Case Boeing X Airbus

In: Business and Management

Submitted By Roberta
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Case Air Bus X Boeing


Developing a larger version of 747 AIRCRAFT

If Boeing develops a larger version of 747, it would have to disburse a sum of U.S. $ 4 billion. When announced the decision to develop a larger version of 747, its shares fell 1.7% on the same day, giving signals to the company that it would not be accepted by its shareholders.
But if Boeing uses it, it would not be worth for Airbus to launch the A3XX, because it could not raise the price and still have to divide the market. Then the NPV would be U.S. $ 650 million to a negative value close to selling $ 225 million per unit, assuming sale of 34 units (30% loss of market), with operating margin of 20%, preventing the launch.

Lower the Value of 747 Aircraft

If Boeing had lower the value of 747, it would have a reduction in their profit margin, and could not compete in technology, comfort and operational efficiency with the A3XX. With this decision Boeing required Airbus to reduce the value of the aircraft arriving at a price of U.S. $ 180 million per aircraft on condition of selling 48 units, with an operating margin of 20%, obtaining an NPV of U.S. $ 61 million. Accordingly the Airbus could enter the market without a high profit.

Developing an Airplane Super Jumbo to compete with the A3XX

Boeing brings a negative past experience, which almost led to bankruptcy. The estimated investment would be U.S. $ 13 billion for this development, and that cause the fugue of its shareholders. Even with this high risk, if Boeing develops a super jumbo, Airbus would not launch the A3XX, because it could not raise the price and would have to divide the market. In this case the NPV U.S. $ 2268 million to a negative value close to selling U.S. $ 225 million per unit, assuming sale of 24 units, with operating margin of 20%, preventing the launch.

Ignore the Potential Threat


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