Aeronautic: a sector with a great potential of development for the future

The aeronautic market keeps on increasing despite difficult economic times and offering many jobs in design offices or directly for a constructor. If American constructors are leaders on the jet aeroplanes market in the world, leaders are European concerning the small commercial aircraft market. And European constructors have the three quarters of planes. For instance, France has 30% of the aeronautic European market.

Today, the needs in planes have never been so important and it is a very good news for the duopoly which dominates the market, that is to say Airbus and Boeing. In september 2013, Airbus has published its forecasts of planes demands for the next 20 years. It considers that 29 220 new planes will be necessary to answer to a growing demand. The aeronautic market would represent 4 400 billion of dollars.

It is not really a surprise because this growth is due to developing countries which think to keep an economic development thanks to aeronautics. Indeed, we estimate that 2/3 of people living in developing countries will take a plane at least once a year. Today, only one person per five take a plane once a year.

Finally, what constructors will take advantage of this rising demand ? Airbus and Boeing, of course. But many other constructors hope to have a greater importance on the market for the following years. If Airbus and Boeing will represent 87% of the global market in 2032, other constructors will not want make up the numbers forever like the Canadian Bombardier, the Chinese Comac, the Brazilian Embraer, the Russian Ikrut or the Japanese Mitsubishi.

Sources : http://www.emploi-et-industrie.fr/emploi-aeronautique/laeronautique-un-secteur-en-perpetuelle-evolution
http://www.usinenouvelle.com/article/le-marche-des-avions-grossit-le-duopole-airbus-boeing-s-effrite.N205726

Airbus/Boeing and the new entrants

In the aeronautic sector we are in a duopolistic sector with two majors companies which are Airbus and Boeing, but recently they have to face to a new competition, with three new entrants which are the Canadian Bombardier, the Chinese Comac and the Russian OAK.

For the year 2012, the different companies have recorded:

• Boeing: 1339 orders for the commercial planes
• Airbus: 914 orders for the commercial planes
• Bombardier: 138 net orders for the commercial planes, 343 net orders for the business 
• Comac: no figures
• OAK (UAC): no figures

Boeing and Airbus still the leader but with those new competitors they will have the obligation to be innovative and to propose plane models for all the different types of clients.

Gross orders of Boeing and Airbus since 2003

As we can see Airbus sells more planes compare to Boeing for the commercial planes business which is their main business activity, except in 2006 and 2012.

For the orders in 2013 it is only included sales  from January to September, Airbus leads the way but with the Dubai Airshow that will reverse the trend because Boeing has recorded 342 orders and Airbus only 160.

Year (gross orders)	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013
Boeing	240	277	1029	1050	1423	669	263	625	921	1339	957
Airbus	284	370	1111	824	1458	900	310	644	1608	914	1215

Sources:
http://www.latribune.fr/entreprises-finance/industrie/aeronautique-defense/20131120trib000796843/pluie-de-commandes-pour-boeing-et-airbus-au-salon-de-dubai.html
http://active.boeing.com/commercial/orders/index.cfm?content=displaystandardreport.cfm&RequestTimeout=500&optReportType=AnnOrd&pageid=m15521
http://www.airbus.com/newsevents/news-events-single/detail/airbus-beats-order-target-and-sets-new-company-delivery-records/

Airbus bets on Superjumbos with the A380

These years the competition between the two companies was harsh. They have chosen two different strategies with their aircrafts offer. With the A380, Airbus expects to put an end to the Boeing 747 supremacy in the superjumbo segment. The optimized version of the A380 can carry more than 800 passengers allowing economies of scale, the objective is to reduce the fuel consumption per passenger and one of the strategies is to increase the number of seats in planes.

But many experts remain skeptical about airbus' A380 because studies show that the trend is not going in their direction as the demand for long distance planes is more focused on 250/300 seats like the Boeing 777 which is a commercial success for the American manufacturer. So the critics argue that Airbus may have wasted time and money developing the A380 while Boeing was improving the smaller 777, enlarging the range and launching the 787 Dreamliner. Moreover the break even point for the A380 will probably be hard to reach because of high costs of development and a too small market share to ensure enough return on investment.

It seems that the hub system is less and less popular among passengers, indeed they prefer direct flights instead of waiting long hours in airports. The problem is that Airbus bets on these hubs for the future as they launched the A380 and some analysts think this could be a problem for them.

The success of the 777 illustrates the trend of 300 seats plane on the long distances. Moreover Boeing focuses on efficiency by using only 2 engines planes, with composites body parts which make it lighter.

http://www.capital.fr/enquetes/strategie/boeing-airbus-duel-au-couteau-sur-le-long-courrier-840107

http://fr.wikipedia.org/wiki/Concurrence_entre_Airbus_et_Boeing

Boeing overview

Boeing is composed of 4 historical and remarkable companies of the aircraft history: Boeing, Rockwell International, Mc Donnel and Douglas. In 2000, a fifth one has joined the company: Hughes Spaces and Communications; which became Boeing Satellite Systems.

Boeing is now present on different markets; it provides commercial and military aircrafts, satellites, weapons, electronic and defense systems, launch systems, advenced information and communication systems, and performance-based logistics and training. 

Today the company employs more than 170 000 people in USA and in 70 countries all around the world. Its head-quarter is located in Chicago. The aircraft company owns contracts with 26,500 suppliers and partners.

Boeing is divided into two business units: “Commercial Airplanes” and “Defense, space and Security” which are based on different corporate function, as you can see in the following scheme:

In 2012, the company’s revenue was $81, 7 billion. 70% of this revenue was made outside USA.


Source: http://www.boeing.com/assets/pdf/companyoffices/aboutus/overview/boeing_overview.pdf

Boeing suppliers

Boeing, the American airplane builder, employs French suppliers.

The aviation segment encompasses the design, manufacture and commercialization of aircraft (airplanes, helicopters, drones, etc..) and specific  equipment related to (propulsion, aircraft systems, etc..).

The French aerospace industry is rather located in the Midi-Pyrénées and Aquitaine regions.

According to the picture, Boeing use Safran (a French group) for the landing gear, wheels and brakes. The company also collaborates with Michelin, a French manufacturer, for the pneumatics.

Thales is an international electronics group specializing in aerospace, defense and information technology. Present in 56 countries, Thales is a leading provider of equipment for the aviation and space. The company works with Boeing for the entertainment during the flight for example.

Zodiac, a French aerospace supplier specialized in embedded airplane systems, flight safety and cabin layout, works with Boeing on the management of water, seats and the toboggan evacuation.

LATECOERE, aviation suppliers and best known for his seaplane, collaborates with Boeing for the passenger doors.

http://fr.wikipedia.org/wiki/Safran_(entreprise)

http://www.latecoere.fr/

http://www.airemploi.org/f/industrieaeronautique/

http://fr.wikipedia.org/wiki/Secteur_a%C3%A9ronautique_et_spatial

Le salon du Bourget

The Salon international de l'aéronautique et de l'espaceParis-Le Bourget, better known as the Paris Air Show, or under the SIAE, is one of the most important international events presenting aerospace materials in the north of Paris. Known by the English speaker as the Paris Air Show, the Salon took place every two years. It is the first appointment of the global aviation industry, just before the Farnborough (Germany).
The Salon includes days reserved for professionals and other for the public.

Manufacturers exhibit their latest aircraft in flight demonstrations.

http://fr.wikipedia.org/wiki/Salon_international_de_l'a%C3%A9ronautique_et_de_l'espace_de_Paris-Le_Bourget

Different logos of Airbus

1970

Before 2010

After 2010

For the first time since 1969, Airbus has changed its logo in adopting this new modern police which should strengthen its brand image.

The logo before 2010 symbolizes the different sizes of the fuselage Airbus product line

The logo after 2010 has not changed so much. It represents the merger between Airbus and EADS.

The Airbus company

Airbus is an European aircraft manufacturer based in Toulouse in France. 100% subsidiary of the industrial group EADS, the company produces more than the half of the plane in the world.
Airbus employs 62,751 people in 18 sites in France, Germany, the United Kingdom, Belgium and Spain. Airbus has subsidiaries in the United States, China, Japan and India.

The company produced its first Airbus A300 aircraft in 1972.
It was announced a restructuring of EADS to become Airbus Group on January 1^st 2014.

http://fr.wikipedia.org/wiki/Airbus

Airbus, Boeing and the state intervention

Airbus and Boeing operate in a strategic sector requiring huge investment and years of development to come up with new planes. If they face some issues during the advancement of a project, it can lead to delays in the delivery, higher costs and even breakdowns like with Boeing's Dreamliner. Moreover, the airlines can request a discount on their orders since this could be harmful for them. 

For instance, recently Boeing had issues with the Dreamliner's ion battery and Japanese airlines – already using several 787 Dreamliner – were forced to cancel hundreds of flights because of these technical incidents.

Because of the risk taken by Airbus or Boeing, no banks would finance their project unless the State brings its support. This is materialized by subsidies. Airbus for example is a subsidiary of the group EADS with both public and private shareholders. Airbus received subsidies for the A380 program and recently for the A350 by the different public investors in EADS (France, Great Britain, Germany, Spain). On the other side of the Atlantic, Boeing is a private company but they also obtain government aids through their military programs. These innovations are then applied to the commercial planes.

For many years, the two firms have been arguing about the state intervention and the aids. Both claim that these are unfair and the bone of contention lies in the amount of the subsidies. They asked the WTO to carry out an investigation and to be the mediator but it doesn't have the power to condemn one of the actors.

It's a war going on between the two major actors of this oligopolistic market. A lot of money and jobs are at stake and this industrial sector is strategic for governments as it influences the balance of trade through exports.

http://www.lepoint.fr/economie/subventions-boeing-triomphe-airbus-aussi-12-03-2012-1440507_28.php

http://www.franceinfo.fr/economie/tout-info-tout-eco/qui-d-airbus-ou-boeing-profite-le-plus-des-subventions-etatiques-554941-2012-03-13

http://www.economist.com/node/14214813