Boeing and Airbus: More Than Price Wars

The duopoly is about to wrench the market; but it is more than just prices.

When only two players dominate a sector, it is difficult to agree who started the price war, even though the first one bends. Low price is often assumed as a competitive strategy and not a marketing gimmick to capture and encroach customer-base, which in any case could be a strong reason. The stakes are high to remain dissociated from political influence and corrupt meddling. International relations and trade agreements are often formulated around the vision of such large deals. Such being the power of the industry, price is destabilised mostly when one becomes insecure of the other’s efficient product, leading further to allegations and deviations from strength in the market.

Boeing recently entered the cost cutting space, citing stiff competition from Airbus. (Analysts do not rule out ‘self-infliction’ as one probable reason). There are estimates that Boeing would need to make a significant profit of $30 million on each airplane to pay off its production costs. Such a profit demand enforces stringent marketing and price wars with Airbus, which is what Boeing is up to. Airbus recently surpassed Boeing in total order base and sales commitment, sparking a further price disruption strategy expected from Boeing. Airbus sold more than 1000 planes in 2015, just beating Boeing down to its face, further inflicting its wounded financial woes. However, manufacturing excellence and price strategies seem inseparable, with many cases and orders considered on non-price factors too.

The war is not just about price; there is a constant effort to replace their own previous expertise by a better one, and to penetrate their extent of intelligence in surpassing excellence. Price seems hardly a component of the rivalry. The battle is based on several other aspects of the product. The two companies entered into a price war when their presence in the airline industry gave rise to duopoly. Having only two well-positioned sellers in a global market makes the buyers perplexed. How would they evaluate their competitiveness? Who would the buyer prefer to deal with, when the best airplanes are sold by only two global sellers, and when both are equally capable? This throws an ethical dilemma for buyers, giving rise to various factors to influence the deal, ranging from politics, to bureaucracy, to international relations.

The airline industry is the most expensive, with fuel being the largest cost of consideration. The two companies are eyeing the same market share. Their reach transcends every airplane buyer. Fuel burn efficiency is the hottest selling proposition that attracts buyers across the world, the other important being the speed of delivery. When both competitors are equally good, the quality of competition is ideal, inducing excellence at every step. The demand to do more and give more is highest in the airline sector, unlike any other. Both encroach and penetrate each other’s territories, and keep improving product offerings. Considering this, the airline industry is one of the least hidden, albeit attracting a high chance of being corrupt. When stakes are higher and international relations is a prime influence, corruption is seldom resisted.

The two players undoubtedly have the ability to downbeat the global airline industry, with such sublime knowledge of the rare kind remaining, confined to them. Price is the outer most layer in this impossible-to-miss rivalry, where the intricacies of their deals and strategy keeps pushing the limits of competition and the extent of political meddling. It is as secured as it is prone to threaten and be threatened, by an insignificant limpid separation.

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