Case Summary and Important facts Despite the fact the airline industry had 87 new-airline failures in the US over the past 20 years. David Neeleman convinced a group of investors and quickly raised $130 million from venture-capital community. With its strong capital base, JetBlue acquired a fleet of new Airbus A320 aircraft and focused on innovation, providing the most valuable and the most excellent travel experience, low-cost, point-to-point service to large metropolitan areas with high average fares or highly traveled markets that were underserved, mainly on central and Western routes in the US. During 2001 and 2006, the airline industry was facing a number of external stress, such as the 911 terrorist attacks, Iraq War, SARS, high price of petroleum, ect. The airline industry in US has been challenged and many of firms were bankrupt.
At some point in the mid eighties members of the Senior leadership of the Air Force decided they felt that the entrance test aircraft should be much more powerful and capable such as a typical fighter aircraft. Mr. Baker tells us that there was much discussion and some argument about this decision amongst the rank and structure of the Air Force. In the end it was decided for the Air Force to use an existing acquisition strategy to purchase a replacement Testing aircraft. This Strategy is called the Commercial Off The Shelf strategy or COTS for short. The Air Force Senior leaderships position was that this COTS strategy is the best way for them to obtain a huge high dollar program such as a new aircraft system.
Airbus A3XX: Developing the World’s Largest Commercial Jet 1. What are the main factors determining the profitability of the A3XX project? Number of planes sold per year – The first and most important factor determining the profitability of the A3XX project is long term demand. This is measured by the number of planes sold/year. In 2000, both manufacturers believed that Asia would register the world’s highest growth rate over the next 20 years.
What does this imply for the future success of each product? Answers: In the 1970s, Boeing dominated all aircraft market segments before Airbus started to challenge it through a series of innovations. In 1972, Airbus entered the twin-aisle segment with the A300 B1 powered by just two engines, pioneering the concept of “twin-aisle-twin.” Over the years Airbus became a stronger challenger and caught up with Boeing in terms of market share. Since the 1990s, the two companies have been in tight competition for virtually each aircraft order. The orders for Boeing has been more than that of Airbus from the year 1996 to the year 2000 with the orders for Boeing decreasing in the year 1999.
Its intrinsic value is $13.39 in 2011, which is substantially less than its current price. But, our fundamental analysis shows that Boeing Company has not only greater earnings growth but also little more ability to grow than its competitor Lockheed Marin Corporation. The Boeing Company also has strong prospect for earnings growth in coming years. Based on the technical and fundamental analysis, we recommend hold. Background Boeing is the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined.
The summer of 1971 found the once formidable company on the brink of disaster. Despite the nearly a $1 billion in sunk costs, Lockheed was in need of $250 million more to bring the plane to market, but its bankers would not commit without federal loan guarantees. Spokespersons for Lockheed claimed before Congress that the Tri-Star program was economically sound and that their problem was mere liquidity crisis. However, opposition to the guarantee focused on estimated break-even sales – the number of jets that would need to be sold for total revenue to cover all accumulated costs. This case illustrates the importance of NPV analysis in capital budgeting.
The end result of this was that Boeing had to step in and provide the engineering anyway. Boeing even had to purchase one of their major tier one suppliers to regain control. This action increased costs tremendously and delayed the first deliveries by 3 years (Denning, 2013). The delays have added to Boeings costs in the form of cash compensation for losses incurred by buyers (Kelly & Sugiyama, 2013). Boeing doesn’t publish sales or cost data for specific planes, but in an article written by Ostrower (2014), Joseph Nadol, (an analyst at J.P. Morgan Chase & Co) stated that “Boeing's unit costs for
Boeing is the largest exporter by value in the United States. The manufacturing process experienced a major change and there was less production delays than before which not only helped in keeping an efficient flow when it came to their supply chain but also helped in better customer service which of course helped them hold on to crucial market share. Gaining market share of course hugely elevated their problems of losing customers or market share to Airbus (who in order to turn away customers from Boeing had initially adopted the strategy to lower prices of their products). Of course the customers were airline companies. Boeing’s success depended directly on the success of those airline companies.
In a 1969 the Brazillian government funded the creation of an aeronautics company called Empresa Brasileira de Aeronáutica S.A.. This company, today known as Embraer, started off making ground attack planes for the government and has evolved over the years into a well known force in the commericial, executive, and military sectors of the aircraft industry. When the company was privatized in 1994 a period of fairly steady growth ensued until 2009. Although Embraer is the number four producer of commercial aircraft in the world the global economic crisis of 2009 still forced management to make some tough decisions. After seeing its profits fall 36% last year, Embraer was forced to lay off 20% of its workforce.
Southwest Airlines – 2008 Case Study Executive Summary Millions of people fly everyday. Southwest airlines provide low-fare travel among 58 cities in the United States. Although the airline industry suffered greatly in the aftermath of September 11, Southwest was able to continue to hold strong. Southwest airline continues to maintain steady sales as much of the industry was affected by changes in laws/regulations and competition entering the market. In the following report there is a brief introduction to Southwest Airlines and their strategy and then what, if anything, they need to do or not do to remain at the top and competitive in the airline industry.