Airbus Case

Question 1

What are the differences between Airbus’ and Boeing’s Market Forecasts from the year 2000?

Answer 1

Airbus: demand for new aircrafts seating >500 people is increasing: Strategy to extend capacity of planes instead of number of flights
Boeing: Demand for smaller regional planes instead of larger (international) planes (Demand for “very large” airplanes is small)

Question 2

Name opportunities and risk regarding the uncertainty in long-term demand?

Answer 2

Opportunities: Gain market strength, high return in case of expected market growth
Risks: Market shifts (no usage, new technologies), costs will exceed project budgets → you cannot predict the future

Question 3

Name the three key features in PF and connect them to the A380 project.

Answer 3

Cash Flows: Airlines had to make upfront payments, repayments of debt are based on the projects’ success (CF-related lending)
Off-Balance: Airbus didn’t use a SPV to take the project off balance
Risk Sharing: Shifted their risks to the main vendors, used governmental launch aid

Question 4

Name governmental benefits when supporting this project.

Answer 4

• Intelligent, sustainable and integrative growth of the EU
• Increasing employment rate
• Investments in R&D
• More efficient energy usage

Question 5

What are typical large project economics?

Answer 5

• Land and site development
• Plant and machinery
• Up-front investments
• Contingencies

Question 6

SWOT- Strength

Answer 6

Strength: Competitiveness (product to compete with the Boeing 747), revolution for the entire airlines industry which in ling run generate higher demand

Question 7

SWOT- Opportunities

Answer 7

Opportunities: expanding to new countries, engaging technically sound and advanced systems to enhance effective operation

Question 8

SWOT- Threats

Answer 8

Threats: uncertainty of demand, danger of competitive plane build by Boeing

Question 9

SWOT- Weaknesses

Answer 9

Weaknesses: Extremely high costs including up-front payment, complexity of the entire project is extremely high, airports need adjustments (size of A380)

Question 10

Did the A380 project fail?

Answer 10

• Without A380 not able to compete with Boing

- Project itself failed partly regarding cost and time frame → delay caused massive problems