threats: Regulatory pressure
Regulations on passenger safety, aircraft health, financial deals, compliance issues and other factors have added increased amount of challenges and obstacles for airliners like Airbus (Annual Report, 2017).
Conclusion – Boeing and Airbus
Both Airbus & Boeing are extremely successful and popular within the airline industry so we make the following recommendation for a new management takeover in either company:
Recommendation for the new management:
Everything in the modern world revolves more and more around PR and image of the company. It is easy to see where each company is boastful of itself and where its operational weaknesses lie, however the real verdict lies in the hands of the end consumer – the airlines' passengers. So what the new management for either company should really look to do is increase its consumer relations and figure out the true opinion of its end users to understand where the true areas of improvement lie in order to oust its competition.




References
Annual Report. 2017. Airbus Annual Report. Accessed from http://annualreport.airbus.com/business/
Boeing official website. 2017. Boeing – Global Presence. Accessed from: http://www.boeing.com/global/