POLITECNICO DI TORINO Corso di Laurea Magistrale in Engineering Management Tesi di Laurea Magistrale Analyzing the market statement of airplane industry Academic Supervisor Candidate Prof. Luigi Benfratello Fatemeh Morovati March 2020 i ii Acknowledgement With due respect, I would like to take opportunity of expressing my sincere gratitude to Professor Luigi Benfratello, my supervisor, for his continuous support, patient guidance and motivation. I also place on record my sincere thanks to my family specially my parents who are playing the most important role in my life and also my friends here in Politecnico di Torino who has given me full co-operation through this master studies. i Abstract The universal market of Commercial Aircraft is of the most major markets in all around the world and there are a lot of papers which are discussing about this subject because of importance of it. This thesis structured around the commercial airplanes which is one of the most important segments in the aerospace industry. This thesis documents in three chapters which includes the introduction which is about the history of emerging airplanes and commercial airplanes and the technology change and the innovation in this industry and then the factors of competition and the market of commercial aircraft and also it shows the application of Michael porter's 5-Force model. Then in the second chapter, it describes the major players in the industry in all over the world which is describing in two parts, major players in the industry and the new entrants in the industry. After all in the third and the last chapter as both Airbus and Boeing have functional product differentiation when it comes to their air-crafts. The Airbus and the Boeing are examples of two companies offering different products based on their vision for the future,and each aircraft is worth billions of dollars. Therefore this report it shows every detail about the existing duopoly between Boeing and Airbus who are dominating the market and at the end we can see the Future outlook of global commercial aircraft manufacturing and the conclusion. ii Contents Acknowledgement....................................................................................................................... i Abstract....................................................................................................................................... ii List of Figures............................................................................................................................. vi List of Tables..............................................................................................................................vii CHAPTER 1 Brief introduction of the World Airplanes and Airlines history and market and Commercial Airplane manufacturing industry and Technical Change in the Commercial Aircraft Industry..........................................................................................................................1 1.1 History of airplanes and how it changed world history ...................................... 1 1.1.1 Timeline of commercial aviation and strategic turning points.................... 1 1.2 Market of commercial aircraft.............................................................................8 1.2.1 Commercial Airplane Market Outlook 2019 – 2038..................................... 8 1.2.2 Market Drivers.............................................................................................12 1.3 Technical Change and the development of industry structure in the Commercial Aircraft Industry...................................................................................14 1.3.1 ABSTRACT.................................................................................................... 14 1.3.2 Analysis of Technological Innovation and Environmental Performance Improvement in Aviation Sector.......................................................................... 15 1.4 Application of Michael porter's 5-Force Model................................................. 21 1.5 How competitive is this industry?......................................................................26 1.6 Does it meet the requirement of a global industry?..........................................30 1.7 Future outlook of Global Commercial Aircraft Manufacturing..........................31 CHAPTER 2 Major Players in the industry in all over the world.............................................. 33 iii 2.1. World's Top 5 Commercial Aircraft OEMs - Airbus SA, Boeing, Bombardier, Embraer SA, ATR.......................................................................................................33 2.2 Major Players in the Industry.............................................................................35 2.2.1 Boeing..........................................................................................................35 2.2.2 Airbus (Commercial Aircraft).......................................................................36 2.2.3 Bombardier..................................................................................................38 2.2.4 Embraer.......................................................................................................39 2.2.5 ATR.............................................................................................................. 41 2.3 New Entrants in the Industry............................................................................. 42 2.3.1 United Aircraft Corporation........................................................................ 42 2.3.2 COMAC........................................................................................................ 43 2.4 Top industry issues and what companies are doing or can do..........................46 CHAPTER 3 Analyzing the duopoly between Airbus and Boeing..............................................49 3.1. Competing products..........................................................................................49 3.1.1. Passenger capacity and range comparison................................................49 3.1.2. Cargo capacity and range comparison.......................................................52 3.1.3. Airbus A320 vs Boeing 737.........................................................................52 3.1.4. Twin aisles.................................................................................................. 54 3.1.5. Airbus A380 vs Boeing 747.........................................................................54 3.1.6. EADS/Northrop Grumman KC-45A vs Boeing KC-767................................56 3.1.7. Small narrow-bodies.................................................................................. 56 iv 3.2. Modes of competition.......................................................................................57 3.2.1. Outsourcing................................................................................................ 57 3.2.2. Technology................................................................................................. 58 3.2.3. Engine choices............................................................................................58 3.2.4. Currency and exchange rates.....................................................................59 3.2.5. Safety and quality.......................................................................................59 3.2.6. Aircraft prices............................................................................................. 60 3.3. Effect of competition on product plans............................................................ 64 3.4. Orders and deliveries........................................................................................ 65 3.5 Controversies......................................................................................................67 3.5.1 Subsidies......................................................................................................67 3.5.2 World Trade Organization litigation............................................................68 3.5.3 Proposed tariffs...........................................................................................71 3.6 Conclusion.......................................................................................................... 72 v List of Figures Figure 1 : Global Overview of commercial Airplane Market Outlook............................9 Figure 2 : 44,040 deliveries............................................................................................ 9 Figure 3 : 3.4% Fleet Growth........................................................................................10 Figure 4 : 4.6% Traffic Growth......................................................................................10 Figure 5 : 2.7% GDP Growth.........................................................................................11 Figure 6 : $6,810B Market Value..................................................................................11 Figure 7 : 4.1% Service Market Growth....................................................................... 12 Figure 8 : $9,100B Services Market Value...................................................................12 Figure 9 : Five Force Model Framework......................................................................22 Figure 10 : Aircraft Demand by region forecast and by size........................................ 31 Figure 11 : Regional Traffic