Crosscuts: Design x Retail
Culture Cut: Humans are fascinated by the freedom of flight, and the aircraft that make flying possible. Before the Wright brothers’ first flight in 1903, man has always wanted to ride the sky. But only slightly more than 8% of the world’s population has even taken a flight. In America it is estimated that 80% of us have flown on a commercial airliner at least once. Larger more fuel efficient airlines, cheaper fares, and accessible gateways have made travel and navigation a snap. Getting from point A to point B has never been more efficient and systematic.
Commerce Cut: The steady improvement in demand for air travel and cargo continues. Growth of commercial passenger airline travel will mostly originate in The Middle East, Asia, India and other emerging regions of the world. Every national and branded carrier wants the most modern fleet of energy efficient planes to help it offset fuel price fluctuations, and maintain premium revenue per seat load factors.
Many commercial passenger airline brands have either merged or become a part of larger alliances. These vertical and horizontal alliances create new demand for passenger planes. By 2025 U.S. carriers are expected to spend $538B on new aircraft, followed by China at $349B, the United Kingdom at $146B, Japan at $118B, Germany at $109B and India spending $100B.
Crosscutting: Every year the Farnborough International Airshow is held in England, creating the largest retail destination for the buying and selling of new commercial and military aircraft. It essentially becomes a really big conference, like the Consumer Electronic Show (CES) in Vegas, the only difference are the size and price of the merchandise. Pop-up retail on an industrial scale, an iconic global aviation trade show.
At the 2010 show held this week, aircraft leasing companies purchased 40 Boeing (BA) 737-800s, 60 Airbus A320s, and 51 Airbus single-aisle jets which were sold at at value of $12.4B. Emirates Airlines ordered 30 Boeing 777-300ER worth $9B, and bought GE (GE) engines to match for $30B. Emirates is growing above 20% per annum, and its growth is predicated on its ability to receive delivery of new aircraft.
Brand Opportunity: Boeing vs Airbus is the main event - which brand will obtain more orders, and which company will encounter delays as it brings new aircraft to market. At the Farnborough show, Boeing announced its Dreamliner and Airbus announced its colossal A380 double decker aircraft in recent shows. Selling and buying airplanes requires face-to-face negotiation, time, and the product. All things being equal, the brand that wins is that brand with stronger relationships and recent performance. Under promise and over deliver is the ticket.
Market Risk: Timing, delivery and cost are the metrics that influence price, but it can cost you business if you’re late. Designing and manufacturing commercial passenger aircraft is not easy, it’s not like assembling an automobile. Product delivery and launch delays are the normal cost of business; Boeing’s 787 Dreamliner is two and a half years late. Airbus’s A380 was three years late and hundred of millions of dollars over budget.