Aerospace Information - the Boeing Corporation

The Boeing Corporation is the world's leading aerospace company and the largest manufacturer of commercial and military aircraft. Boeing was incorporated in Seattle by William Boeing, on July 15, 1916, as "Pacific Aero Products Co." On May 9, 1917, the company became the "Boeing Airplane Company". In late 1917, the US entered World War I as the navy needed planes. In 1933 the revolutionary Boeing 247 was introduced, the first truly modern airliner. The 247 was an all-metal low-wing monoplane that was much faster, safer, and easier to fly than other passenger aircraft. Since then Boeing has been doing business with more than 90 countries around the world and is one of the largest U.S. exporters in terms of sales. Boeing employs more than 158,000 people across the United States and in 70 countries. They have one of the most diverse workforces in the world.

Airbus Industrie was established as a Groupementd'InteretEconomique (Economic Interest Group or GIE) on December 18th 1970. It had been formed by a government initiative between France, Germany and the UK that originated in 1967. The reason it was formed was to compete with American companies such as Boeing, McDonnell Douglas and Lockheed, which at this point had a strong grasp on the commercial aerospace industry since WWII. The name "Airbus" was taken from a non-proprietary term used by the airline industry in the 1960s to refer to a commercial aircraft of a certain size and range.

The Commercial Airline Industry is dominated presently by these two large companies, Boeing and Airbus. McDonnell Douglas was a strong third competitor but lost a lot of share in the 1980's and 1990's and was eventually bought out by Boeing in 1997. The Risk of entry by potential competitors is very high. It starts with Research and development. The cost is so high in developing a new airliner that it would cost a new company over $5 billion. The second reason is tough to enter the industry is for the new company to break even they would have to capture a significant share of projected world demand. This means the company would have to sell somewhere between 250-320 aircrafts just to break even at $0 profit. It could take up to a decade for a company to finally make a profit on a specific type of airplane. A third reason it is tough to enter the industry is because of learning effect in aircraft production. Companies that have been building aircraft for a long time know how to cut cost. The final reason it is tough to enter the industry is because of the complex process it takes to manufacture aircraft. It involves over one million parts.

The intensity of rivalry among established aerospace manufacturers, Boeing and Airbus, is so great that it is very hard to get between them. Both are trying to outdo each other and are constantly coming up with ways to be more innovative than the other company.

The bargaining power of buyers is that if