We now turn to the aircraft manufacturers themselves, where a familiar story emerges.
Many corporations manufacture parts for aviation, such as United Technologies, BAE Systems, Raytheon and Honeywell International. But a big proportion of the work carried out is for defense aircraft. If you narrow it down to who produces commercial aircraft, from design to finished product, we are left with just two companies, both of which have unrivaled control of the market share.
- Founded in 1916 in Seattle, Washington by William Boeing
- Traded on the NYSE
- Headquarters in Chicago, Illinois
- Company Slogan: ‘Forever New Frontiers’
- Revenue of $96.1 billion in 2016
- The 737 is Boeing’s leading commercial aircraft:
- The ‘Next Generation‘ 737 is supplied to 114 separate airlines
- 296 have been ordered so far in 2016, out of a total of 334 aircraft on order
- Total number of orders worldwide for the 737 stands at 13,478
- Up to the end of June 2016, Boeing has taken 23,284 orders for aircraft, and delivered 17,591
- The Boeing 747-200 is the aircraft of choice for Air Force One’s Presidential Airplane. The next Presidential aircraft to replace the 747-200 has been confirmed as the Boeing 747-8
- Founded in 2000 as ‘European Aeronautic Defense and Space Company’
- Traded on the Paris stock exchange
- Headquarters in Leiden, Netherlands – Main office in Blagnac, France
- Company Slogan: ‘We Make it Fly’
- Revenue of $67 billion in 2015
- The Airbus A320 family of aircraft leads the way
- Jets in this range are the A318, A319, A320 and A321
- 12,714 Airbus A320 jets have been ordered in total, with 7,156 delivered
- The Airbus A320neo (new engine option) is part of a modernisation programme of the A320 series
- 4,583 of these jets were ordered as of July 2016
- Up to 31st July 2016, Airbus has taken orders for 16,674 aircraft and delivered 9,859 of them
The numbers above indicate that Airbus’s A320 range of aircraft is closing up to Boeing’s 737 line. Last month both corporations were on a par with one another, as this report from Reuters confirms:
Airbus virtually closed the gap with Boeing in their intense battle for airliner orders in July after booking about half of the 197 firm sales unveiled at last month’s Farnborough Airshow, according to the latest data from both companies.
Amid a broad slowdown in purchases, the European planemaker said it had sold a total of 373 jets between January and July, or 323 after adjusting for cancellations.
That compares with 383 airplane sales, or 333 after cancellations, by U.S. rival Boeing.
From a broader perspective, Airbus’s performance for the whole of 2015 shows how close they are to Boeing in terms of production. This from The Guardian back in January 2016:
Airbus has claimed to have edged ahead in its battle with rival Boeing last year as it won orders for more than 1,000 new planes, although Boeing made and delivered more aircraft.
The aircraft manufacturer said it now had 57% of the market overall by units ordered, with the 1,036 orders in 2015 making its cumulative order book total more than $1tn (£693bn), securing production for a decade to come.
Airbus said its improved, fuel-efficient A320neo family of planes was securing it a dominant position in the single-aisle market for smaller short-haul aircraft. The first such plane will be delivered this month, but 861 are on order, comfortably outselling Boeing’s competitor, the 737 MAX.
However, its US rival is selling more widebody planes – and delivering more aircraft overall. Boeing delivered 762 planes in 2015 for revenues of $125.bn compared with Airbus’s 635 aircraft, earning $91.6bn.
The scale of these numbers demonstrates why it is a two way market. It is a further example of how deeply compartmentalised the aviation industry is today.
Three years ago, Boeing predicted that over the next twenty years there would be demand for over 35,000 new aircraft worth almost $5 trillion dollars. By 2032, they say their global fleet will be as high as 40,000. Boeing’s vice president of Marketing, Randy Tinseth, was reported in The Guardian as saying:
‘Air travel has become an integral part of the social and economic fabric of the world. The centre of aviation will move from the US to Asia, and Asia Pacific will be by far the largest market place.’
If Randy’s view comes to fruition, it would obviously be a further step in destroying American hegemony. But, again, what becomes clear here is a rise in ‘tensions’ – on the surface at least – between the West and the East, as touched upon in previous blog posts.
In my research for this article, I came across a comment from Dan Birchall at Quora.com in relation to the dominance displayed by Boeing and Airbus. He said:
Both are the result of significant consolidation within the aerospace industry at a continent-wide level, generally either driven by or tolerated by government, in the view that creating a single large, strong company or conglomerate will give competitive advantages in the global market over having many smaller, weaker companies that compete with each other in addition to trying to compete globally.
Globalisation is seen world wide as a business mainstay. A strength, something to be admired and celebrated. It is touted as progress. The all prevailing mood of pushing on and conquering the next slice of the market. Reducing the availability of competition and creating super corporations, as with Boeing and Airbus, is viewed as innovation. Eliminating choice and herding people towards an amalgamated industry is the result of centralising corporate power. It does not matter which industry is brought into question, this same ethos wins out each time.
As I was putting the details of this post together, I also discovered that Airbus, who own shares in the French aircraft manufacturer, Dassault, were finalizing the sale of their investment. This from the Financial Times in June 2016:
Airbus is finally cutting its last ties with Dassault Aviation, raising €2.4bn from the sale of its residual 23.6 per cent stake in the French family-controlled aircraft maker through a complex institutional placement, buyback and bond offer.
Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank, Goldman Sachs and JPMorgan are acting as joint bookrunners on the placement and the bond issue.
Not surprisingly, Rothschild & Co have been advising Airbus on the transaction.
What do you think about the shared dominance of Boeing and Airbus? Please let me know your thoughts.