Early Phase and Development of Airbus - Essay Example

 Early Phase and Development of Airbus The following case study tends to comprehend the various factors that have contributed to the current exalted status of Airbus in the market. Airbus has had a long drawn and illustrious history that has been marked by a lot of achievements which have changed the landscape of the aviation industry. Airbus was basically the child of a joint initiative between the countries of France, Germany and UK. Its inception was in the form of a GIE, or more popularly as the Economic Interest Group. This was an attempt on the part of the European nations to unsettle the unflinching dominance of the Americans in this sector. Early phase and development of the Company The name Airbus was taken from a generic term used by the Airline industry. One of the other reasons of choosing the name was the linguistic acceptance of the name to the French. Initially, the stake holdership of the company was distributed between a number of players. Aerospatiale had 36.5% of the controlling stake in the company, whereas Deutsche Airbus also had a 36.5% share in the company. This pattern was evident in the company due to the multifarious origin. The other stakeholders were Hawker Siddeley with 20% and Fokker-VFW with 7%. A major change came in the year 1979 when the British Aerospace acquired 20% stake in the company Initiation into Aircraft Development The A-300 was the first Commercial Airline to come out of its stable. The work of the development of each of parts was given to separate countries (that in turn is routed to the various companies in the consortium). Initially the sales of the aircrafts were extremely slow, but later the sales of the aircrafts picked up considerably. This was mainly due to the development of subsequent superior models of Aircrafts as well as the innovative marketing strategies used by the company Strategic Drift- Corporate Restructuring and other changes The fact the Airbus was a consortium a number of companies was working against it. The group companies were not ready to divulge information on the technical breakthroughs. The attempt of the part of the companies to maximize the prices on the transfer of the sub assembled parts had detrimental effects on the financial fortunes of the company. Secondly, the Company was in a stage where it was developing a large number of new aircrafts to fend away competition from the other players as well as to augment market share. In the early half of 1990, a lot of steps were taken on an executive level to merge the various entities of the various companies to ensure a smoother environment for the purpose of decision making (Matthew, 1997). However, the steps were averted because of the fear of absolute ownership by one company. One such instance happened in the year 1998, when Aerospatiale tried to sabotage negotiations fearing a take over by British Aerospace and DASA. In the year 2000, three of the participating partner companies, namely CASA, Aerospatiale, Marta and Daimler Chrysler Aerospace merged together to form the new entity called as EADS. BAE and EADS transferred the production facilities to the new company called as Airbus SAS, in lieu of shareholding rights in that concern, this also brought to an end the constant bickering among the various partners and went a long way in streamlining the production facility of the consortium. Scientific implications (merging of the separate entities) The merging of the separate entities had a great effect on the operational and financial capabilities of the company. Earlier, due to the varied nature of the constituent products, there were large scale issues with the functional efficiency of the Airbus brand. This particular move brought in a lot of financial clarity into the functioning of the company. The penultimate result of this particular measure was the development of a lot of new products, most notably being the Airbus A380 (forbes.com, 2011). This particular Aircraft was an attempt by the company to break into the success that its current competitor Boeing was accruing with the 747 -400 model. It can also be safely stated that the functional unity in the operations brought about a series of interesting advents in the software development process. The HOOD method and the development tool called as STOOD were some of the unique revelations that came to the fore because of the functional integrity. Both these methods allowed a lot of design dependence and seamless integration of the design algorithms. The other interesting aspect was the Delcam software developed by the company for the creation of wonderful interiors. It allowed for the three dimensional visualization of the interiors in terms of the design optimization Financial Implications The financial implications of the restructuring were paramount to the future of the company. The company was undergoing a lot of fiscal stress due to the segregated nature of the functioning of the company (Matthew, 1997). The current strategy was to vanish the unnecessary bulk that was present in the company. In 2009, the bold measure of downsizing the workforce by ten thousand was taken. Most of the entrenchment would come from the underperforming and the sick units in the various parts Germany and France. This had also to do with the recent meltdown in the global markets and the technological advances of the company. In the aftermath of this move came in another move that was designed to change the financial landscape of the company. The initiative was named as AFIT (Airbus Finance Improvement and Transformation). This particular process envisaged an improvement in the following four areas The process of operational efficiency and streamlined control Partnering of the business across the multiple fronts and proactive steps in the developing the business Standardization of the accounting tools and the advent of new ones Developing a sustainable road map for the development of the military products Operations Strategy Operations strategy basically refers to the group of decisions that have an impact on the functioning of the company. It also leads to a reorganization of the resources of the company according to the available market Initiation of the strategy The strategy development at Airbus took place in the four basic steps Comprehending the primary area of function- Airbus concentrated on its primary area of function (Aircraft Manufacture) by integrating the various companies into one entity, downsizing the workforce and taking active steps in the development of new software that could result in strategic advantage Determination of the Core Competencies- Airbus, being a consortium had the advantage of using the best technologies from the participative companies. They also concentrated on developing cheaper and more reliant aircrafts as this was a major area of their expertise The decision on the order qualifier and the order winner- This is one of the major areas where Airbus has succeeded in implementing its strategy. The classic case is that of the Airbus A380 which succeeded because of the larger fuel efficiency a well as the operational simplicity. Therefore the, winning point here is the level of the sophistication achieved Positioning of the Firm- Airbus has succeeded in changing its positioning from time to time. In the beginning, Airbus positioned itself as an alternate to the current manufacturers by supplying the best of the technological know-how (McGuire, 1997). However, over time, Airbus has positioned itself as an innovative company that provides economical solutions to the aviation needs of a fast growing world. It ha also exercised a lot of thrust on the green technology, whereby it tends to benefit itself by placing itself as premium player in the category Airbus has also set down competitive priorities by concentrating on the following areas Cost- The cost of an airbus model is definitively lower than that of its other counterparts by around ten-fifteen percent Quality- Airbus has also concentrated on its quality by giving more cabin space, more wing area and quieter engines. All this factors lead to better passenger comfort and better quality of service Flexibility and speed- Airbus has been concentrating on producing airliners that have got considerably higher speeds than their counterparts. The current speeds are extremely high at 0.89 mach, which is almost twenty five percent higher than the nearest competitor in the same category (airbus.com, 2011). There were new softwares, as for example Corena, that were developed for the purpose of navigation Manufacturing Process Design Airbus has one of the most innovative process designs in the history of aviation. They have got an extremely innovative method of production of the Airplanes The various stages for the process of design of the Aircraft are basically as follows PRE PRODUCTION AND DESIGN PHASE The pre production phase is mainly divided into the following major areas Determination of the Market- An initial study is done to determine the market for the current product. The feasibility of the product along with the demand parameters are studied in it. Data from various sources is taken, which includes the worldwide Air traffic forecasts, the outlook of the market and the applicability of the product. The analysis that is done I this regard is called as VRHN analysis (Wong, 2006). The words VRHN would basically stand for Valuable (a product that adds value), Rare (a product that is not easily available), Hard to forge or imitate and the non substitutability of the product Feasibility report- after a feasibility report has been submitted in this regard, the next steps of the process are sanctioned. These include the design of the Aircraft according to the various criteria set by the regulatory authorities and subject to the market demand DESIGN AND PRODUCTION PHASE Need (The specifications for the requirements at hand) - The needs of the process are defined in the beginning. This includes the standard parameters of production of an airplane. An initial team of engineers meet up and design the Aircraft to be made. There are a large number of criteria that are discussed in the design phase. Some of them include the payload, thermal protection, the wing specifications, the safety specifications, the noise levels of the Airline Start of the design process- Earlier, the design process used to be simple. But nowadays, the design process is complex and needs to be handled by multiple teams across the various locations. Plausible determination of the objectives Stress on the key areas of design Design variables and the various workable parameters Analysis and pre-functional designing Repetition in the designing parameters( an iterative method is used by them to comprehend the final needs of the design process) Final design of the aircraft Intimation to the Plausible buyers- The most probable buyers are intimated about the final outcome. The orders are also taken about the number of aircrafts needed; deliver timing and other peripheral factors Reconfiguration of the resources or retooling- If the requirement for the Aircrafts is low, than the company will reconfigure one of its existing factories for the production. If the numbers are higher, a new factory shall be constructed to meet the needs. Production- The assembly lines are crated in the company for the large scale production purposes. The assembly lies are different for the different components to be designed Assembly and the shipping of the final products- The assembly and shipping of the final products is done. This is then shipped to the final assembly plant Plane Reassembly- The parts of the airplane are reassembled to meet the statutory compliances Fitting of the minor elements- The outer auxiliary parts such as the seat, bathroom are added to the airplane Fitting of the engines- The engines are fitted on to the aircraft from the various manufacturers of the engines. As for example, the engines of Airbus A380 had been developed by Rolls Royce Painting and shipping- After the completion of the process, the aircraft is painted in the required colours of the Airline Company and delivered. (Refer Annexure1) This is a broad outline of the general steps that is used by Airbus to manufacture the Aircraft. Role of software in the complete process-The softwares are of primary importance to the production of the airplanes. Airbus uses a lot of its indigenously developed software called as ACSYNT (Aircraft synthesis). Other than this, a lot of other software are also used like supersonic Airfoil,Soarsoft software, VISUAL FOIL and others Airbus (Quest for quality) Airbus, from the tome that it was started has always ventured towards the maintenance of quality. The designed processes at Airbus have undergone a lot of changes over the years. A lot of quality parameters have been incorporated in the design and the production of the airplanes (Heppenheimer, 1995). There are various steps that have been taken by Airbus for the purpose of quality management and continuous process improvement CLASSIC CASE OF A-380 One of the prime examples in this is the production of A380. This was the first airline in the world to have around 25 percent composites incorporated in it. As a result, because of the composite enforced centre, the weight of the centre wing box has decreased by around 1.5 tones (airbus.com, 2011). This has ensured that the fuel consumption has come down by three liter per passenger /hundred kilometer. Qantas Airlines had categorically stated about the fuel efficiency in one of their press releases. The noise levels have also been decreased in the current airplane. The company is working on nacelle designs that produce low noise and therefore guarantee a quieter flight. Currently Airbus is working toward a process that would envisage a total of fifty percent reduction in noise levels. It also works on the concept of reducing the noise by around eighty percent. Quality Parameters followed at Airbus Airbus follows a lot of quality parameters. The principal steps followed by it are Benchmarking Kaizen Cross standardization of the products across levels Lean manufacturing process(Kanban is also incorporated as apart of the philosophy) The two different types of Kanban used are withdrawal and the production mode of Kanban Airbus also uses a lot of the management tools called as Activity Network Diagram, FMEA analysis, Tree diagram to capitulate and understand the carious problems (airbus.com, 2011). During the production of the A380, it also used various path breaking techniques such as Spaghetti process, Total productive Maintenance for understanding the value chain (Value stream mapping and CAPA). It is also one ISO 14001 Certified because of its compliance to the environmental safety norms CONCLUSION Airbus has come a long way since its beginning in the 1960s. It has introduced a lot of revolutionary concepts in its period of growth and changed the face of the aviation industry. Airbus currently registered whopping revenue of thirty billion euros in the last quarter. It also recently concluded its record ten thousandth sale to Virgin America (airbus.com, 2011). The current market worth of Airbus is slightly higher its nearest rival Boeing (approximately 51.67 percent of the market share at the end of the last quarter).however, the growth of Airbus has not without its share of controversies (American companies allege that subsidies are meted to Airbus by the European Union). However, with a strong sales record and buoyant growth, the story of Airbus has just taken wings. REFERENCES airbus.com. Airbus. Retrieved from http://www.airbus.com/. Access on 1 Jun 2011. Carman, Gerry. (1979). "Airbus funds flow on". Sage Publishing David Weldon (1995). Airbus Industrie: The Politics of an International Industrial Collaboration. St. Martin's Press. eads.com. EADS. Retrieved from http://www.reports.eads.com/ Access on 1 Jun 2011 forbes.com. Forbes. Retrieved from http://www.forbes.com/. Access on 2 Jun 2011 Heppenheimer, T.A. (1995). Turbulent Skies: The History of Commercial Aviation. John Wiley.  Lee,John(1969). Britain abandons the European Airbus project. John Wiley Lynn, Matthew (1997). Birds of Prey: Boeing vs. Airbus, a Battle for the Skies. Four Walls Eight Windows.  McGuire, Steven (1997). Airbus Industrie: Conflict and Cooperation in U.S.E.C. Trade Relations. St. Martin's Press.  McIntyre, Ian (1982). Dogfight: The Transatlantic Battle Over Airbus. Praeger Publishers. Thornton, Nicholls,Mark. (2001). Airbus Jetliners: The European Solution. Key Publishing Wong, Kenneth. (2006). "What Grounded the Airbus A380?". Sage Publishing ANNEXURE Annexure-1 Today, complex sets of requirements and objectives include specification of airplane performance, safety, reliability and maintainability, subsystems properties and performance, and others. Some of these are illustrated in the table below, based on a Airbus chart Transport Aircraft Design Objectives and Constraints  Issue  Civil  Military Dominant design criteria Economics and safety Mission accomplishment and survivability Performance Maximum economic cruise Minimum off-design penalty in wing design  Adequate range and response Overall mission accomplishment Airfield environment Moderate-to-long runways Paved runway High -level ATC and landing aides Adequate space for ground maneuver and parking Short-to-moderate runways All types of runway surfaces Often spartan ATC, etc. Limited space available System complexity and mechanical design Low maintenance- economic issue Low system cost Safety and reliability Long service life  Low maintenance- availability issue Acceptable system cost Reliability and survivability Damage tolerance In addition to the regulatory requirements, the primary airplane design objectives include a specification of the number of passengers or cargo capability, target cruise speeds, and ranges. These are often established by extensive marketing studies of target city pairs, current market coverage and growth trends, and customer input. Annexure-2 PORTRERS FIVE FORCES 1. Threat of New Entrants. At first glance, you might think that the airline industry is pretty tough to break into, but don't be fooled. You'll need to look at whether there are substantial costs to access bank loans and credit. If borrowing is cheap, then the likelihood of more airliners entering the industry is higher. The more new airlines that enter the market, the more saturated it becomes for everyone. Brand name recognition and frequent fliers point also play a role in the airline industry. An airline with a strong brand name and incentives can often lure a customer even if its prices are higher. 2. Power of Suppliers. The airline supply business is mainly dominated by Boeing and Airbus. For this reason, there isn't a lot of cutthroat competition among suppliers. Also, the likelihood of a supplier integrating vertically isn't very likely. In other words, you probably won't see suppliers starting to offer flight service on top of building airlines. 3. Power of Buyers. The bargaining power of buyers in the airline industry is quite low. Obviously, there are high costs involved with switching airplanes, but also take a look at the ability to compete on service. Is the seat in one airline more comfortable than another? Probably not unless you are analyzing a luxury liner like the Concord Jet. 4. Availability of Substitutes. What is the likelihood that someone will drive or take a train to his or her destination? For regional airlines, the threat might be a little higher than international carriers. When determining this you should consider time, money, personal preference and convenience in the air travel industry. 5. Competitive Rivalry. Highly competitive industries generally earn low returns because the cost of competition is high. This can spell disaster when times get tough in the economy. Read More