Recovery of Airbus A380 From Failure

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Table of Contents

Executive Summary
Introduction
Discussion
Conclusion
Reference List

Executive Summary

The decision to stop A380’s production was reached after the Emirates decreased its latest order. It is believed that some of the factors that may have led to the failure of the Airbus A380 include limited route paths, environmental concerns and high operating costs. Many firms chose to cut their fleet as well as routes, which further reduced the demand for the aircraft. In order to recover, Airbus has considered some courses of action. For instance, modification of the A380, reduction of production, and marketing the model to new customers. The best course of action is finding new markets for the model A380. This can help a company to remain competitive and profitable, even in times of low demand. Innovation is a key factor, as entering new markets can encourage companies to innovate and develop new products or services to meet the needs of new customers, which can assist to differentiate the company from its competitors and increase demand for its products or services.

Introduction

The demise of the A380 can be linked to various issues, including a change in the market as well as reduced demand for the craft, that is regarded among the largest airplanes. Lack of incentives for companies to purchase and operate such immense planes means that it could be the end of their era. The decision to halt A380’s production was reached after the Emirates decreased its latest order. The last plane model was delivered in 2019 and Airbus declared, in 2021, that it would end making of the plane, citing reduction of demand as the main problem.

Nevertheless, many A380s still remain in service with airlines worldwide. Some companies have declared plans to continue operating the A380 for the near future. It is believed that some of the factors that may have led to the failure of the Airbus A380 include limited route paths, environmental concerns and high operating costs. Many firms chose to cut their fleet as well as routes, which further reduced the demand for the aircraft. In order to recover, Airbus has considered some courses of action. For instance, modification of the A380, reduction of production, and marketing the model to new customers. Apart from discussing the problems and the main challenge facing the aircraft manufacturer, the paper recommends the best course of action to deal with low demand of recovery of the A380.

Discussion

Most Important Facts of the Case Study

The Airbus A380 has recently not been in production as the last aircraft was delivered in 2019. The company stated that the reduced demand for its planes was the main challenge facing the firm (Brennan and Davidson, 2020, p. 869). The airplane is regarded among the biggest commercial passenger aircrafts worldwide, with a wingspan of eighty meters (Brennan and Davidson, 2020, p. 869). It was first flown in 2007 and delivered to customers in the same year (Bartlett and Beamish, 2010, p.752). It can accommodate a capacity of more than eight hundred passengers and has a range of around eight thousand nautical miles (Brennan and Davidson, 2020, p. 870). It contains two decks that stretch the length of a fuselage and powered by four engines (Brennan and Davidson, 2020, p. 871). As of two years ago, about two hundred and fifty-one A380 aircrafts have been produced (Brennan and Davidson, 2020, p. 871). Nevertheless, despite stopping A380’s production in 2021, Airbus is recovering.

The Key Problems and Issues

One of the key problems or issues affecting Airbus with regard to A380 are the high operating costs. This has had a major effect on the plane’s market success (Davidson and Brennan, 2019, p. 407). Due to the size of the aircraft and complexity, it needs more fuel, maintenance, and staff to operate than smaller planes. Many airlines describe these characteristics as being unattractive, particularly in the current economic climate where the firms are targeting to reduce expenditure and increase efficiency (Davidson and Brennan, 2019, p. 407). Among the main reasons behind the expenses is the restricted route options.

As a result of A380’s size, it can only operate from a limited number of airports that have been upgraded to accommodate it, which restricts the number of routes on which it can be utilized. This means that forms cannot use it on as many paths as they could other smaller airplanes, which limits its revenue generation potential (Davidson and Brennan, 2019, p. 407). Moreover, the high purchase price of the model and lack of economies of scale due to the low production numbers added to the cost for the airlines.

Another key problem that affected Airbus and led to failure of A380 is limited route options. The aircraft is large in size and thus, it can only operate from a restricted number of airports that have been upgraded to suit it. This means that firms cannot utilize the planes on as many routes as they desire, hence limiting the revenue generation potential (Davidson and Brennan, 2019, p. 408). The size as well makes it hard to operate from smaller airstrips (Davidson and Brennan, 2019, p. 408). Some of the airfields have not been improved to accommodate the A380 as a result of the fiscal constraints or dense populations in the surrounding areas.

The limited route options mean that the airplane is less flexible than smaller planes regarding the paths it can operate. For instance, the aircraft cannot manage shorter destinations with less traffic, meaning that the firms must thoroughly plan their schedules and routes to guarantee that they are making the most efficient utilization of the airplanes. This situation has been seen to be less appealing to companies in the aviation industry as they are required to prepare their networks carefully to ensure that they can suit A380s. Additionally, they are needed to use the airplanes on paths where they could produce most revenue (Davidson and Brennan, 2019, p. 408). All the mentioned issues with regard to route options result in low market potential and thus, low sales.

The third problem that has faced Airbus and resulted in stopping of A380’s production includes environmental concerns. These have had an effect on the market success of the airplane model. The aircraft is a large piece of engineering with four engines, which makes a target for criticism from environment activists. Analysts claim that it is not as eco-friendly or fuel-efficient as smaller airplanes (Davidson and Brennan, 2019, p. 409). They add that its size as well as number of engines lead to higher emissions of greenhouse gasses and noise pollution (Davidson and Brennan, 2019, p. 409). The high fuel consumption of the plane has been an issue as firms are under immense pressure to decrease their carbon footprint and meet emissions regulations.

The pressure felt by the airlines has made the Airbus A380 less attractive to the companies, particularly as newer and more fuel-efficient airplanes, including the Boeing 787 and Airbus A350 have entered the market. Moreover, the size of the A380 means that it produces more noise, which is disruptive for people near airfields (Davidson and Brennan, 2019, p. 410). This has resulted in criticism from local communities and environmental groups, and has made it harder for airports to cater to the A380. These concerns have led to the low sales quantity as firms are hesitant to buy the model as there is a negative perception linked to its environmental impact, which is among the main reasons behind stopping of the production.

The Main Problem or Challenge Facing Airbus

Despite there being various issues that affected production of the A380 model by Airbus, the main challenge that the manufacture faced is low demand. This is believed to have significantly impacted production in numerous ways. One major effect was on the fiscal performance of Airbus, the manufacturer. Normally, if the demand for an airplane model is limited, the maker may fail to sell as many units, which often results in reduced revenue and losses (Grimme, Maertens, and Bingemer, 2021, p. 76). Additionally, this can lead to less orders, which negatively influences the production schedule, resources, and staff.

Another effect of low demand was on the production procedure itself. In normal instances, if there is limited demand for a product in the market, the manufacturing company may have to reduce the quantity of aircrafts they produce. This can result in lower production rates, less efficient utilization of resources, and possibly even the closure of facilities. Airbus has reported that the situation impacted its supply chain, as the suppliers may had to adjust their production plans and volume to cater to the situation. What happened after include disruption in the chain and loss of supplier associations (Grimme, Maertens, and Bingemer, 2021, p. 76). In general, the issue can influence a firm’s ability to produce airplanes efficiently as well as profitably.

Alternative Courses of Action to Handle Low Demand

Regarding low demand of A380 aircrafts, the alternative courses of action include reduction of production, modification of the A380, and marketing the model to new customers. There are various ways decreasing production can help to handle the issue. For instance, it is the main factor that aids in lowering the costs of operation. By doing this, Airbus limits expenses incurred by not having to produce as many planes (Grimme, Maertens, and Bingemer, 2021, p. 78). This can assist to alleviate the losses linked with low demand. Another way that reducing production helps to deal with low demand is by improving efficiency. A decrease in production quantity means that the firm is able to concentrate on producing a smaller number of planes with greater quality and less defects. This can aid in enhancing efficiency and limiting the costs. Lastly, it is important to note that a company that restricts its manufacturing ensures that it matches the supply with available demand.

In order to deal with the low demand of the A380, Airbus can choose to modify the aircraft by making the design alterations to the model. Such include updating the inside cabin layout, integrating new materials to enhance fuel efficiency, and adding innovative technology (Grimme, Maertens, and Bingemer, 2021, p. 79). They can make modifications to the wing design to increase performance as well as range. Moreover, the company can check for ways to reduce the weight, thus lowering maintenance expenses to make the planes more appealing to customers. Additionally, limiting the number of engines could make the aircrafts more attractive to airlines, as it would lower the fuel consumption.

Finally, the third course of action is marketing the model to new customers. Through identifying new markets, the company can limit its dependence on a particular market and alleviate the effect of a downturn in demand for the aircraft in a specific marketplace. Additionally, this idea would provide Airbus the opportunity to find other firms who may be searching for a large capacity aircraft such as the one they produce (Grimme, Maertens, and Bingemer, 2021, p. 80). Thirdly, by entering another market, the manufacturer could capitalize on lower costs and economies of scale by boosting A380’s production capacity. It could as well encourage Airbus to innovate as well as develop novel products and services to cater to the needs of the new customers.

Discussion and Recommendation the Best Course of Action

The best course of action is finding new markets for the model A380. Regardless of industry, doing this can be an effective method of dealing with low demand in a business as it enables a firm to diversify its customer base and revenue streams. This can reduce the impact of a downturn in demand in any one market and provide new opportunities for growth and revenue. New markets can additionally provide the chance to search other clients who may be searching for products or services that are not available in their current market (Grimme, Maertens, and Bingemer, 2021, p. 82). This can increase the potential customer base and revenue for the firm.

Additionally, entering new markets can also provide cost savings through economies of scale and lower costs. This can help a company to remain competitive and profitable, even in times of low demand. Innovation is a key factor, as entering new markets can encourage companies to revolutionize and develop new products or services to meet the needs of new customers. This assists to differentiate the company from its competitors and increase demand for its products or services (Grimme, Maertens, and Bingemer, 2021, p. 82). Overall, finding new markets can aid an organization to mitigate the impact of low demand and result in novel opportunities for growth and success and thus, this is the recommended course of action.

Conclusion

The A380 has faced challenges due to market changes and decreased interest in such large aircraft. Factors such as limited routes, environmental concerns, and high operating costs have contributed to the decline of the A380. For instance, issues regarding have greatly influenced production of the aircrafts. The large size and four engines of the aircraft have made it a target for criticism from environmentalists who argue that it is not as environmentally friendly or efficient as smaller airplanes. The large emissions of greenhouse gasses and noise pollution caused by the aircraft’s size and number of engines have been an issue as companies are under pressure to decrease their carbon footprint and comply with emissions regulations.

Additionally, the high fuel consumption of the A380 has also been a concern for companies looking to decrease their environmental impact. To recover, Airbus has looked at options such as modifying the A380, reducing production, and targeting new customers. One solution is to explore new markets for the A380, which can help the company remain competitive and profitable, even during low demand. Additionally, entering new markets can also encourage innovation and the development of new products or services to meet the needs of new customers, which can help to differentiate the company from its competitors and increase demand.

Reference List

Bartlett, C. and Beamish, P. (2010) Transnational Management: Text, Cases & Readings in Cross-Border (p. 752). Illinois, McGraw-Hill Education.

Brennan, P.A. and Davidson, M. (2020) Re: What has an Airbus A380 captain got to do with OMFS? Lessons from aviation to improve patient safety. British Journal of Oral and Maxillofacial Surgery, 58(7), p. 869-873. Web.

Davidson, M. and Brennan, P.A. (2019) Leading article: What has an Airbus A380 captain got to do with OMFS? Lessons from aviation to improve patient safety. British Journal of Oral and Maxillofacial Surgery, 57(5), p. 407-411. Web.

Grimme, W., Maertens, S. and Bingemer, S. (2021) The role of very large passenger aircraft in global air transport–a review and outlook to the year 2050. Transportation Research Procedia, 59, p. 76-84. Web.

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