Friday, December 1, 2017

New Product Design, Winners and Losers

Maybe a dozen years ago Boeing and Airbus were casting around for an idea for a new aircraft.  Airbus decided to build the largest plane that available engines could hoist off the runway, the A380.  It was a double decker, four engines, seating 500 passengers.  Boeing did some market research and decided that more modest aircraft, seating 250-280 passengers was about right for the market.  After all it takes some doing to round up 500 paying passengers to fill an A380.  The Boeing plane, the 787 has only two engines (engines are the most expensive part of an aircraft), a very high tech "composite" fuselage and lithium ion batteries which gave a lot of grief. 
   As of right now, Boeing has sold several hundred, and has a backlog of close to 1000 787's.  They judged the market right.  The A380 has only one customer, Emirates, who has an order for another 42 A380's.  After which, the production line will shut down.  And as things are, Airbus is loosing money on every one they build.  Emirates (and no one else) is thinking about ordering some more, but they fear that Airbus might stop building A380's at a loss.  So they have not committed to an order. 
   Looks like Boeing's marketeers called it right.  The Airbus marketeers followed the Field of Dreams marketing plan (If we build it they will come).   Airbus has taken a big hit on the A380.  So big that they might not stay in business at all.   

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