Analysis of Airbus A3XX Project and its Impact on Aviation Industry

Running header: FINANCE
Finance
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1FINANCE
Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................3
Answer to Question 3.................................................................................................................4
Answer to Question 4.................................................................................................................5
Answer to Question 5.................................................................................................................6
Answer to Question 6.................................................................................................................6
Reference....................................................................................................................................7

2FINANCE
Answer to Question 1
On June 23, 2000, a super jumbo jet named A3XX was approved by the Airbus
Industry’s Supervisory Board. This jet could provide the carrying capacity to 550 to 990
passengers. This jumbo jet had a list price of $216 million and it cost $13 billion to develop.
The development of this aircraft was ongoing since 1990. The Authorization to Offer (ATO)
permitted the company to start delivering this aircraft by 2006. The company announced
about the first order of the aircraft in July 2000. It got a total of twenty two orders of that
model from Air France, Emirates Airlines and International Lease Finance Corporation. The
management of the company also expected to notice a considerable hike in the market of very
large aircraft (VLA) in the next 20 year (they assumed to sell as much as 750 aircrafts in the
meantime). The management even predicted that they would break on an undisclosed cash
flow basis as selling 250 planes (Adler et al. 2018). They also expected that the sales of this
particular model would help to gain the profit of $350 billion.
There is no doubt that Airbus was one of the leading companies in Aviation industry.
But their main competitor in this industry was Boeing Company. It had been ruled the
aviation industry for more than fifty years. The market was also in favour of Boeing since the
World War II. The sales of Boeing aircraft used to gain two third of its revenue from the
commercial aircraft. The rest was dependable upon fighter jets and space shuttle. They also
provided 14 models from 5 aircraft families. The flagship of the Boeing industry was the 747-
400. It was also a very large aircraft (VLA) which could carry up to 420 passengers and had
three different classes to offer. The Boeing Company announced about the initial 25 order of
this aircraft and its stock price jumped at 5.1%. The management of the company expected
that this specific model would generate sales more than 700 planes in between 1980. But this
prediction failed as this project failed and this caused the company to face a very difficult
situation.