Dipti Kapadia Asks Whether the Jumbo Jet Era Is Coming to an End.direct flight over vast distances problem.

In the 1960s, Boeing introduced the world's first jumbo jet.  This met two key needs of global travel.  The Boeing 747 could carry 450 people and it could fly vast distances such as crossing the Pacific.  For decades, the only way to connect two cities seven or more thousand miles apart wast a jumbo jet. Over time both 747s and various wide aisle twin engine planes extended their range, but jumbo jets were the only solution to the direct flight over vast distances.

Both Airbus and Boeing project global passenger growth at or near 5% a year for the next two decades. This would require both more available seat miles and airports that could accommodate the growing passenger throughput. Airbus and Boeing made different strategic decisions about how their customers, the world's airlines, would respond to meeting this growth.  Airbus decided the global air carriers would continue their hub-and-spoke systems and overcome the resulting choke points at those hubs by flying a yet bigger jumbo jet.  Thus they committed to building the A380, the world's largest jet, which, in one configuration, can seat 950 people.  Boeing figured airlines would increase their international point-to-point flights garnering more business travel with its higher revenue per passenger mile. thus they bet the company on building the boeing 737 Dreamliner, a largely composite (thus more fuel efficient and less costly) plane with a long range and 350-450 seats.

Who is winning?

in this November 9th, 2015, Wall street Journal video, the Journal's Dipti Kapadia wonders if "The Jumbo Jet Era Is Coming to an End?"







Jet Deals Fall at Dubai Air ShowConcern about slowing aircraft sales has risen in recent months

Will Airbus Give Up on the A380?

 Two strategic bets
When Boeing committed to the Dreamliner (AKA the B787), it made a very different strategic bet from Airbus which had made its own huge bet on the A380.  Both manufacturers forecast world traffic growth of near 5% per year over twenty years.  The demand for planes is a demand derived from air travel. Thus the straegic question:  How were the duopolists' customers–the world's airlines–going to meet a doubling of passenger miles/kilometers in less than two decades? 

Two different answers
Airbus decided they airlines would move more people through the key international hubs with a bigger jumbo jet that would increase those hubs' throughput capacity.  Their solution was the A380 which could both fly 8-10,000 nautical miles and hold up to 950 people. The massive size of the plane would also allow it to be marketed with a smaller seating capacity and hitherto undreamed of luxuries like an airborne gym, three cocktail lounges, and other amenities.

Boeing predicted that the world's airline would meet the growing demand with more point-to-point flights.  The Dreamliner would have a similar long range, but would hold only 250-350 passengers.  Boeing bet the airlines would try to attract their most lucrative customers with direct flights maximizing the time value of flying executives rather than the luxury that also required large numbers of the unwashed masses to meet load factors. Boeing also committed later than Airbus and may have gone to school on the European's putt.


With hindsight is there a winner?
So are the results in yet?  No, but there is preliminary evidence Boeing may have made the better bet.        
So far Airbus has failed to get a single new buyer this year.  And now in this video, Bloomberg's Benedikt Kammel suggests Airbus's might discontinue its A380 superjumbo as soon as 2018.  

Has Airbus misjudged the market? 


(Source: Bloomberg, Dec. 11)

A Different Take on the Two Tier Corporate Jet Market

Michael Stothard, the FT’s Paris correspondent, reports from the Farnborough air show: Business Jets on the Rise (see the 3:51 minute August 13, 2014 video below.) After a 30 per cent fall in revenue following the financial crisis, the global business jet market is pulling out of its dive.  But as he explains in his article, there is a big difference between the market for big expensive jets and smaller ones.





Big Birds, Little Birds 

What lies behind the more horrendous drop in small plane demand (down 56%) and their continued weakness? I would argue it is yet further evidence of the root causes of America's weak recovery. The large corporations, the Fortune 500 and the next rank down have been very profitable and have gained enormously from the loose monetary policies of the Bernanke and Yellin Fed. Smaller firms have not fared well and the business climate is definitely hostile to unglamorous start-ups. Big Corporate America is buying big jets. The smaller guys are either not starting up in the first place (for the first time since the statistics have been kept more business went out of business than started up) or they can not grow to the point where a small plane would be cost effective.

In a recent Economist interview, President Obama disputes