Airbus- Making of A3XX CASE STUDY

According to experts the plan of Airbus to build a large capacity aircraft Airbus A380 is not a good option. There is a rising demands for planes which are of medium size and can go long range. Here we will analyse why Airbus may not meet the demands of the future. The airline industry has become very much competitive and labour and capital intensive as well. Many low cost carriers have come up which have put tremendous pressure on the conventional carriers which used to ply big capacity planes those were manufactured by two major companies, namely Airbus and Boeing. The airline industry is quite seasonal and have increased revenues only in the 2nd and 3rd quarter of the year and there are various factors influencing the revenues as they influence the airfare namely, customer demands and fuel prices. The airlines industry had grown immensely despite the fact that there has been decline in the number of passengers and the increased insurance costs. On domestic routes, the most commonly used aircrafts are of small or medium capacity. but the freight sector has seen a significant growth and looks promising with demand leading ahead of capacity. There are many factors which can help us to conclude whether the industry is competitive or not. The revenue mainly depends on the ability of the carrier to fill the maximum number of seats in the aircraft. Also, airline costs is another major factor in this regard. Major chunk of the airlines costs come from landing fees, administrative and other costs like the charges ,route and the opportunity costs for the time the aircraft is not flying. Therefore the turnaround time for the aircrafts should be as low as possible as the aircraft looses on revenue during the time it is not carrying the passengers. Airline industry has grown tremendously and hence the air traffic has increased significantly and there have been congestion problems across all the major airports and hubs. But as per airbus increasing frequencies and the number of routes is not a permanent solution to the problem and there is a need of bigger aircrafts with large capacity. Also the frequency of flights cant be increased beyond a certain level as there are certain restricting factors like the crew strength, the no. of runways and many more. Also there is a limitation on the number of airports that can be build specially in crowded cities like Tokyo in Japan. Airbus A380 aircrafts have several features which are novel and which match to the customers needs and expectations. This aircraft will have wider aisle and the cabin size would be large. This would ensure more comfort for the passengers and also make the

movement within the plane easier. Also for the safety concern, it would have 4 engines instead of 2 engines on the small and medium capacity planes. But all these factors make this very expensive aircraft as it will cost 230 million dollars and the Boeing 747 with a capacity of 424 passengers costs 187 million dollars. Airbus A380 will have the common features available in other Airbus aircrafts such as fly by wire technology and other significant characteristics. In the long run operating costs can be reduced as the pilots flights flying Airbus can be exchanged for flying different planes. The airbus 380 will help the Airbus to recover some its development costs as it has already received early orders from some of the major carriers but it is not easy for it to become dominant in the market. Infact there are chances for Boeing B77 to dominate the market and overrule A380. This will also be an opportunity cost for Airbus as it will have to focus more on A380 and may loose the investments it has made on small and medium capacity aircrafts. But even if A380 is not a success, it wont make the Airbus bankrupt.

Recommendations for Airbus: The airbus A380 is not a good option as there is not much need for a large capacity aircraft in the market. Infact there is growing demand for small capacity planes such as Boeing 777 and Airbus A340. Thus Airbus should focus on improving the short and medium planes ranges. Airbus has also planned to launch A318 which can carry 150 passengers and has a range of about 3500 nautical miles. Therefore they should focus on it as there is a huge demand for small capacity planes specially in the domestic markets. Due to rising competition from Boeing it need to focus on low capacity and long range aeroplanes. There are huge opportunities for Airbus due to the Airline industry growth and the future prospects. They should focus more on the economies of scale.