Airbus's Predicament

Case 1

Airbus's Predicament

The Airbus company is facing some very bad news. A number of ugly

incidents are worrying top management and bringing difficulty with

investors. Your job is to use your skill as an MBA candidate and devise a

specific plan to improve their situation.

You must first understand the situation by reading articles in The Wall Street

Journal and other publications. This situation calls for clear action. Hence,

you cannot take the view that the situation is too complex or that you do not

have enough information. That would be unworthy of an MBA candidate!

Here are some major issues to consider.

1. The recent Airasia plane crash involved an Airbus plane. While no

one is blaming Airbus yet, it is a very bad situation. Many people

were killed. There will be doubts about airplane safety. Airbus's main

concern is the safety of the plane itself. However, Airbus planes flown

by crews that are not fully trained would also be a bad reflection

on the company. Quality and safety are critical to a company's

reputation.

2. It is widely thought that Airbus has made "deals" with governments

that selected Airbus over Boeing. This may come to light and would

damage the image of the company. It suggests unfair competition

particularly with developing countries where bribery is more common

than in the US or Western Europe. This has a public relations aspect -

avoiding or tamping down bad news.

3. Boeing is a tough competitor. Maybe Airbus should increase its

advertising and marketing. After all, marketing is very important.

While Airbus has made a spectacular rise in recent decades, one can

never rest. Airbus's stock has dropped more than 25% in roughly

the last six months. Boeing's stock has done pretty well over the last

twelve months. What could cause this difference between the two

companies? More ad's on TV or other marketing efforts might help in

these difficult times.

4. The specific number of airplane sales and the delivery schedule

may be the most important issue the company faces. Sometimes bad

news blows over. People may have "short memories" about airplane

crashes. Perhaps Airbus should downplay recent crashes and focus

on delivering the planes that were purchased but not yet delivered.

Failing to deliver on schedule is very bad for a company's reputation.

5. Gasoline cost is a big issue for airline companies. It has been

suggested that Airbus work doggedly to improve airplane efficiency -

lowering the cost of flying passengers. Profit for the airline companies

Airbus serves is important.

6. Another view is that Airbus is fine; it simply needs to sell at the right

price in the right manner. This view holds that the Boeing 737 and the

Airbus 320 are both very good planes. There are differences in cost,

passenger capacity, operating costs and other matters. Maybe Airbus

should lower prices or otherwise fine tune how it sells its planes. This

view also holds that customer preferences are fickle. People may like

one airline because it gives better peanuts. The real issue is the profit

of the airlines.

Further Instructions:

There are many issues to look at in this case. You must read about the topic

and formulate a credible "solution" that will please top management of

Airbus.

1. When you identify a solution, evaluate all alternatives. Select one -

2. Be specific. Give facts. Do not rely on opinion. Quote credible

3. Use the Problem—Solution —Benefits format to solve the

the best - alternative and develop a comprehensive plan to carry it

out.

sources. Don't use expressions such as "People say..."

problem. Do not create a paper that merely describes the problem.

Your problem description should not exceed one page. Do not

waste time defining the problem or the history of the company as

told in Wikipedia. You must SOLVE the problem.