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TEAM 1 – Airbus AXX Future of Air Transportation and Possible Air Response

TEAM 1 – Airbus AXX Future of Air Transportation and Possible Air Response. Evaluate how air transportation is evolving – point to point vs. hub and spoke. Point to Point – Direct Flights Between Secondary Airports Dependent on passenger income added cost for convenience

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TEAM 1 – Airbus AXX Future of Air Transportation and Possible Air Response

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  1. TEAM 1 – Airbus AXXFuture of Air Transportation and Possible Air Response

  2. Evaluate how air transportation is evolving – point to point vs. hub and spoke • Point to Point – Direct Flights Between Secondary Airports • Dependent on passenger income added cost for convenience • Higher fuel cost per passenger • Higher frequency of flights (Southwest Airlines) • Medium-sized, long –range aircrafts (777) • Hub and Spoke – Flights from Secondary Airport to Primary Airport to Secondary Airport • International travel • Long-distance and long duration flights • Requires at minimum two legs to reach destination • High passenger density

  3. Resultant demand for VLAs • Factors • Airport growth rate = 1.7% • Passenger growth rate = 5.0% • Increased range of smaller capacity planes • Number of city pairs over 3,000 miles has doubled since 1990 • Cargo capacity increase • Conclusion • VLAs offer solution to select market • High population density

  4. Analyze Boeing’s possible competitive response to A3XX • 1. Develop a stretch version of the 747 (the 747X) • Modify existing design to compete • 2. Cut prices of the 747 • Response only in special cases • 3. Develop a competing super jumbo jet • Current demand does not justify initial research investment • 4. Ignore the potential threat • Allow Airbus to take risk • 5. Capture point to point market (BEST OPTION) • Develop/Expand point to point market using medium capacity long range

  5. How would Airbus decisions and Boeing’s response change due to changes in fuel prices, euro value changes? • Increased fuel prices = Increase demand for VLAs • Decrease in Euro value change = Increase foreign demand and increase flight demand for VLAs

  6. Should Airbus launch A3XX? • NO, NOT YET • Point to point traffic is continuing to increase • Competition with Boeing • Current demand for VLAs is driven by range • Medium sized aircrafts can achieve similar range • Airport capacity will be limiting factor in the future

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