Future Of Airbus

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The Future By Airbus

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fter celebrating four decades of innovation, Toulouse, Francebased Airbus looks ahead to the next 40 years. In its recent “The Future by Airbus” report, the aircraft manufacturer seeks to determine what air transport will look like in the year 2050. Through this initiative, it works with various stakeholders and experts to anticipate the global needs of a better-connected and more sustainable world. Airbus believes that the aviation industry as a whole must focus on technological advances that will satisfy passenger and market demand, the growing population and its demographic profile, and respect all aspects of the environment. Airbus has come a long way since it launched four decades ago. It has gone from a vision to consolidate and develop an independent European aviation industry, which led to its creation in 1970, to being today’s market leader with more than 11,500 aircraft orders. At the heart of this growth has been creating the world’s most modern aircraft by building innovation into all of its products. Airbus incorporates advanced technology to: Improve customer profitability,

Airbus’ Innovative Marketing Supports Sustainable Growth By Christophe Ritter I Ascend Contributor

Address environmental concerns impacting the airline industry, Provide the best possible flying experience for passengers. Technology, combined with economies of scale, is the main driver in making airliners more economical. From the onset, innovation has been key to competing with established manufacturers Boeing, Lockheed and McDonnell Douglas. While three- and four-engine aircraft were standard for large aircraft at the time, Airbus’ founders decided to design and develop a competitive two-engine wide-body aircraft. The Airbus A300 would be lighter and more economical than its competitors. After a slow start, the aircraft became a hit, reaching a market share of 26 percent by the mid-1970s. With the development of its product line, Airbus pioneered innovations such as: Cockpit commonality, Fly-by-wire controls that reduce training time and costs, New weight-saving materials such as carbon fiber, Time- and cost-saving centralized maintenance. An ambitious focus on innovation required ground-breaking marketing techniques to

overcome the traditionally conservative opinions of crewmembers, maintenance and operations teams, and finance departments. More importantly, the financial benefits for airlines had to be clear to demonstrate the advantage of Airbus products against wellestablished competitors. As part of the process, Airbus developed a team of fleet- and network-planning experts who model, evaluate and determine, for each potential customer, the revenue and cost benefit of flying Airbus aircraft. Using special support tools to assist with decision making, and working collaboratively with its airline partners, Airbus’ marketing team creates specific scenarios to design the optimal fleet size and sub-fleet requirements in the medium and long term to maximize airline profitability. This innovative partnership approach allows airlines and Airbus to quantify the revenue and cost benefits of each incremental aircraft or sub-fleet. For years, Airbus has been in the position of the challenger to penetrate new airline customers. However, marketing challenges for Airbus are changing: Airbus experiences more fleet renewals rather than gaining new customers because of the success of its sales campaigns. This

Photos: Airbus

Airbus Facilities More than 11,000 people are employed at Airbus facilities in the Toulouse, France, area, where final assembly lines are located for the A320 family as well as A330/A340 and A380 aircraft.

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Competitive Airbus A380 Among several key drivers that make the Airbus A380 competitive, it has excellent operating numbers due to the amount of passengers it can carry.

adds more complexity to the fleet and network analysis performed by its experts. Airbus has a wider range of aircraft, more versions of the same aircraft and, with the Airbus A320 and A320neo families, two generations cohabiting together. This creates additional complexity in the preparation and development of marketing campaigns. Airlines expect more in-depth simulations and detailed analysis during aircraft selection and negotiations. It is expected that aircraft will deliver on technical performance because airlines have less control of the overall cost of operation. This is mainly due to increasing fuel prices and lower yields. Hence, it has become paramount to precisely evaluate the expected incremental revenue and associated costs at both the specific market and network levels. In addition, the development of codeshares, joint ventures, alliances and other partnerships has complicated the work of the marketing team. To support the need to perform specific fleet and network analysis, Airbus recently selected Sabre Airline Solutions® to provide airport data intelligence (ADI) and global demand data tools. Leading Airbus’ fleet and network profitability group, Vice President Philippe Gossard shares with Ascend his perspectives on the strategic role of his department, the partnership Airbus wants to foster with its 24 ascend

customers and its support of the company’s “The Future by Airbus” concept. Question: Airbus’ revenue and fleet departments play a key strategic role within its marketing division. What are your specific roles and activities within Airbus? Answer: We are here to support our Airbus sales and marketing teams. Fleet planning is more and more complex, and we need to have a team of specialists able to communicate with their airline counterparts. Several of our team members used to do fleet planning for an airline before joining Airbus. Q: Your department is currently enhancing its support for decision making. Which changes in your relationship with your customers drive this investment? A: Our customers have an excellent and indepth knowledge of their own numbers. Some of them have even developed teams to look at those of their competitors. Therefore, we need to equip ourselves with data and tools to have constructive discussions with our customers. Worldwide, successful companies dictate significant efforts to acquire, digest and analyze data. Apple, BMW, 3M and Cisco are examples of companies with this winning strategy. Q: Against an external consulting firm, how would you define the role of your fleet and revenue team? How do you cooperate with such firms? A: First, through the different studies we do for our customers, we build on what we learn

to improve and leverage our own expertise. Second, we stick to strict confidentiality rules. What is shared with some of our customers remains between them and us, without time limit. Third, our role is not only limited to fleet planning studies. Some of our knowledge is recycled for other parts of our own company, such as strategy or pricing. This would be difficult to do with external consultants. Q: The development of alliances, joint ventures and codeshare agreements should lead to a rationalization of the fleet through better utilization and optimization of capacity among airline partners. What is the impact for Airbus? A: Airlines have already made huge progress in yield management. Load factors are significantly higher than 10 or 20 years ago. International yields remain at relatively good levels. Therefore, we have to continue to improve our products and demonstrate that the combination of our products, through fleet planning scenarios, creates value for our customers. Today, 75 percent of world traffic is carried by the three major alliances, so we need to be very convincing with these three alliances’ partners. Q: There is currently a movement toward concentration within the airline industry, specifically in North America and Europe. Does this present an opportunity or threat for Airbus? A: Some new airlines pop up, some airlines disappear and some airlines merge, that’s life. However, merged airlines are bigger and often

capitalize on their respective skills. It also forces us to be more efficient in the way we convince our customers that combined operations of our products create value for them … and for their shareholders. Q: How does the current financial crisis affect your customers? A: A lot of people forget that the financial crisis of the last two years has been worse than that of Sept. 11 for the airline industry, in terms of earnings impact. Our customers want, more than ever, fuel-efficient aircraft with competitive operating costs. They also want reliable products, especially for low-cost airlines with high daily utilization rates. Airlines’ revenue generators are aircraft, and the airline industry is based on growth, so their appetite for modern aircraft is still very strong, as shown by the 2011 order intake. Q: With the launch of the Airbus A380 program, does Airbus have a hub-and-spoke strategy that will prevail for network carriers? A: It is incorrect to describe Airbus as having a hub-and-spoke strategy. Airbus makes both point-to-point aircraft, such as the A330, A340 and A350 families, as well as hub-to-hub aircraft, such as the double-deck A380. Both strategies (fragmentation and hub-and-spoke) are valid, and airlines can chose from the modern Airbus aircraft family that suits them best. Three drivers make the A380 very competitive. First, with more passengers, the aircraft has excellent operating numbers. Second, the hub-and-spoke structure is, for some destinations, the only way to distribute passengers where the volume is not high enough. Third, the limited resource for airlines is slots. There are not many new airports and runways so, to continue growth, there are many alternatives than operating bigger aircraft. Q: A hot topic is the current row over the European Emissions Trading System that came into force in January. What is Airbus’ perspective on this issue? A: What is important is that a particular sector is not weakened compared to other transportation sectors. We live today in a global economy, so if there are important modifications impacting global companies, such as airlines or our own company, it is important that all views are discussed for a constructive dialogue. We all want to protect our planet, but this needs to be discussed all together. Remember that global aviation only generates 2 percent of carbon dioxide emissions, whereas the heating and cooling of buildings and cars each account for around 40 percent. Therefore, while we as manufacturers are doing our part to reduce emissions, the worthwhile savings are to be found elsewhere. Q: Airbus recently presented its vision of aviation in 2050 called The Future by Airbus. What are some highlights of this study? A: This is a long-term vision. If you go back 40 years, a lot of technologies incorporated in

our current product line did not even exist. In 40 years, passengers will enjoy technologies and solutions that are still in our labs today. By communicating about these possibilities, we wanted to keep the dream of aviation alive so we could benefit from new technologies and services in the next 40 years. Q: What role does technology play in Airbus’ future? How will it translate for your airline customers and their passengers? A: Innovation, and the technology that is part of it, is in Airbus’ DNA. It is still a big part of our company culture. Airbus has been very innovative by incorporating new technologies during the development of its products, provided, of course, that they make economic sense. For our customers, this means reliable, fuel-efficient aircraft with good operating numbers. For passengers, this means affordable Highlight

Our aim is to continue to innovate; keep our aircraft at the forefront of economics, capability and value; and deliver world-leading products to our customers.

— Philippe Gossard, vice president, fleet and network profitability group,Airbus.

tickets, better comfort and good services on board, which all help put the fun back into flying as well as make it more accessible. Look at some of the services offered by various carriers. Most were not even possible in hotel rooms 30 years ago. Technology made them possible. Q: Airbus plays an active role in the Single European Sky ATM Research (SESAR) initiative. What is the scope of this project? Why did Airbus want to be involved in the project? A: Aircraft fly longer paths to their destinations than they did 30 years ago, often on

indirect paths, because advances in aircraft and communications have yet to be matched in the equipment used by air traffic controllers on the ground. Air traffic management will enable shorter and more direct routings, saving fuel and journey times. Airbus is working with several key partners to make this happen … both in Europe and the rest of the world. Q: What are the medium-term challenges for Airbus? A: There are many medium-term challenges. Building enough of our modern aircraft family to satisfy the world’s needs is one of them. Introducing the game-changing Airbus A350 into service, and then ramping up deliveries to airlines is another. We have also had tremendous success with the re-engined A320neo family, which is the world’s fastest-selling airliner product line, and we are working to engineer and deliver that, beginning in 2015. Q: How do you perceive the threat of new entrants, in particular, Chinese aircraft manufacturers? A: We recognize that we will be challenged by aircraft made in Brazil, Canada, China, Japan and Russia. However, it has taken us a couple of decades and tens of billions of dollars of investment to create the world’s most modern aircraft family, which ranges from the 100-seat A318 to the 500-plus-seat A380. There will be no shortcut for our competitors. Our aim is to continue to innovate; keep our aircraft at the forefront of economics, capability and value; and deliver world-leading products to our customers. Q: Where do you see Airbus in five years? A: We will have begun delivering the world’s most efficient single-aisle aircraft, the A320neo family, which is around 15 percent more economical per seat than the aircraft we are building today, and around 6 percent more efficient than its older competitor. Our A350 will also bring people together on new longhaul routes, with more comfort and wider seats than are available today. In addition, our A380 will fly with even more prestigious carriers, bringing its stunningly quiet cabin to even more flyers. a

Christophe Ritter is a senior partner for Sabre Airline Solutions. He can be contacted at [email protected].

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