Say I had told you in 1972, when almost all the world’s aircraft companies were in the U.S., all giants themselves: Boeing, Lockheed, Martin Marietta, McDonnell, Douglas, Hughes, Lear and the list goes on, that I wanted to start a new aircraft company that builds airliners.
You would have told me I was crazy, out of my mind kind of crazy. One does not start aircraft companies.
Well, in 1972, a group of people at Deutsche Aerospace in Germany, and at Aerospatiale in France did just that, and soon a small consortium called Airbus was starting to build and sell airliners.
In the U.S., consolidation brought the companies together. McDonnell Douglas bought Hughes, Boeing bought McDonnell Douglas (who would ever have thought that possible in 1972) and now there is really only one American giant aircraft company that builds airliners: Boeing.
Boeing has struggled from time to time. Over the years I was lucky enough to do work for Boeing, hang around in their factories, get to know their workers, processes and decision-making approaches. I was just a small contributor on their shop floors, never really got to know management, but I always liked the company. For a long time, Boeing had the only very large airliner on the market, the venerable 747. Until a few years ago. The Airbus 380 is larger.
Looking at the chart below shows Boeing and Airbus market share and deliveries.
This chart essentially indicates Airbus deliveries going steadily up, almost every year, along with its market share. Airbus and Boeing market share met and crossed in 2002 and Airbus is now the largest aircraft company in the world, both in terms of market share as well as in annual deliveries.
Boeing is fighting back. The 787 should give it a new edge. But looking at a chart that spans more than three decades, and looking at the trend, what would you bet will the next 10 years look like? Which direction are the two steady lines going to go?
Which of the two companies would you invest in?
There were many critics of Airbus over the years. They asserted that Airbus was not a real company, but it was heavily subsidized by a number of governments, including Germany, the U.K. and France. True. Government run industry? Hmm, not a happy word in the 2012 election season in the U.S.
Against all odds, a bunch of engineers in socialist Europe decided in 1972 to start a company to build airliners, and within 40 years made it into the largest airline manufacturer in the world. In 2012, Airbus hired another 4,000 employees making the employee count around the world approximately 60,000. In comparison, Boeing commercial airplanes group employs about 81,000 people.
What I would not have deemed even remotely possible happened: a virtual startup took over a market that the U.S. owned absolutely.
It was done by:
- Sheer engineering prowess in Germany, France and the U.K.
- Manufacturing efficiencies
- Breakthroughs in material science (composites)
- Government subsidies