How Airbus became Boeing's greatest rival

AirbusThe Airbus A380 superjumbo.
  • Over the past 20 years, the commercial aviation industry has come to be dominated by Airbus and Boeing.
  • Airbus and Boeing each own roughly 50% of the global commercial airliner market.
  • Airbus is relatively new when compared to Boeing. While Boeing has been around since 1916, the Airbus consortium did not come together until 1970.
  • Airbus currently boasts a production backlog of nearly 7,200 planes while Boeing’s backlog is around 5,900 aircraft.

Airbus versus Boeing is one of the great rivalries in business today. On par with the likes of Coke versus Pepsi or Ford versus GM.

However, it wasn’t always this way. Not that long ago, the world of commercial aviation was filled with names like McDonnell Douglas, Lockheed, Fokker, and even Convair.

But these days, if you fly, it will probably be either an Airbus or a Boeing.

Boeing is the elder statesman of the two. Founded in 1916, the Boeing Company is now an aerospace and defence juggernaut that is America’s largest industrial exporter.

The company we know today as Airbus can trace its history back to an agreement signed in July 1967 by the French, German, and British governments to strengthen their cooperation in the field of aviation technology.

Included in the agreement is a clause that called for the governments to “to take appropriate measures for the joint development and production of an airbus.”

It was a decision made out of necessity, Richard Aboulafia, an aviation industry analyst for the consulting company Teal Group, told Business Insider.

At the time, American firms like Boeing, McDonnell Douglas, and Lockheed were growing in strength and influence around the world. European manufacturers, once commercial aviation’s leaders in innovation, were feeling the pinch.

Together they formed a consortium called Airbus to counter the might of America’s aviation giants.

The consortium would be based at the headquarters of Sud Aviation in Toulouse, France where it remains today.

Here’s a closer look at how Airbus became Boeing’s greatest rival:


By the 1960s, European plane makers had proved they could build really good jetliners. The Brits had planes like the Hawker Siddeley Trident and…


… The de Havilland Comet.


The French produced the Sud Aviation Caravelle.


Together, the two nations teamed up to build the Concorde. To this date, the Concorde remains the world’s first and only commercially viable supersonic airliner. But on their own, the individual European manufacturers could not take on the might of the Americans.


After all, the Douglas DC-8 and …


… Boeing 707 had become new workhorse jets for airlines around the world.

Boeing

Plus, a new generation of wide-body American airliners was on their way. This group was headlined by Boeing’s iconic four-engine 747 jumbo jet.


There was also the McDonnell Douglas DC-10 and…


…The Lockheed L-1011 TriStar.


The Europeans needed a wide-body jet of their own. On May 29, 1969, the French and German governments agreed to lead a consortium that would produce and sell the A300B airliner.

Airbus

The development of Airbus as a company and the A300 as an aeroplane was fraught with challenges.

First, there was the issue of engines. Airbus struggled to find a suitable engine for the plane. Rolls-Royce’s new RB211 triple-spool turbofan engine was expected to be able to deliver the performance capable of powering the new 300 seat jet. So Airbus planned to use a version of the Rolls-Royce engine called the RB207. But, that deal fell through, leaving the A300 with no engines.

Instead, Airbus decided to buy off-the-shelf engines from GE and Pratt & Whitney after it scaled the A300 down from 300 seats to 250 seats. This occurred after Airbus realised that its plane may be too big for the European market due to lower airline demand forecasts.

In late 1968, the structure of the consortium took a major shift when the British government decided to pull its support in the wake of the massive cost overruns associated with the Concorde program. But, British manufacturer Hawker Siddeley remained in the consortium to build the A300’s wings.

On December 18, 1970, Airbus Industrie was officially created.


To differentiate itself from the competition, Airbus made it a strategic point to offer a high level of technology in all of its aircraft. This included innovative construction techniques like the employment of lightweight composite materials.

Airbus

From the very beginning, the consortium agreed to build the A300 using parts from its various European members. To transport the various components to the assembly plant, Airbus used trucks, barges, and a fleet of over-sized transport planes called Super Guppys.

It was decided that France would build the cockpit, control systems, and the lower center section of the fuselage. While the Germans would be responsible for the forward, rear, and upper center sections of the fuselage. Britain’s Hawker Siddeley built the wings.

The Dutch would make the control surfaces while Spain’s CASA, a late addition to the consortium in 1971, constructed the A300’s horizontal tailplane.


On September 3, 1970, Airbus made its first sale; an order from Air France for six A300Bs. However, Air France felt the 250-seater was too small. So, Airbus re-stretched the A300B1 to 270 seats to create the A300B2.

Airbus

On October 28, 1972, the Airbus A300B made its maiden flight.

Airbus

The A300 wasn’t designed to be a rival for Boeing’s jumbo jet. Instead, as a medium-range, medium-sized widebody, it was a competitor for the DC-10 and the L-1011.


Airbus then took the A300B on an international sales tour. But, even after netting orders from global airlines likes Lufthansa, South African Airways, Thai Airways, and Korean Air, Airbus was effectively frozen out of the US market.

Airbus

That all changed in 1978 when Airbus handed over four A300s to Eastern Airlines for a “free” six-month trial. All Eastern Airlines had to do was pay for its custom interior.

Under the agreement struck between Airbus and Eastern Airlines CEO Frank Borman, the Miami-based carrier had six months to use the planes. If the A300s didn’t live up to Borman’s expectations, Eastern could simply return the planes to Airbus no questions asked.


At the end of the six months, Borman ordered 23 more Airbus A300s. Airbus had arrived in America!


In July 1978, Airbus launched its second model, the A310. It was derivative of the A300 that was shorter but with much greater range.

Airbus

During the 1970s, Boeing concentrated on growing its highly lucrative jumbo jet business while casually staying out of the smaller widebody market. Boeing didn’t build a jet in the A300’s segment until it launched the 767-200 in 1978. By the time the 767 entered service in 1981, the L-1011 was effectively done while the DC-10 was in a weakened position due to scandal.


However, Airbus didn’t truly become a global power until the arrival of the single-aisle A320. It was the company’s first all-new design since the A300.


In June 1981, Air France announced its intent to buy 25 of the yet-to-be-launched jet. Since then, the A320 family has been the best selling jet in the world with more than 14,000 planes ordered.

JetBlue

The A320 marked the arrival of the digital cockpit and fly-by-wire technology in airliners. According to Aboulafia, the A320 and its many technological innovations make it Airbus’s greatest contribution to commercial aviation.


In 1985, Airbus poached John Leahy away from Piper to be its head of sales in North America. The hire was a stroke of genius. By 1994, the New Yorker had become the company’s global head of sales.


Leahy is known for his bold and daring sales campaigns. Often gunning for and successfully winning over even Boeing’s most loyal customers. By the time Leahy retired this January, he had helped Airbus sell more than $US1 trillion worth of jets.

In an interview with the Seattle Times, Leahy recounted how he got Northwest Airlines, a loyal Boeing customer, to buy Airbus in 1986.

Leahy went with a strategy called “Buy small, think big” in which he told Northwest it could order just 10 A320s but receive the bulk discount of a 100 plane order. However, Leahy also told Northwest it would reserve delivery dates for 100 planes in case it wanted more.

And if Northwest didn’t like the A320s, it’s simply stuck with 10 planes while Airbus absorbs the risk for the rest.

The strategy worked. Northwest really liked the Airbus.

“They didn’t just take 100, I think they got up to 145,” Leahy told the Times.


In the early 1990s, Airbus launched two new widebody airliners with mixed results. The four-engine A340 first flew in 1991 while…


… The twin-engine A330 took to the air in 1992. The A340, launched at the end of the four-engine era, proved to be a commercial failure with just 377 sold. On the other hand, the A330 remains the company’s best selling widebody jet with more than 1,700 ordered so far.

The A330 and the A340 are comparable in size. However, the A330 was designed for medium to long-haul flights while the A340 was designed for long and ultra-long-haul flying. But with increasingly capable modern turbofan engines, the less-expensive to operate A330 could effectively operate most of the A340’s routes, rendering the latter obsolete.


In November 1996, Boeing dealt Airbus the first in a succession of setbacks. American Airlines signed an agreement that made Boeing its exclusive aeroplane supplier for 20 years. By June 1997, Boeing had managed to nail down similar 20 years agreements with both Delta and Continental.


In 1997, Boeing acquired rival McDonnell Douglas for $US13 billion.


It immediately killed off the widebody MD-11 and…


… The MD80/90, a rival for the Boeing 737 and Airbus A320. With Lockheed long out of the airliner game, this effectively reduced the market down to Boeing and Airbus.


As part of the merger, Boeing promised the European Union Commission that it would drop the exclusivity clause from the contracts it signed with American, Delta, and Continental. However, it is believed the airlines and Boeing tacitly enforced the clause after the merger. American would not buy from Airbus again until 2011. Delta didn’t place another order with Airbus until 2013.


In the early 1990s, Airbus decided it was time to go big game hunting with a plane designed to best the Boeing 747-400.


That plane became the Airbus A380 which launched in 2007. The double-decker A380 is the world’s largest commercial airliner. Airbus expected the plane to be a game changer with grand visions flying casinos and luxury lounges.


However, superjumbo found orders hard to come by. Since the early 2000s, Airbus has managed to sell just 335 A380s with more than half to Emirates.

Emirates

According to Teal Group analyst Richard Aboulafia, the A380 is the biggest mistake in the history of Airbus. Aboulafia believes the A380 is a poorly executed aircraft designed for a market that doesn’t really exist. As a result, the $US25 billion Airbus spent on the A380 program could have been better used to elsewhere like a rival for Boeing’s next-generation 777X or a true replacement for the ageing 757.


In 2017, Airbus and Boeing went toe-to-toe again when the US manufacturer launched a trade complaint against Canada’s Bombardier over sales of its innovative C Series airliner.

Airbus

The US Department of Commerce threatened to levy a 299.45% tariff on the C Series jets after Boeing alleged Bombardier used Canadian government subsidies to lower its prices for Delta. Airbus jumped into the fray by taking a 50.1% stake in the C Series program and announced it would produce US-bound C Series jets at its plant in Mobile, Alabama thereby making the plane a domestically produced aircraft. The US International Trade Commision eventually found that Bombardier had done no harm to Boeing’s business and scrap the proposed tariff.

Within the next few years, Airbus will take full control of the C Series program and the innovative carbon composite jet will be integrated into the Airbus lineup.


As Airbus looks towards the future, its narrowbody lineup is headlined by the updated A320neo family with new engines, electronics, and wings.

Airbus

While is widebody fleet is led by the carbon composite A350XWB family of jets.


Airbus versus Boeing is alive well. Game on.

Airbus

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.