Why Airbus Did Not Find Boeings Threat Credible and Proceeded with the “super Jumbo” Proj

The reasons are summarized below based on the whitepaper and the course learning’s:

1. Perceived demand for VLA product leading to profitability:

Based on the 20 year forecast numbers of VLA deliveries (Passenger Jets > 500 Seats). As of 2001, Boeing forecasted 340 units and Airbus forecasted 1256 units(using different models). Airbus felt, Boeing to have deliberately understated the demand to deter/delay its entry, since delay could significantly increase the value of Boeings 747 franchise. With 1,445 planes order backlog and “fly-by-wire” technology catching up, Airbus estimated it would break even with 250 VLA plane sales and would have 100 firm orders by the end of 2001. As of early 2002, Airbus had 97 orders + 41 options for the A380 strengthening its resolve to build the superjumbo.

2. Game theory and models of strategic product introduction:

Key deductions by modeling competition in terms of a standard Hotelling-type model of