Airbus vs. Boeing: Logistics, Backlog, and the A380 Strategy
This paper examines Airbus's competitive position in the early 2000s, focusing on logistics process improvements aimed at cutting costs by 20%, the significance of its order backlog, and the threat posed by a declining U.S. dollar to European exporters. It compares Airbus and Boeing across key metrics including operating margins, net orders, and production capacity, and discusses the strategic importance of the A380 superjumbo as Airbus's vehicle for entering high-growth markets such as Japan, India, and China. The paper draws on sources including Business Week, CNN, Reuters, and Airwise to assess Airbus's short- and medium-term outlook.
- Introduction: Logistics Reform and the Production Backlog: Airbus cuts costs and accelerates manufacturing output
- Currency Risk and the Falling Dollar: Falling dollar threatens European export competitiveness
- Competitive Dynamics: Airbus vs. Boeing: Airbus outperforms Boeing on margins and net orders
- Sales Trends and Production Capacity: Sales growth slows but backlog remains manageable
- The A380 and Emerging Market Strategy: A380 targets Japan, India, and China expansion
- Conclusion: Airbus outlook cautiously positive amid market recovery
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What makes this paper effective
- Integrates multiple credible sources — Business Week, CNN, Reuters, Airwise — to support each analytical claim with concrete figures.
- Uses specific financial data (operating margins, order volumes, development costs) to ground competitive comparisons between Airbus and Boeing.
- Demonstrates awareness of macroeconomic factors, particularly currency risk, and explains how they affect corporate competitiveness in a global market.
Key academic technique demonstrated
The paper demonstrates comparative industry analysis: it consistently evaluates Airbus's strategic decisions not in isolation but against Boeing's parallel actions, using quantitative benchmarks (e.g., 16.5% vs. 10.5% operating margins, net vs. gross orders) to draw meaningful conclusions about relative competitive standing.
Structure breakdown
The paper opens with logistics and backlog analysis, moves to macroeconomic risk (the dollar), then addresses the head-to-head competitive record between Airbus and Boeing. A section on sales trends and production capacity follows, leading into a forward-looking discussion of the A380 and Asia-Pacific market entry. A brief conclusion wraps the argument. The structure is largely thematic rather than chronological, though it anchors claims in the 2001–2003 timeframe throughout.
Introduction: Logistics Reform and the Production Backlog
Airbus is currently implementing new logistics processes that it expects will cut costs by 20%. Part of this initiative involves flying parts to central locations to facilitate assembly. More importantly, however, the reforms are designed to increase inventory turnover. Like all airplane manufacturers, Airbus carries a significant backlog: if this backlog is eliminated or reduced through more expedient manufacturing, Airbus can produce at a faster rate and sell more products.
The backlog is also counter-cyclical — customers receive their orders faster when fewer buyers are competing for delivery slots. The current backlog stands at over four years, while market cycles generally last ten years or fewer, with prolonged recessions being rare. Only a sustained recession of more than several years could seriously threaten Airbus's production pipeline, which is unlikely given that air travel had already recovered from its early-2003 low. According to the course exercise, a new airplane requires a total of 85 days in the Toulouse plant, although for many of those days the aircraft — or portions of it — may not be physically present within the plant itself.
Currency Risk and the Falling Dollar
Perhaps more disquieting is the falling U.S. dollar. Because most international banks use the dollar as a reserve currency, the euro has been able to purchase drastically more than it could three years ago. Although this benefits Western consumers, it comes at the expense of European manufacturers who wish to export their products. Airlines such as Gulf Air that operate outside Europe and North America must now choose between expensive Airbuses and comparatively inexpensive Boeings.
Analysts have noted that Airbus and other European companies have so far protected themselves against the dollar's decline by using hedging instruments — specifically, forward contracts designed to lock in exchange rates at a specific price. Euro-denominated contracts already in Airbus's backlog are safe from this exposure. However, The Economist and other sources contend that the dollar will stabilize at a lower level, making the American economy more competitive on a sustained basis. This bodes poorly for Airbus both inside and outside Europe.
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