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    Case Study

    wide bodied segment of Aircraft

    wide bodied segment of Aircraft


    1) Reason for wide bodied segment of large commercial of jet aircraft to provide profitable support two players at present and implications for barriers to entry into segment


    The wide bodied segment of large commercial jet aircraft industry support two players at present time such as Airbus and Boeing where both has covered 31% and 50% respectively at marketplace (Jansson and et. al., 2017). These both have dominated market of Airline industry having more than 100 seats. Respective market is very large as well as growing in nature where Boeing has delivered 723 aircraft as well as Airbus with 620 aircraft. There is high demand for new aircraft which is grown by 5% per annum. These both have good future opportunity in terms of earning margins to meet requirements of customers. Both are growing day by day and lead towards bright future in case of Airline industry and earn maximum. Jet Aircraft can see these both at highest peak in coming days with their progress and development so support is provided to Boeing and Airbus in most effective way and achieving high success and growth at competitive market.
    Some of the implication for barriers to entry into segment is because of high start-up costs such as cost of new Boeing is $80 to $116million, high competition for entering into airport gates and large economies of scale (Setó-Pamies and Papaoikonomou, 2016). The other reasons of wide bodied segment for entry barriers are described below:

    Fleet Cost- The purchasing of fleet of airplanes is very costly due to high barriers to entry for newcomers in respective field. Cost of price for single airplane is $11million for small prop flight (Barriers to Entry in the Airline Industry, 2020).

    Fuel- It is the largest barrier for entry into Airline industry for newcomers. The cost of fuel is 50% of airline’s expenses. Change in prices of fuel leads to create problems for start-up (Wymer and Rundle-Thiele, 2017).

    Government Regulations- There are important government regulations for entering into airline industry which should be followed by all new as well as existing company (Yin, Qian and Singhapakdi, 2018). This includes mandatory compensation for booking, advance notice for change in flight status, handling delaya and many more. 

    Competition- Due to high regulations, new airline experience high entry barriers for gate at major airport. The high control in airline creating difficult for new airline for getting foothold in such market.

    Pilots- Staffing for airline requires highly skilled as well as capable employees for work performance. Airline industry is facing barriers in shortages of pilot which creates risky for new start-ups. It is difficult to trust new pilot for flights so this leads towards barriers in industry.
    2) Do entry barriers of narrow bodied segment is same as those wide bodies segment
    The entry barriers into narrow bodied segment are not same as of wide bodied segment. In case of wide bodied segment, there is requirement of high and innovative technology, huge capital investment and many more (Jordan and Kristjánsson, 2017). There is high demand for market and technology and operating at huge level. Entry barriers for both are different from one another. They are described below:

    Low Technology- The narrow wide bodied segment requires low technology in airline industry. This is called barriers though it is easy for new business to enter into market with low technology but risks are high as it can impact or hamper life of passengers in case of flights (Lazarides and Goula, 2018). This barrier create problem for airline segment to start their business at competitive marketplace. In case of wide bodied segment, there are in need of high technology for operating their business activities and operations in most effective manner.

    Low Market- It is another barrier into airline industry in case of narrow bodies segment where market needed is low. For operating business at competitive market, it is important to have huge market so that proper activities and operations can be run in suitable way. In order to run functions by wide bodied segment they required large market so that all activities are run in effective manner. This is barrier for airline industry to expand business at competitive level.

    Low Innovation- This is another barrier in case of narrow bodied segment. For operation of airline industry, innovation is required which should be at huge level (Liu and et. al., 2016). If there is huge innovation then it falls under category of wide bodied segment otherwise it will fall under category of narrow bodied segment. With such barrier, it is not possible for airline industry to run their activities and operations at competitive marketplace.

    Therefore, in this way, entry barriers of narrow bodied segment are different from wide bodied segment. Narrow focus at small level whereas wide is focusing at huge or big level in appropriate manner.
    3) Future projections for demand, how industry will do in next twenty years and how to forecast differ for both wide and narrow bodied segments
    The demand for air transport will increase by 4.3% per annum in next 20 years. If such growth is attained then by year 2036, airline industry will be contributing in following aspects such as 15.5million jobs and $1.5 trillion of GDP to global economy of country (Moody-Stuart, 2017). Aviation sector is growing at faster speed and will grow. The global airline will reach up to 29.3billion US dollars. The airline industry as a whole will be doing several things in next twenty years such as: use of drones for safety at airports, using of AI & robotics, cyber security, environmental change for safety of surrounding, big data, availability of in flight services, real time updates, simplified airspace, single token, self service, Apps and beacons, and many more (The future of aviation: a definitive guide to the next 20 years, 2020).
     The forecast for wide bodied and narrow bodied segment are differing in different aspects (Quarshie, Salmi and Leuschner, 2016). Here, wide bodied segment is regarded as twin aisle aircraft which is regarded as jet airliner having fuselage wide for accommodating two passengers having seven or more seats abreast. This types of segment required high technology, innovation to conduct business activities and operations. Similarly, on other hand, narrow bodied segment is regarded as single aisle aircraft which is small type of aircraft which is used for operating short haul global flights as well as domestic flights. If it does not have any additional classes then there is less seat per row.
    4) If new entrant into part of narror bodied industry, what would be long term development strategy

    It is very important to make strategy for business and work accordingly to attain desired outcomes and leads towards success and growth at competitive market. Being new entrant at bottom part of narrow bodied industry, long term development strategy should be formed by them in most appropriate manner. It is essential to make long term strategy that should be developed through expertise in narrow bodied industry such as creating substantial economy of scale as well as gaining loyalty for customers  After achieving such, it is important for companies to focus on enhancing narrow bodied aircraft by paying particular attention towards fuel efficiency.

    If new business keeps on developing as well as growing at successful manner then it will be directly competing through reputable and credible organisation such as Airbus and Boeing (Reinecke, Arnold and Palazzo, 2016). In addition to this, it is significant for new entry or entrants to focus on joining along with creating alliances for becoming more and more competitive at marketplace as compared to others in suitable manner. Moreover, new entrants should not focus on rushing towards wide bodied segment. They should develop as well as bring market into large jet aircraft which is extremely high cost and which is attained with help of economies of scale and cost advantages. Whenever Comac or Bombardier achieved their strong brand position then they should consider developing of wide bodied aircraft. This is also required for new entrants to monitor outside environments which are creating fresh opportunities.
    5) What Boeing and Airbus do to deter future new entry into industry and/or keeping new entrants boxed into bottom end of market
    In case of airline industry, mainline market for narrow bodied is jet which always focuses on becoming interested towards industry (Schuler and et. al., 2017). From last year, there is change in choice of suppliers which has doubled. Bombardier as well as aircraft manufacturer in Russia and China all possess fresh generation of narrow bodies during time of mainline sector in development as well as signing up consumers. If they focus on beating odds then they have to schedule for new jets and become realities over next three to five years. Boeing and Airbus has to focus on new and innovative strategy for entry into industry so that they could survive and sustain at competitive marketplace.