Airline Manufacturing Collaboration - Are There Areas Where Boeing and Airbus Can Cooperate?

Are there areas where Boeing and Airbus can cooperate? Explain.

Although Boeing and Airbus have been competitors for a long time, there are areas where they can collaborate for mutual benefit. Despite their differing opinions on the future of the airline industry (point-to-point nonstop service vs. larger aircraft at hub-and-spoke airports respectively), Boeing and Airbus each realize they must be more innovative in order to reduce costs, maximize profit and strengthen their position in the industry as more international competitors enter the market. Strategically, this will require collaboration between the two in areas where they agree and seek to achieve similar success.

While a previous joint venture between Boeing and Airbus to share the cost and risks associated with developing a super-jumbo aircraft failed in 1995, not all collaborative efforts between the two have experienced the same fate. For instance, Boeing and Airbus have been working together since 2008 to help the aviation sector and governments modernize the world's air transportation management system in order to increase routing efficiency, eliminate traffic congestion, reduce delays, time in the air and save fuel - reducing aviation's environmental impact.

Earlier this year, Boeing and Airbus (along with another smaller competitor) signed a memorandum of understanding to collaborate on the development of drop-in, affordable aviation biofuels. Each aircraft manufacturer will seek "collaborative opportunities to speak in unity to government, biofuel producers and other key stakeholders to support, promote and accelerate the availability of sustainable new jet fuel sources." Their goal is to have biofuel meet four percent of aviation's fuel needs by 2020.

Consequently, Boeing and Airbus are rethinking the way they build jetliners. Boeing has implemented lean manufacturing techniques and other process improvements to ensure quality, reduce parts inventory and significantly reduce production time. Boeing and Airbus are also working with suppliers more closely to streamline production processes. Together, each company is increasing the pressure on suppliers and subcontractors for increased efficiency in production, and standardization of equipment and parts. As a result, both Boeing and Airbus seek to benefit from a highly centralized production system.

Perform the five forces analysis of competitive pressures for the Airline Industry

The strong competitive environment of this industry and the high costs associated with it are significant enough for one to immediately assume its not worth entering. But with increasing market volume expected to rise into the trillions over the next 10 years, even a small share of these revenues would interest new firms. Air travel is expected to rise, especially in Asia. Further, the willingness of companies in China to enter this industry is extremely likely and is fueled by political and prestigious interests to become a dominant economic superpower.

Risk of entry by potential competitors

Within the airline industry, there are several factors that impact the risk of entry by competitors. First and foremost, entry into