Slide 1

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 1 Source: http://img.airliners.de/2009/12/emirates Source: http://www.airbus.com

Slide 2

Muytoy Nancy Izquierdo Alfonso Wenzler Jrgen CASE AIRBUS A380 BUILDING THE WORLDS LARGEST COMMERCIAL AIRCRAFT MBA IM 2015 Project Management

Slide 3

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 3 AGENDA 1. Historical background of the Airbus Company 2. Airbus competitor Boeing 3. Diagnosis of the project business plan and future prognosis 4.The project execution 5.Airbus and the A380 today 6.Future competitiveness of Airbus 7.Conclusion 8.Discussion

Slide 4

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 4 Airbus Industries began as a consortium of European aviation firms to compete with American companies such as Boeing, McDonnell Douglas, and Lockheed in 1970 British (20%), France (37.9%), Germany (37.9%), Spain (4.2%) Headquarter: Toulouse, France In 2000 Airbus made the transition from a consortium to a fully functioning private entity 1. Historical background of the Airbus Company (1)

Slide 5

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 5 1. Historical background of the Airbus Company (2)

Slide 6

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 6 1. Historical background of the Airbus Company (3)

Slide 7

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 7 1. Historical background of the Airbus Company (4)

Slide 8

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 8 Found in the year 1916 in the Puget Sound region of Washington state Market leader in the industry of military and commercial aircraft manufacturing Customer base and support in 150 countries Employee strength of 165.000 around the globe More than 12.000 commercial jetliner engaged in aviations services The commercial jetliner (SBU) total revenue earned during the period in 2013 stands at 52.9 bn USD 2. Airbus competitor Boeing (1) Company Profile of

Slide 9

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 9 Commercial Aircraft Product Line 2. Airbus competitor Boeing (2)

Slide 10

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 10 Evolution Competition Airbus - Boeing 2. Airbus Competitor Boeing (3)

Slide 11

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 11 2. Airbus competitor Boeing (4)

Slide 12

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 12 Managing New Product Development and Supply Chain Risks: The Boeing 787 Dreamliner Case 2. Airbus Competitor Boeing (5)

Slide 13

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 13 2. Airbus Competitor Boeing (6)

Slide 14

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 14 Dreamliner Outcome 2. Airbus competitor Boeing (7)

Slide 15

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 15 2. Airbus competitor Boeing (8) NTCP-Analysis

Slide 16

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 16 Traditional Supply Chain Lesson 1: Assemble a management team with requisite expertise Dreamliner Supply Chain 2. Airbus competitor Boeing (9)

Slide 17

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 17 Lesson 2: Supply chain visibility should be improved to ensure issues are addressed on time Lesson 3: Cost estimation of a project should follow a full understanding of all the underlying costs Lesson 4: Improve Tier-1 supplier training and selection process 2. Airbus competitor Boeing (10) $7.3 billion Estimated costs (conventional outsourcing) $4.2 billion Estimated costs (new outsourcing model) $15 billion Actual costs

Slide 18

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 18 3.Diagnosis of the project business plan and future prognosis (1) 3.1The Airbus A3XX: 1990: why not a super jumbo? Basic design finalized in 1999 passenger & cargo models 550 Passengers (VLA) Could cover the same routes of the Boing 747 + extended Full passenger decks and a third deck capable of accomodation baggage, cargo, and/or passenger amenities (cocktail lounge, exercise room and showers)

Slide 19

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 19 3.Diagnosis of the project business plan and future prognosis (2) 3.1The Airbus A3XX: More space per seat and wider aisles attract passengers Same fly-by-wire tech, flight deck design & performance characteristics (Airbus family) Higher list price than 747, but increased capacity and reduced costs Operating cost +12% but +35% capacity Planes size complications

Slide 20

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 20 3.Diagnosis of the project business plan and future prognosis (3) 3.2The diagnosis: List price of $216 million Cost of development: $13 billion Funding: $3.5 billion from vendors $3.6 billion of launch aid from the partners national governments $5.9 billion Airbus partners

Slide 21

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 21 3.Diagnosis of the project business plan and future prognosis (4) Was there sufficient long-term demand to justify industrial launch? 9.0 Domestic USA (25.7 %) Europe USA (13.0) Intra Europe (7.0) Asia USA (6.6) Europe Asia (4.6) Domestic Europe (2.9) Africa Europe (2.7) Domestic P.R. China (2.1) Intra Asia (2.1) Domestic Japan (2.1) USA Central America (2.0) South America Europe (2.0) USA South America (1.7) Canada Europe (1.5) Europe Pacific (1.5) 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Avg. Annual RPK Growth (%) 1999 - 2019 Airbus Industrie 1999 Global Market Forecast Average Annual RPK Growth (%) (1999 2019)

Slide 22

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 22 3.3Project expectations: Delivery starting in 2006 Hope to secure 50 jets as many as 5 major airlines. When it reached full production capacity (4 planes/month) in 2008 price $225 million & operating margins 15-20% Effective tax rate = 38% (French rate including social contribution) 3.Diagnosis of the project business plan and future prognosis (5)

Slide 23

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 23 3.3Project expectations: Annual growth rate of 4.9 % (passenger traffic) Annual demand for new aircraft of each 10,000 passengers routes linking almost 2.000 airports Forecast demand: 14.661 new passenger aircraft and 703 new freighters over the 20-year period through 2019 727 new aircraft seating from 400 to 500 passengers 1550 new aircraft seating +500 passengers Sales = $350 billion Finantial success & aviation industry leader Approx. costs of $13 billion (not consider $700 million that would have been expended in 2000) 3.Diagnosis of the project business plan and future prognosis (6)

Slide 24

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 24 4. The project execution (1) Example of an Aerospace Project Network (Multiple Intersecting Iterative Loops)

Slide 25

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 25 4. The project execution (2) 4.1General data of the project: 1.19. Dec. 2000 - voted to launch a $13 billion programm to build the A3XX A380 2.Early 2001: The aircraft configuration was finalised 3.23. Jan. 2002: Manuf. the 1st wing box component 4.The development cost had grown $3 billion when the first aircraft was completed 5.First flight: 27. April 2005 6.It entered commercial service: October 2007 7.200 orders up to the year 2009 8.Committed customers cost reductions (fuel) Source: Singapore Airlines

Slide 26

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 26 4. The project execution (3) 4.2Complications: 1.At the beginning of the project: The planes size, noise, emissions, turnaround time, taxiway movements, evacuation 2.2005: ICAO Separation row (heavy aircrafts) 3.3 delays announced in 1.5 years 4.MAIN Causes: a)Electrical systems and structure (complex cabin wiring) b)Use of different engineering methods at different Airbus sites wiring incorrectly design to manufacture c)Late weight reduction design changes 5.2006: change of Airbus CEO & program director 6.2006: spend $2 billion more than the budget 7.2010: Qantas Flight 32 uncontained engine failure

Slide 27

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 27 4. The project execution (4) 4.3 The main failure: Fall 2006: assembly stage in Toulouse (France) Preassembled wiring harness produced in Hamburg failed to fit in the airframe Design software incompatible (CATIA ) Consequences: Ability to share design specifications between the 2 plants was compromised Hundreds of miles of cabin wiring failed to fit Postpone deliveries for 2 years & redesign the wiring system Cost expected to exceed $6 billion When the delay was announced, the stock lost 1/3 of its value June 2008: Copresident accused (sell stock before make public)

Slide 28

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 28 5. Airbus and the A380 today (1) 5.1 Restructuring-program power8+ (2007-2014): Preparation to stay competitive in future No double production structures Reduction of 10.000 workplaces Intended sale of plants in France and Germany Intended cost reduction: 2,1 billion p.a. from 2010 (create free cash flow) Engineering sector: intended cost reduction 15% Administration sector: intended cost reduction 30% (until 2010) e.g. by reduction amount of suppliers Predominant success (targets 2010 were beaten) Ability to compete was achieved due to power8+ But: factories could not be sold (Premium Aerotec)

Slide 29

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 29 5.2 Actual situation and focus: Currently ca. 69.300 employees (Boeing: 165.000) Sales: 42 billion p.a. (Boeing: 41 billion) EBIT 1.8 % p.a. (Boeing: 1,71 %) 2009: Airbus Military was founded In August 2013 the 8.000th aircraft (A 320) was delivered to Malaysian Air Asia (Boeing: more than 12.000) Technical problems (2014: material fatigue wings; 2013: fractures in the body; 2012: hairlines in the wings) but BOEING also has problems with the Dreamliner 787 EADS: loss of order for 42 aircrafts for the Indian SpiceJet in 03/2014) (Boeing 737 Max, $4.4 billion) 5. Airbus and the A380 today (2)

Slide 30

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 30 5.2 Actual situation and focus: Airbus A350XWB: set to redefine the standards of tomorrow, 4 flying test aircrafts Capacity for the best-selling single aisle aircraft A320neo-Family shall raise from currently 42/month to 46/month in Q2/2016 Currently 60 % market share for A320neo-Family (2.610 orders) Strategy of strengthening the star to stay competitive Demand on civil aircrafts until 2030: In Feb. 2014 the ACJ319 Elegance was shown at Abu Dhabi show (aircraft for VVIP) Strategy of diversification 5. Airbus and the A380 today (3)

Slide 31

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 31 6.1 Short-term future: Development of capacities Global interobility: Airbus and Commercial Aircraft of China (COMAC) Memorandum of Understanding (Feb. 2014) Increasing share from 20 to 25 % of an joint-venture: Arbin Hafei Airbus Composite Manufacturing Centre (HMC); Feb. 2014 Airbus reinforces its presence in India (subsidiary: Airbus India) Massive development of relationship in Singapure Aeroflot (RUS): first airline with sharklet equipped A320 (Feb. 14) Invests in robotics-project FUTERASSY in Spain (Feb. 2014) Agreement with M.I.T. to explore the use of digital manufacturing in aerospace (Dec. 2013) Good promotion on R+D Good positioning on actual and future markets 6. Future competiveness of airbus (1)

Slide 32

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 32 6. Future competiveness of airbus (2) 6.2 Long-term future - Airbuss vision for smarter skies: Annual report about the future of aviation (in 2050) Basis for Airbus Concept Plane: A380 Future depends on the challenge how to solve the energy- problem Impressions (video):

Slide 33

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 33 6. Future competiveness of airbus (3) 6.3 Summary ideas: Seats with sensors, that adapt to your body Recycable materials made of plant fibres, self-cleanable Glass-cabins (partially) Social rooms: virtual golf court, lounge Oil of an alga istead of kerosine Artificial intelligence, self-repairing materials Vertical take-offs for gaining space in cities For long-distance flights: flying aircraft carriers work on implementation of some visions already nowadays

Slide 34

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 34 7. Conclusion Competition between Airbus and Boeing: duopoly in the large jet airliner market since the 1990s The A380 emerged from the estimated necessity of a VLA: more capacity (550 passengers), more comfort, also to reduce Boeing's market share Some successful restructuring programs assure the ability to compete nowadays. Nevertheless the project A380 was so far an expensive failure: The problems that Airbus experienced during the development of the project A380 resulted in significant cost overrun (3 billion), schedule delays (3 in less than 1.5 years) a firm crisis (change of Airbus CEO, A380 PM) Technical problems with the A380 during the last years: necessary to search new approaches and new technologies to stay competitive. Airbus has here very good, but ambitious imaginations ambitious visions are necessary for breakthroughs

Slide 35

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 35 Source: http://www.avioners.net Source: http://www.airbus.com

Slide 36

MBA IM 2015 Project Management Muytoy Nancy / Izquierdo Alfonso / Wenzler Jrgen / 22.04.2014 36 Source: http://www.austrianaviation.net Discussion Source: http://www.aerotelegraph.com

Slide 37

The Airbus A3XX Project proposal for solution Technology ComplexityNovelty Pace Super-high tech High-tech Medium-tech Low-tech DerivativePlatformBreakthrough AssemblySystemArray Regular Fast/competitive Time-critical Blitz Current style Required style