The global commercial aircraft market is dominated by two manufacturers, European conglomerate Airbus and Seattle-based aerospace giant Boeing. Their drive to secure market share is affecting everything from which aircraft you are on, to what routes you can choose from and how many passengers you share the cabin with. The rivalry between the two is shaping not just their own future but the air travel industry itself, driving innovative aircraft design, new buying patterns among airlines and expanded route maps that offer travelers more choice, flexibility and convenience.
How we got here
The rivalry began when Airbus was founded to consolidate the fragmented European aerospace sector in 1969. They have been slowly growing their market share ever since, while Boeing bought out and or out-competed other U.S. firms, leaving the two as the only major commercial aircraft manufacturers.
As the worldwide travel market expanded from just over 400,000 travelers in 1973 to 3.96 billion in 2016, Airbus and Boeing fought to gain market share in the rapidly growing industry, competing at every level over who would get the largest slice the rapidly-growing pie.
Today, both companies are using every advantage they can find, driving innovation and efficiency. Boeing and Airbus each control around half of the global aircraft market, and analysts anticipate the booming travel industry needing as many as 39,000 new planes over the next 20 years. With a value of over $6 trillion over two decades, even small differences in market share add up to big business, so it is no wonder competition is so fierce.
One of the main ways Airbus has clawed valuable ground away from Boeing has been the success of mid-range models like the A340 and A320Neo, the latter of which currently enjoys a 59% market share in its class1. This leads us to the first way the rivalry of these two companies and the new aircraft technologies they are developing is reshaping the air travel industry. That is, the changing shape of airline fleets themselves, and the types of planes you are likely to fly on.
In the early years of the new millennium, many airlines as well as Airbus thought the key to lower costs in the future would be size5. Boeing’s 747 was the queen of the skies, oil was cheap and passenger numbers were steadily increasing. Larger airplanes would allow carriers to get the most out of their precious take-off and landing slots at crowded international hubs and the more passengers they could fit into each plane, the more profitable they would be. This was the theory behind Airbus’ huge, double-decker A380 superjumbo, designed to shuttle travelers between global hubs in large numbers. ‘We'll sell a lot more than 250. We'll sell 700 or 750’ Airbus Noel Forgeard opined back in 20056. Thirteen years on, only 217 A380 aircraft are in service, and it took a last-ditch deal with Emirates to stave off the shutdown of the program. So, what happened? Why are you not finding yourself inside a superjumbo more often?
New Aircraft Buying Patterns
Airlines changed their buying patterns, favoring a mix with greater emphasis on the narrow-body and smaller wide-body section of the market at the expense of the superjumbo. Boeing banked on a contrasting model of the future, anticipating higher frequencies on major hub-to-hub trunk routes along with a proliferation of services linking smaller cities to the network5. Rising fuel costs and the pressure of the Global Financial Crisis on airline balance sheets pushed the industry in the direction Boeing had predicted. Now, smaller narrow-body aircraft make up the vast bulk of all those sold, currently accounting for more than 75% of total sales. But the way aircraft were deployed was also a big part of the change.
Smaller aircraft can be redeployed more easily to meet demand, are easier to fill with customers and have lower running costs, making them attractive propositions for carriers. That doesn’t mean that the Superjumbo is a thing of the past. “Given a purely commercial choice, most airlines would order mid-size, long-range aircraft to replenish their fleet” says David Richardson, Vice President of Air Strategy for FCTG Americas, “However, ordering new aircraft has a political dimension, particularly for state owned carriers. I would expect a continued trend of reduced but continued Superjumbo orders”.
But airline preferences alone don’t tell the whole story. The desires of customers also played a crucial role. Airlines realized that consumers, especially First and Business-class passengers on their prized intercontinental routes, wanted frequent rather than large services. Basically, Business travelers were much more interested in how soon the next service was than in how many people it was carrying. So, fleets of superjumbo jets increasingly gave way to more adaptable inventories of narrow-body craft flying more frequently. This trend seems set to continue as competition and excess capacity keeps ticket prices low.
But, this transition of buying patterns didn’t happen in a vacuum. Airlines took advantage of other, more suitable models being offered by Airbus and Boeing as they competed to offer the most compelling value proposition to their customers. In that sense, the superjumbos are victims of their own manufacturers success with other models, as well as changing demands of consumers. But what were the innovations that enabled this shift?
An important outcome of this intense rivalry has been the competition for more fuel efficient, cost-effective aircraft. Rising prices mean the cost of fuel now makes up almost half the of the operating costs of airlines, so small improvements in fuel efficiency can yield huge benefits to carriers. One reason superjumbos are less popular is that alternative narrow-body or smaller wide-body craft are so much more efficient than they used to be. Boeing’s latest version of the 787 consumes 40% less fuel per traveler carried than its equivalent aircraft did in the 1970s11. That means those smaller aircraft can fly for longer without having to stop and refuel at intermediate destinations, enabling airlines to deploy them on services that would have needed a 747 or A380 before. More frequent services, operated by more adaptable, smaller aircraft became practical and cost effective. This allowed airlines to keep ticket prices low, while giving consumers more flights to the destinations they wanted, giving the more control over their time and their travel.
One driver of this increased efficiency is the new generation of engines powering aircraft. Sustained demand for jet and the need for competitive advantage allowed companies like Pratt & Whitney to develop innovative new approaches to propulsion technology like the ‘geared turbofan’. This engine alone can yield 16% more fuel efficiency, with half the carbon-dioxide emissions and only 25% of the noise pollution of previous models.
These more efficient and longer-ranged, small to mid-sized aircraft have enabled airlines to expand route maps, add new services between previously unconnected city pairings and give travelers more choice. These new services, known as ‘long and thin’ routes, connect smaller airports with more distant hubs, or even link two ‘spoke’ cities together.
Rather than having to fly to a larger hug like New York and then getting a long-haul flight, more and more consumers can fly direct. Boston is an excellent example of how new aircraft technology is unlocking opportunities for airlines and travelers. What was previously thought of as a minor long-haul destination has had more than 12 new routes added to its roster over the last few years. Services from Boston now go to Tokyo, Shanghai, Beijing, London, Oslo and more all without stopping at an intermediate hub.
This is particularly useful to business travelers, saving them the time and hassle of transiting in congested hub airports and providing direct routes to their destinations. And this story is being repeated at other airports around the country. San Diego, Austin, San Jose, St Louis, Portland, Baltimore, Hartford, Orlando and others are all being linked to hubs farther afield directly. 2017 saw more than 53 such services linking previously unconnected city pairings using the Boeing’s flagship 787 Dreamliner alone. This trend will only accelerate as more new aircraft roll off the production lines and airlines continue to find new ways to profitably employ them to serve the market.
These kinds of long-haul routes would once have been the preserve of four-engine, fuel-guzzling behemoths like the 747 or A380. But with the improvements in fuel efficiency and range unlocked by the Airbus-Boeing rivalry they are now being operated mostly by narrow-body or smaller wide-body dual-engine jets like the Dreamliner or the A320.
So next time you can catch a direct flight from a smaller city to a major hub, or head straight home from your trip without transiting through congested airports like LAX or JFK, you may have the innovative new planes of Boeing or Airbus to thank for opening the way.
This productive rivalry has a long way to go yet. Both Boeing and Airbus are plowing billions into research and development to try and gain an edge, pioneering new forms of air transportation and propulsion in the process. Airbus’ E-Fan all-electric prototype aircraft completed a demonstration flight over the English Channel in 2015. Not to be outdone, Boeing is investing in electric aircraft startup Zunum which plans to launch a hybrid-electric commercial air service by 202216. Airbus has also been issued a patent for a new hypersonic jet in the mode of the now defunct Concorde, which would be able to fly from London to New York in just over an hour by moving at 4.5 times the speed of sound.
While it might be years before we see any of these projects come to fruition, if they prove viable at all, these aerospace giants and the ongoing rivalry between them will be changing the nature of air travel for airlines and consumers for years to come. They have already helped give travelers more frequent services, more destinations and more flexibility determining routes, all while lowering costs and reducing noise and pollution. Who knows what might be next?