Airline duopoly to monopoly – are Airbus forging ahead?

Duopoly is a form of oligopoly and exists in a market when two companies control nearly all the market share of a product or service. The $400bn market for passenger aircraft has been dominated by Airbus and Boeing and the two companies share almost exclusive control of the worldwide airplane supply business for large commercial jets. Their established brands are Boeing’s 7-series and Airbus’s A-series of jets. These aircraft include narrow-body aircraft, wide-body aircraft, and jumbo jets.

The recent blowout of a door plug on Boeing’s 737 Max series during Alaska Airlines flight and the two catastrophic accidents in 2018 (346 people killed) has seen Boeing’s continued loss of market share in the plane manufacturing business. On the contrary Airbus has bounced back with an order for 7,197 A320 series of smaller, single-aisle jets. Airbus holds a market share of 62% in the narrow-body segment. Overall the popularity of Airbus’s single-aisle planes is evident in orders – Airbus backlog = 8,598 and Boeing backlog = 5,626. However the A320neo has been a reason for Airbus’s success in this market. By 2019, the A320neo had a 60% market share against the competing Boeing 737 MAX. As of December 2023, a total of 10,354 A320neo family aircraft had been ordered

Concerns over Airbus dominance The rivalry between Boeing and Airbus has led to a huge increase in passenger numbers and innovations that have reduced operating costs and fares. Michael O’Leary of Ryanair has emphasised the fact that there needs to be a competitive duopoly structure so that there are further innovations and benefits from service to passengers.

The Chinese challenge. However, the Chinese are now challenging the duopoly’s market share by introducing its alternative to the Boeing and Airbus options. COMAC, a Chinese state-owned planemaker, has its C919 plane as a competitor to the Airbus 320 and Boeing’s 737 . Eventhough COMAC is state backed there are still significant barriers to entry for the commercial airline manufacturer.

• It is anticipated that the C919 fuel efficiency will not be a the levels of the newer versions of the Boeing 737 and Airbus A320.

• The Chinese have little experience in creating complex production systems and supply chains. Boeing research and development costs for the new Dreamliner, grew to $28 billion as a result of problems with its supply chain.

• They will need to improve their safety records in order to encourage sales. COMAC’s regional jet, the ARJ21 had its first test flight in 2008 but there were concerns with poor wiring and cracks on the wings.

• There is also the approval from foreign regulatory bodies to enter new markets especailly in the US and Europe. Add to that the slow pace of its production with fewer than 5 aircraft per month coming off the production line.

• It is estimated that it will take 20 years at least before COMAC can match what Boeing and Airbus produce.

Although the weakening of Boeing relative to Airbus is a concern for competition and innovation, the cost of technology, in which is an already a very expensive industry, is of greater concern.

Source: How Boeing’s troubles are upsetting the balance of power in aviation. FT January 28 2024