Benefits for Airbus From Boeing’s

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 1
BENEFITS FOR AIRBUS FROM BOEING’S 737 MAX DEFAULT IN THE NEXT TWO
YEARS
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Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 2
Introduction
Airbus is self-assured to finish 2019 ahead of Boeing for the first time since 2015, with
an increase of about 50 percent since January. With the ambiguity of approvals surrounding the
Max to recommence flying, most analysts estimate the French aircraft maker will progress to
outperform its distressed peer in the coming years. Unfortunately, Airbus’ production problems
in France amid trade issues with the U.S may affect its performance. In 2020, insecurity is
predicted to be the opening theme for Boeing, with some assuming that the shares of Airbus will
continue to benefit from the difficulties, given that it is the only other primary maker of
commercial aircraft.
However, the effectual duopoly has come into question as the “World Trade
Organization” (WTO) considered competing for EU and U.S claims of unfair state subventions.
Conversely, Airbus fell 4.4 percent in December after the WTO stated that the EU did not
adequately remove the severe effects of grants to Airbus. The benefit Airbus may gain from
Boeing’s 737 Max shortfall is that it can focus on the fallout from the tariff conflict, and its
manufacturing and engine troubles. Thus, Airbus will be capable of narrowing its body planes
that are in the same classification as 737 Max.
Overview of Airbus Strategy in the Coming Two years
According to the chief marketplace analyst at CMC Markets England, Michael Hewson,
Airbus is bound to benefit extensively from the troubles Boeing is currently facing with the
shortfall of 737 Max. According to figure 1, the shares of Boeing and Airbus starting in 2019
were at a brusque pace with both having 35 percent through February. However, things changed

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 3
in March after the second Boeing 737 Max crash in five months, which triggered investigations
into the firm.
Figure 1: Airbus Shares Outperform Boeing in 2019; Source link
https://www.bloomberg.com/news/articles/2019-12-09/airbus-secures-lead-over-boeing-as-737-
max-weighs-into-2020
Airbus may consider taking advantage of Boeing’s shortcoming after the shortfall of 737
Max. First, Airbus may consider taking advantage of the headship issues that Boeing is currently
facing, which led to the shortfall of 737 Max. For instance, John Barnett stated that after his
arrival, a new chief team whose initial experience focused on Boeing’s military tasks started
supervising the commercial production of the airliner. As a result, they began pressuring
Barnett’s team to not document flaws, which caused the bypassing of processes, and neglecting
the maintenance of confinement controls of airplanes. Airbus may benefit from these lapses by

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 4
improving their administrative departments, which would encourage employees to fill out
paperwork properly.
In the next two years, the latter can fully take advantage of these administrative issues by
prioritizing on defective parts installed on the planes, and basic issues connected to aircraft
safety. For instance, an audit discovered that about 25 percent of oxygen masks in Boeing’s
planes, including 737 Max did not work. In addition, defective parts began getting lost in the
structure, and were only discovered after being installed on aircraft. Airbus can prioritize this
Boeing’s defect by ensuring all its oxygen masks are functioning properly, and any defects are
discovered before being installed in the plane (Davis, 2019). Notably, these improvements can be
a slow process, so if Airbus can focus on these improvements over the next two years, it may be
able to surpass Boeing’s safety measures.
Second, Airbus may benefit from Boeing’s issues with the metal silvers. This has
emerged as a major concern for Boeing after the shortcoming of 737 Max was securing the
aircraft’s floorboard with titanium fasteners, and 3-inch silvers of sharp metal fall into the
compartment where the sensitive electronic equipment of the plane lie. From this Boeing’s
shortcoming, Airbus can focus on safeguarding the surface below the floorboard as it contains all
the flight control wires and the electronic equipment. Over the next two years, it can have
enough time to enhance and safeguard its planes’ control systems and control power. Notably,
these improvements can be attained by using other materials other than silver, which has caused
electrical shorts and caused potential fires in Boeing planes.
In 2019, Airbus obtained 542 plane orders compared to Boeing at a negative 95, which
adjusted conversions and cancellations. Similarly, the market share of Airbus for its narrow-body
planes rose by two percent from 56 percent in January. Consequently, the seven billion dollars

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 5
for “Long-Range Airbus A321s” in December 2019 was a massive blow to Boeing. This was
mainly attributed to the fact that the “United Airlines Holdings Inc.” decided to buy 50 Airbus
A321s work more than seven billion dollars to substitute its aging Boeing 752-200 planes
(Remondini, and Dey, 2019). The troubles of Boeing with 737 Max have made the company to
second thought its strategy of developing a new aircraft that can counter Airbus’ A321s. This has
been a significant advantage to Airbus as it can confidently produce more planes in this category
without much opposition. From Graph1 below, it is evident that Boeing has significantly lagged
Airbus’ over the past two quarters of 2019.
Graph1: Boeing Lags Behind Airbus; Source link
https://www.bloomberg.com/news/articles/2019-12-09/airbus-secures-lead-over-boeing-as-737-
max-weighs-into-2020
Currently, Airbus is heavily benefiting from 737 Max grounding, which has greatly
improved its sales. For instance, the company has taken orders for over 350 planes in Asia alone
since August, which has streaked ahead of its rival, Boeing, due to grounding of 737 Max. In

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 6
November 2019, the former obtained a contract when IndiGo, an “Indian budget carrier,”
ordered “300 narrow-body planes” in a deal worth over 33 billion dollars. Moreover, Cebu Air
and VietJet Aviation confirmed acquisitions in recent days of December 2019 (Bloomberg
News, 2019). Importantly, Boeing only managed to get commitments for 16 jets over the past
three months. This shows how Airbus is maximizing on Boeing’s troubles with 737 Max by
producing more planes and taking more orders, which may be a productive strategy over the next
two years.
By 2020, Airbus may maximize on 737 Max grounding by ensuring that it has fixed its
“Pratt and Whitney” engines of IndiGo to avoid its A32oneos from getting grounded. This is
crucial as the company has at least 100 of these planes, and considering that Airbus has made a
new contract with it. Thus, Airbus must take this opportunity and work with its engine makers
such that it has adequate modified spare turbines to meet the needs.
Airbus Strategy over the Next Two Years
Airbus management strategy may consider focusing on maximizing the available
opportunities since the grounding of 737 Max has caused a lot of hardship and second-guessing
on Boeing’s approach. Due to this fact, Boeing took a one billion dollar hit to its revenue, and
adjourned a full-year supervision. Notably, quarterly proceeds in its corporate aircraft division
decreased to 11.8 billion dollars from 12.9 billion dollars in the same period in 2018 (Waldmeir,
2019). At a group level, Boeing’s revenue decreased by two percent at 22.9 billion dollars, while
operating profits decreased by 18 percent to 2.35 billion dollars in 2019. Therefore, the firm has
cut its production rate of 737 Max from 52 to 42 planes monthly from mid-April, which means
Boeing will have to amortize the program’s fixed costs over a longer-term.

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 7
The best approach that Airbus management can utilize over the next two years is ramping
up production to ensure that they can meet demands for its aircraft. By fragmenting Airbus’
production systems, the company can enhance its aircraft production across France, Spain,
Germany, and Britain. This approach is effective as the firm’s headship has been reluctant to
consider this over the past years. Hence, Airbus can focus on building more of its A320s, and
improve on its NEO version that was its 2018 priority. Alternatively, the organization can elevate
its A350 production to reach a monthly target to 10 planes. Therefore, investing in new
technologies, transport capacities, and facilities may aid the ramp-up.
As noted earlier, new technology is crucial for the ramp-up of Airbus’ production as it
has fallen behind Boeing in its engineering technology. Currently, Boeing is capitalizing on
“state-of-the-art technologies” to enhance competitiveness. For instance, Boeing presents
Siemens US selection to apply new automation resolutions in its manufacturing structure. The
review of this approach may help Airbus in developing a strategy to modernize its production to
attain Boeing’s competitive edge (Greenwood, 2019). Conversely, the turnover in Airbus’
management can provide a chance to change the firm’s culture, and focus on the invention. Due
to this fact, Airbus chose Egon Zehnder, an executive search company, to help the firm locate
better skilled and qualified executives. Moreover, Airbus CEO, Guillaume Faury, is dedicated to
bringing together a new frame of mind in the firm, including Airbus' headship.
In the coming two years, the firm may focus on creating new and better facilities, which
would ensure that Airbus can produce at least 60 planes monthly by mid-2020 through its
assembly lines in Hamburg, Tiajin, Toulouse, and Mobile. This target production is achievable
as in 2018; the firm managed to open its fourth A320 production line in Hamburg. Besides, the
new line makes usage of digital know-how, and more supple industrial set up to develop aircraft

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 8
more effectually. By the next two years, the Hamburg line may fully feature user-optimized
delivery materials closer to workers, and digitalized production management structures.
Additionally, the line may be able to fully automate 7-axis robots for circumferential joints, and
subtleties measurement assembly with laser trackers. Currently, the present Hamburg line can
only produce 626 A320 planes annually, which may be improved by the above suggestions.
In the next two years, Airbus management can focus on investing in better and effectual
delivery channels. In 2019, the company focused on addressing its transport capability
requirements that are connected to the ramp-up of A350 and A320 plan production. This will
ensure that the organization gets an additional transport capacity of 60 to 80 percent, which
suggests that over 227 tonnes can be delivered with ease. As the grounding of the 737 Max may
be up until August 2020, Airbus may maximize this opportunity by extensively rolling out its
“Skywise digital platform” to aid the functions of airlines globally. Currently, Airbus is
benefiting from the platform’s rollout as at least 50 airlines representing more than 4,000 aircraft
have signed up annual contracts (Airbus, 2019, p.16). These services may assist in ramping up
Airbus production ability as it extends into the supply chain, and improves reliability,
performance, and quality.
By 2019-2020 season, the firm expects its ramp-up may elevate by retaining its advanced
segmentation, which seeks to classify the market more precisely in the manner in which airlines
function planes in terms of range and size. Using this technique, Airbus can effectively reflect
the overlaps that are created between some market classifications. In 2019, Airbus’ aircraft in
operation, suggest that A320s and A330s deliver capacity is decent, especially after the
grounding of 737 Max. According to figure 2, it is evident that the widespread ranges and size by
the Airbus’ A320s and A330s have increased their daily operations over the past year (Airbus,

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 9
2019, p.46). Due to this fact, Airbus can enhance its plan production by increasing the capacity
of its neutral seaters from 100 to over 400. Using various shades in graph 2, Airbus was capable
of noting the diverse way these planes can be used in terms of range and size, even within their
neutral seat classification.
Figure 2: Heat map of current airline operations; Source (Airbus, 2019, p.50)
In the next two years, Airbus can also focus on ramping up the production of its advanced
version of A321, which has about 240 orders, and pledges in Paris. Considering that Boeing’s
737 Max is grounded, the Boeing deal may not be an issue in Europe as A321 is more cost
effectual that is an alternative to “longer-range wide-body” aircraft. This gives Airbus a potential
free-of-competition market as its biggest rival, Boeing, has faced some issues with its 737 Max.
Furthermore, the new A321 is has a range of 15 percent that is higher than the A321LR, its

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 10
predecessor. Additionally, the fuel tank of the new A321XLR enables the plane to cover about
9000 kilometers in nine hours, which is more than Boeing’s 737 Max. Hence, Airbus can
maximize on this niche by increasing its production in these planes over the next two years.
Graph 2: Passenger aircraft (A320s and A330s) over 100 seats; Source (Airbus, 2019, p.51)
By 2020, Airbus management can focus on building a new airline that fills Boeing’s
space. Currently, the firm is designing a new 220 to 270 seater plane to fill in the “middle of the
jet market” that is left vacant by Boeing. As a result, Airbus can focus on derailing Boeing’s
plans for the mid-market jet by controlling the lower end, where its A321 is outselling Boeing.
Apart from focusing on the lower end category planes, Airbus can prioritize on the top end
segment where its A330neo is competing against Boeing 787 (Hepher, and Johnson, 2019). As

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 11
such, the latter can focus on grasping key orders from Virgin Atlantic and Cebu Air. By ramping
up production on all the major segments in air transportation over the coming two years, Airbus
can get a competitive edge against Boeing as the company is only focused currently at reinstating
its best-seller, 737 Max.
In the process of building production, Airbus can ensure that its digitalization strategy
plays a critical role in unlocking its data potential in aviation. In a coming couple of years, the
company can focus on deploying and industrializing its digital concepts, including the “Skywise
data platform.” Thus, the former can fully capitalize on Skywise’s success, as Boeing is currently
focused on restoring 737 Max’s glory. Airbus can introduce advanced statistics analytics to the
A320s to enhance functional safety, and minimize maintenance aid costs. Alternatively, the
company can continue on its innovation strategy to ensure that its product is at the vanguard of
aerospace technology. Presently, the commercial planes are developed based on customer needs,
which helps them function their fleets more effectually, and serve new markets while offering
clients the best inflight experience.
Importantly, fuel consumption is the primary focus for airlines when it comes to
planning operational costs. Due to this fact, Airbus can ramp up its production by making its
products more fuel effectual over the next two years. According to the 2018 annual report,
Airbus was capable of maximizing on its new wide-bodied “A330-900”, while the “A330-800”
variant made its initial flight. By 2020, the firm can ensure that its A330s can further enhance its
fuel consumption by ensuring the consumption rate is reduced by 25 percent compared to older
planes of similar size. These changes can be attained in installing the new era Rolls-Royce
engines, greater span, and new 3D optimized wings. Besides, Airbus can ensure over the next
two years; they have installed “Sharklet wing-tip” devices to optimize aerodynamic performance.

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 12
Notably, Airbus is in a better position of making these changes within the two years considering
that Boeing is busy developing new technology and certifications for its grounded 737 Max.
Conclusion
Currently, Airbus is maximizing its production after the grounding of Boeing’s best-
seller, 737 Max. In spite of some challenges Airbus is encountering with its “Pratt and Whitney”
engines of IndiGo, the firm is at a better positioning of making the necessary changes and initiate
proper technological advancements over the next two years. Currently, Airbus has a contract
worth over 33 billion dollars with IndiGo, while Boeing has made a loss of at least one billion
dollars during its quarterly proceeds in 2019. Due to this fact, Airbus management can focus on
ramping up its production to ensure that the firm meets demands for its planes. By working on its
production, Airbus will be capable of maximizing Boeing’s 737 groundings as the company will
have ample time in testing and implementing new plane technologies, and designing new planes
that fit the mid-market jet.

Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 13
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Benefits for Airbus From Boeing’s 737 MAX Default in The Next Two Years 14
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