Airbus A3XX MBA Case Study

Airbus A3XX MBA Case Study - Table 7: Market Share Range...

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Unformatted text preview: Table 7: Market Share Range enar io Analysis, Pr ice Competition Table 9: Sensitivity Analysis - Revised Forec Table 3: Break Even Analy Table 4: Company Forecasts Table 5: Revised Demand Forecast Table 6: Production t o Demand Ratios Table 1: Simplified Financial Model Table 2: Scenar io & Sensitivity Analysis MBA Case Study Airbus A3XX: Developing the Worlds Largest Commercial Jet Executive Summary This paper analyzes Airbus Industries decision to develop the A3XX, a super jumbo jet with the potential to eliminate Boeings monopoly in the very large aircraft market, provide a large financial gain, and position Airbus as the leader in the aviation industry. Airbus was predicting that the project would generate sales in excess of $350 billion with potential sales of 750 planes over the next 20 years. Boeing Company, however, was forecasting very low demand for the very large aircraft market over the same time period. Uncertainly over market demand and required initial investments of $13 billion made the A3XX an incredibly risky project. Section 1 of the paper examines the specifics of the A3XX project, including its goals, risks, and sources of financing. Section 2 determines rudimentary ranges of demand, operating margin, and lifespan required for the project to break even. Scenario and sensitivity analyses are performed using a pro forma financial model. Section 3 evaluates potential market demand for the A3XX using market data and the 20-year forecasts provided by Boeing and Airbus. Boeings potential responses are considered and the degree to which those reactions might impact demand is assessed. In Section 4 , a revised financial model is presented that incorporates conclusions about market demand, operating margin, and project lifespan from section 3. A recommendation to pursue the A3XX project is provided. Section 1: Project Description The goal of the A3XX is to displace Boeing as the sole producer of jumbo jets in the commercial aviation industry. Boeing was the market leader and its primary plane, the 747, enjoyed a monopoly in the very large aircraft (VLA) market. Airbus, a consortium of European aerospace companies, had gained market share since joining the industry in 1970 due to its technologically advanced planes. However, Airbus only produced small and medium-sized planes, and did not have a plane to compete with Boeings 747. The A3XX would be a step ahead of the 747 with more capacity, better technology, improved operating efficiency, greater appeal to passengers. The project would cost approximately $13 billion to launch, and would be financed through partnerships with corporate and government organizations. Airbus itself would provide $5.9 billion in funding, $3.5 billion would come from risk sharing partners (RSPs), and $3.6 billion would be provided as launch aid from the RSPs national governments. The RSPs would be repaid as a share of profits from the project. Launch aid had to be repaid over 17 years at a market rate of share of profits from the project....
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Airbus A3XX MBA Case Study - Table 7: Market Share Range...

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