Airbus Competition
Now Viewing Airbus's competition in: Aerospace Products and Parts Manufacture (primary)
Call Preparation Questions
Customers, Marketing, Pricing, Competition
Who are the company’s primary customers? - The Department of Defense, NASA, and the world's airlines are the primary customers for aerospace manufacturers. Subcontractors typically work for the Big Five manufacturers.
Does the company produce for the military or commercial market? Does it have security clearance to work on government contracts? - During the recent commercial aviation downturn, the military segment became more important.
What are typical prices for the company’s products? - Prices for parts vary, as commercial aircraft cost from $50 to $200 million. Private jets list for $6 to $45 million depending on size.
Does the company cultivate ties with Congress? If so, how? - Companies dependent on government contracts frequently lobby for spending on particular defense programs.
How large is the company’s sales force? - A strong sales force is critical to building and maintaining relationships with key customers. Parts suppliers frequently sell to the airlines and other end-customers to have their products specified in new aircraft orders.
How does the company market itself? - Advertising expenditures are relatively small.
Do the company’s contracts include cost adjustments for inflation? For cost-overruns? - Because contracts are typically cost plus or fixed-price, the company must be able to estimate costs accurately.
How many contracts is the company currently working on? Who are the major contractors? - Companies frequently have multiple contracts and production lines.
How large is the company’s order backlog? - Backlogs are common, but risky, given potential government budgetary cuts.
Who are the company’s primary competitors? On what basis does the company compete? - Small companies typically specialize in various components and develop relationships with contractors.
Competitive Landscape
Demand is driven by the US military budget and the overall economic climate, which affects airline traffic and demand for new commercial aircraft. The profitability of individual companies depends on technical expertise and the ability to accurately price long-term contracts. Large companies enjoy economies of scale in design, manufacturing, and purchasing. Small companies can compete effectively by concentrating on selected components and parts manufacturing for particular prime contractors. Increasingly, small companies are developing system integration capabilities as large firms outsource more aspects of contracts. Production of aircraft and major aircraft components is highly automated: average revenue per employee is nearly $300,000.
Full Industry Overview For Aerospace Products and Parts Manufacture
Business Challenges
CRITICAL ISSUES
Volatility of Government Spending - Dependent in large part on federal government spending, the aerospace industry is cyclical by nature and unpredictable, due to uncertainty of the annual government budgeting process, election cycles, and the ebb and flow of spending levels. In six of 15 recent years, annual production of aerospace products and parts fluctuated more than 10 percent from the previous year.
Dependence on Air Travel - Commercial aircraft and parts production, which is significantly larger than military aircraft production, depends highly on worldwide air travel. Air travel, in turn, depends greatly on consumer and corporate spending. Reductions in air travel decrease the need for new aircraft and can lead carriers to change existing orders from developed planes to newer, more efficient aircraft.
Industries Where Airbus Competes
- Aerospace & Defense
- Aircraft Manufacturing
- Commercial Aircraft Manufacturing(primary)
- Military Aircraft Manufacturing
- Aircraft Manufacturing
