Question:What should Airbus and Boing have learned from IBERIA case? What changed in the industry when Boing decided to develop Dreamliner in 2003?( Read the following case and ppt)

Airline Route Structure Passenger volume was the primary factor that determined whether an airline could serve a route profitably. In order to consolidate passengers flying into or out of small cities, many airlines used hub-and-spoke route systems, with major cities serving as "hubs" to connect smaller routes or "spokes." For example, a traveler flying from Hartford, Connecticut, to Kansas City, Missouri could fly from Hartford to an airline hub in Chicago, Cincinnati, or Charlotte and then connect to a second flight to get to Kansas City. Hub-and-spoke systems were also used internationally; for example, travelers on Emirates Airlines flew from London to Dubai and then on to Riyadh, rather than directly from London to Riyadh By 2011, the hub-and-spoke system had been the predominant model for decades, but recent trends suggested the rise of an alternate system: point-to-pointrouting. Travelers typically preferred nonstop flights, and airlines such as Southwest Airlines successfully appealed to this preference by building point-to-point route networks. "We focus on nonstop traffic," said Southwest CEO Gary Kelly in 2005. "We'd prefer fewer connections. It's what customers want least. It raises the bar. It is extra work for no more money. It's a lot cheaper for us to fly you nonstop."" Though Southwest operated entirely in the United States, airlines such as EasyJet and Ryanair in Europe and AirAsia in Asia did the same with short-haul international flights. Worldwide, the number of routes served by nonstop flights grew from just under 6,000 in 1985 to more than 10,000 in 2005.15 Airline Purchasing An airline considering an aircraft purchase had to consider multiple factors, not least of which was the size and range of a given airplane. In 2012 there were four categories of commercial jet aircraft based on passenger capacity and flight range Regional jets (less than 100 seats) for short-haul routes Narrow-body or single-aisle jets (100+ seats) for short-to medium-haul routes .Wide-body or twin-aisle jets (100+ seats) for medium- to long-haul routes .Very large, jumbo, or superjumbo jets (400+ seats) for long-haul routes Airport and runway design could limit which aircraft an airline could use on a particular route. For example, San Diego International Airport could not accommodate nonstop service to Asia until Boeing's 787 was produced because its runway was too short for other long-haul jets taking off into Pacific headwinds.16 Los Angeles International Airport (LAX) spent $50 million for taxiway improvements and $50 million updating two gates in the international terminal in order to accommodate the Airbus A380. Even with these improvements, however, LAX reported that service vehicles had to be moved off taxiways and runways to accommodate the huge jet, which needed "an official escort of operations vehicles."1 The plane was so large that it had the potential to interfere with the airport's instrument landing system; as a result, air traffic controllers ensured that the plane had priority and moved in and out as efficiently as possible. Gridlock was projected if multiple international carriers tried to use the jets at the airport more frequently.18 Other airports to maintain and replace. In addition, the 787 engine-wing connection interface was designed to enable the engines to be removed and replaced within 24 hours. According to Boeing 787 propulsion director Ron Hinderberger, "It is not uncommon for an airplane to serve three or four carriers in its lifetime. Leased airplanes have even more operators; being able to easily transition into a new fleet is important." The 787 enhanced airline revenue opportunities by offering greater cargo volume, which Boeing believed would lead to more stable revenue flow based on its forecast that air cargo would triple from 2010 to 2030.8 The aircraft also promised revenue enhancement as a result of more flying days and greater route flexibility The Dreamliner's design not only addressed the needs of airlines, it also addressed the needs of passengers. The composite fuselage enabled the cabin to be kept at higher air pressure than other airplanes of the same size, which meant more oxygen and less incidence of air sickness. The 787 also used a powerful air filtration system that made cabin air cleaner and healthier Other innovations included increased humidity, quieter air conditioning, less wall vibration, larger windows with passenger-controlled tinting, and new turbulence-detecting technology that reduced in-flight bumpiness.80 (Exhibit 8 shows how United Airlines describes the new passenger features of the 787 Dreamliner.) In 2003 Boeing made a deal with a consortium of Japanese companies- Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and Fuji Heavy Industries-to build the fully assembled Dreamlinerwing, and the Japanese governmentprovided aid tosupport the aircraft's development. Thomas Pickering, Boeing's senior vice president for international relations, commented on the arrangement: "We said, 'let's spread the risk and spread the benefit .they get the advantages but they [Japan] also carry the burden." The first order of 50 Dreamliners was placed by All Nippon Airways in 2004, followed by another order from Japan Airlines later that year. The People's Republic of China placed the next order in 2005 on behalf of Chinese airlines Several months prior, Boeing announced that the airplane's rudder would be made in the Chengdu plant of China's AVIC. Mike Bair, who headed the 787 program, suggested that additional contract work would go to China through Boeing's major subcontracting partners: "Our expectation is that there's a fair amount of this airplane that ultimately is going to be produced in China."4 With the 787, Boeing made significant changes to its supplier relationships and manufacturing process, which the company claimed would reduce development time by 24 months and trim costs by $4 billion.5Boeing moved away from its traditional "build toprint" process, in which it internally developed detailed plans and contracted with suppliers to build parts to exact specifications, to a ess that required suppliers to produce components that performed to build to performance" proc Boeing's requirements. In comparison with the 737 production process, in which Boeing was the main systems manufacturer and subsystems assembler, production of the 787 relied much more heavily on partnerships with strategic suppliers (see Exhibit 9). Tier 1 suppliers served as both designers of systems and integrators that assembled different parts and subsystems produced by Tier 2 suppliers (see Exhibit 10). Largesubassemblies wereconstructed around the world and transported to Boeing's facility in Everett, Washington, on a "Dreamlifter," a hollowed-out 747-400 passenger plane that reduced delivery time from one month to one day.s7 Boeing hoped to assemble each Dreamliner in only three days on the Everett production line. In all, Boeing outsourced more than 60 percent of the Dreamliner's production, including all 11 major subassemblies, using a web- based planning system to coordinate the activities of more than 100 suppliers in 12 countries.N Boeing believed that this system would keep manufacturing and assembly costs low while spreading financial risk to suppliers; for example, no Tier 1 supplier would receive payment for its development costs until Boeing delivered its first 787, giving suppliers a financial stake in the successful completion of the projeIn addition, suppliers gained experience designing and assembling large sections of a complex commercial aircraft, activities that were previously performed by Boeing engineers. Unfortunately, rather than speeding up the delivery, the new process resulted in significant delays. "We gave work to wl then we didn't provide the oversight that was necessary," said Boeing's commercial aviation chief Jim Albaugh.90 Some of the parts arriving in Everett did not fit together, and late deliveries by producers of crucialsections of the planestopped the entire assembly process. Some Tier 1 suppliers were unable to meet their output quotas, and other suppliers faced parts shortages from their subcontractors.9 As a result, Boeing was forced to reverse some of its original outsourcingdecisions; for example, in 2009 it spent $1 billion in cash and credit to acquire its fuselage manufacturing partner Vought Aircraft Industries.2 At the time of the purchase, Vought's CEO said that the firm had already invested twice what it had anticipated in its attempts to fulfill the Dreamliner orders. ple who had never really done this kind of technology before, and The delivery date for the 787 was delayed at least six times between 2006 and 2010 (see Exhibit 11).4 The plane was finally completed more than three years after the original delivery date-a delay that cost Boeing millions of dollars in fines and concessions to customers. Despite the lengthy delay, orders and excitement for the Dreamliner remained strong, and there were more than 800 planes on order at the end of 2011 Larger Regional Jets In 2002 Embraer introduced a new family of four "E-Jets" with seating capacities of 70 to 120 and a maximum range of 2,200 nautical miles. E-Jets quickly became popular with regional and low-cost airlines-U.S-based JetBlue Airways ordered 100 Embraer 190s in 2003.7 Embraer began manufacturing ERJ 145s in Harbin, China, in 2002 under a joint venture agreement with AVIC. In 2010 Embraer negotiated to extend the joint venture for an additional five years, but AVIC announced that it had developed a commercial plane with specifications similar to the E-190 that it planned to deliver to domestic carriers beginning in 2014. China agreed to purchase 20 E-190s manufactured in Brazil, and the Chinese government allowed Embraer to continue its joint venture with AVIC under the condition that the Harbin facility be converted to manufacture Embraer's business jets.S As it renegotiated its agreements in China, Embraer faced a rapidly strengthening currency in Brazil that put pressure on export profits. Expecting executive jet and defense jet sales to be "relatively flat," Embraer saw commercial airline growth as the only segment with short-term profit potential, and company executives began considering development of a new jet capable of carrying 130 or more passengers. An aircraft of this size would allow Embraer to compete on some of the busiest short-haul routes in the world: between European capitals and the shuttle between So Paulo and Rio de Janeiro.10 In 2008 Bombardier announced it would expand its line of aircraft and build a new series of narrow-body planes. CEO Pierre Beaudoin said, "The CSeries family of aircraft will revolutionize the economics and network strategies for airline operations in the 100- to 149-seat commercial market."101 Some industry analysts considered the CSeries risky: although it appeared there would be strong demand for fuel-efficient narrow-body aircraft in the next 10 to 20 years, it would be hard to compete with Boeing and Airbus on price.102 However, Beaudoin said the airplanes would be delivered on time -something Boeing and Airbus rarely accomplished "The CSeries family offers the greenest single-aisle aircraft inits class," said Gary Scott, president of Bombardier Commercial Aircraft "These game-changing aircraft emit up to 20 percent less CO and up to 50 percent less NOx, fly four times quieter, and deliver dramatic energy savings-up to 20 percent fuel burn advantage as well as up to 15 percent improved cash operating costs versus current in-production aircraft of similar size. The CSeries aircraft will set a new benchmark in the industry."10 Planes from New Manufacturers In 2008 COMAC announced plans to build the C919, a narrow-body jet with 160 to 190 seats (comparable to the Airbus A320 and the Boeing 737). When the company introduced plans to select suppliers of engines, airborne equipment, and materials through an international bidding process, it urged interested foreign suppliers to create partnerships with Chinese manufacturers.104 COMAC chose the LEAP-1C engine manufactured by CFM (a joint venture between GE and the French Snecma) and lined up an array of American and European suppliers, including Honeywell Crane AE, Rockwell Collins, and Parker Aerospace (see Exhibit 12).15 The first orders for the C919 were booked in 2010; customers included China's three largest airlines and GE Capital Aviation Services. In 2011 GE entered into a joint venture with AVIC to produce sophisticated avionics, the electronics for aicraft communications, navigation, cockpit displays, and controls-the same avionics used on the 787 Dreamliner. COMAC was also at work on a regional jet the ARJ21, which had its first flight in 2008-but deliveries initially scheduled for 2011 were delayed due to certification troubles. Describing the ARJ21, author James Fallows said the plane had "about the same number of seats as models from Embraer or Fokker-seventy-eight in a normal configuration-but because of various inelegant aspects of design and manufacture, it weighs about ten thousand pounds more. In aviation, this is a crippling disadvantage." According to aviation expert Richard Aboulafia, "We know that this plane, the ARJ21, is completely useless . . .It amounts to a random collection of imported technologies and design features flying together in loose formation."19 The challenges were daunting, but some competitors recognized China's determination to succeed. Jim Albaugh, who headed Boeing's commercial aircraft division until retiring in June 2012, said: "Whether [the C919 is] a good aeroplane I don't know, but eventually they'll get it right."0 Other manufacturers of regional jets included Mitsubishi and Sukhoi. The MRJ (Mitsubishi Regional Jet) was a 70-to 90-passenger regional jet that was in final manufacturing in 2012. The first aircraft to be designed and produced in Japan since the 1960s, the MRJ was expected to complete its maiden flight in 2013 Russian aircraft manufacturer Sukhoi, which in 2006 had merged with five other major aircraft makers into a single entity with substantial government control, developed the 75- to 95-seat Superjet 100 (SSJ 100). The plane undertook its first commercial flight in 2011 and was beginning to attract some interest from airlines outside of the formerSoviet Union, having received 170 orders, 42 of which were from Indonesia.11 However, the first planes delivered have suffered from reliability problems, and on May 9, 2012, an SSJ 100 crashed during a demonstration flight in Indonesia, killing all on board Future Outlook Expanding markets and growing demand for more efficient planes made for a positive outlook for aircraft manufacturers. Both Boeing and Airbus predicted 5 percent annual growth between 2011 and 2030, which would create demand for more than 30,000 aircraft.12 Although they disagreed about the makeup of the demand for large aircraft, they agreed that the majority of sales would be narrow-body (100 to 200 seats) and midsize (200 to 400 seats) wide-body aircraft Both companies expected a large share of the growth to come from the Asia-Pacific region, with China driving much of the increased demand. Boeing's forecast included 8.8 percent annual growth in domestic Chinese air travel, which would create demand for 3,400 new aircraft by 2026 nearly quadrupling the country's fleet. Despite the challenges Boeing and Airbus faced in developing and producing the 787 Dreamliner and the A380, and despite the new competitors that had begun to make a play for their share of the market, the two airlines remained optimistic about global sourcing in future aircraft development. Entry: - High fixed cost - Reputation important and costly - Government support Outsourcing of suppliers + Regional jet makers +Chinese >Not imminent threat Rivalry: Suppliers - Rolls Royce and GE Only 2 main competitors - Switching costs Lumpy sales and big-ticket items + Homogeneous products Buyers: - Over 200 airlines - Switching costs + Few airlines able to buy +Mixed fleets -> Moderate power complementors +Unions Minimal power Excess capacity + High fixed costs + Few non-price attributes Substitutes: Used planes Leasing planes Real threat >Not imminent threat Rivalry: IBERIA d GE ors Only 2 main compet+ Resale guarantee switching costs is Fleet included both plane types di+ Call/response with time to outbid IBERIA: er Exploited lumpiness rival + High fixed costs + Few non-price-.... - BERIA Substitutes;Threat of used planes Airline Route Structure Passenger volume was the primary factor that determined whether an airline could serve a route profitably. In order to consolidate passengers flying into or out of small cities, many airlines used hub-and-spoke route systems, with major cities serving as "hubs" to connect smaller routes or "spokes." For example, a traveler flying from Hartford, Connecticut, to Kansas City, Missouri could fly from Hartford to an airline hub in Chicago, Cincinnati, or Charlotte and then connect to a second flight to get to Kansas City. Hub-and-spoke systems were also used internationally; for example, travelers on Emirates Airlines flew from London to Dubai and then on to Riyadh, rather than directly from London to Riyadh By 2011, the hub-and-spoke system had been the predominant model for decades, but recent trends suggested the rise of an alternate system: point-to-pointrouting. Travelers typically preferred nonstop flights, and airlines such as Southwest Airlines successfully appealed to this preference by building point-to-point route networks. "We focus on nonstop traffic," said Southwest CEO Gary Kelly in 2005. "We'd prefer fewer connections. It's what customers want least. It raises the bar. It is extra work for no more money. It's a lot cheaper for us to fly you nonstop."" Though Southwest operated entirely in the United States, airlines such as EasyJet and Ryanair in Europe and AirAsia in Asia did the same with short-haul international flights. Worldwide, the number of routes served by nonstop flights grew from just under 6,000 in 1985 to more than 10,000 in 2005.15 Airline Purchasing An airline considering an aircraft purchase had to consider multiple factors, not least of which was the size and range of a given airplane. In 2012 there were four categories of commercial jet aircraft based on passenger capacity and flight range Regional jets (less than 100 seats) for short-haul routes Narrow-body or single-aisle jets (100+ seats) for short-to medium-haul routes .Wide-body or twin-aisle jets (100+ seats) for medium- to long-haul routes .Very large, jumbo, or superjumbo jets (400+ seats) for long-haul routes Airport and runway design could limit which aircraft an airline could use on a particular route. For example, San Diego International Airport could not accommodate nonstop service to Asia until Boeing's 787 was produced because its runway was too short for other long-haul jets taking off into Pacific headwinds.16 Los Angeles International Airport (LAX) spent $50 million for taxiway improvements and $50 million updating two gates in the international terminal in order to accommodate the Airbus A380. Even with these improvements, however, LAX reported that service vehicles had to be moved off taxiways and runways to accommodate the huge jet, which needed "an official escort of operations vehicles."1 The plane was so large that it had the potential to interfere with the airport's instrument landing system; as a result, air traffic controllers ensured that the plane had priority and moved in and out as efficiently as possible. Gridlock was projected if multiple international carriers tried to use the jets at the airport more frequently.18 Other airports to maintain and replace. In addition, the 787 engine-wing connection interface was designed to enable the engines to be removed and replaced within 24 hours. According to Boeing 787 propulsion director Ron Hinderberger, "It is not uncommon for an airplane to serve three or four carriers in its lifetime. Leased airplanes have even more operators; being able to easily transition into a new fleet is important." The 787 enhanced airline revenue opportunities by offering greater cargo volume, which Boeing believed would lead to more stable revenue flow based on its forecast that air cargo would triple from 2010 to 2030.8 The aircraft also promised revenue enhancement as a result of more flying days and greater route flexibility The Dreamliner's design not only addressed the needs of airlines, it also addressed the needs of passengers. The composite fuselage enabled the cabin to be kept at higher air pressure than other airplanes of the same size, which meant more oxygen and less incidence of air sickness. The 787 also used a powerful air filtration system that made cabin air cleaner and healthier Other innovations included increased humidity, quieter air conditioning, less wall vibration, larger windows with passenger-controlled tinting, and new turbulence-detecting technology that reduced in-flight bumpiness.80 (Exhibit 8 shows how United Airlines describes the new passenger features of the 787 Dreamliner.) In 2003 Boeing made a deal with a consortium of Japanese companies- Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and Fuji Heavy Industries-to build the fully assembled Dreamlinerwing, and the Japanese governmentprovided aid tosupport the aircraft's development. Thomas Pickering, Boeing's senior vice president for international relations, commented on the arrangement: "We said, 'let's spread the risk and spread the benefit .they get the advantages but they [Japan] also carry the burden." The first order of 50 Dreamliners was placed by All Nippon Airways in 2004, followed by another order from Japan Airlines later that year. The People's Republic of China placed the next order in 2005 on behalf of Chinese airlines Several months prior, Boeing announced that the airplane's rudder would be made in the Chengdu plant of China's AVIC. Mike Bair, who headed the 787 program, suggested that additional contract work would go to China through Boeing's major subcontracting partners: "Our expectation is that there's a fair amount of this airplane that ultimately is going to be produced in China."4 With the 787, Boeing made significant changes to its supplier relationships and manufacturing process, which the company claimed would reduce development time by 24 months and trim costs by $4 billion.5Boeing moved away from its traditional "build toprint" process, in which it internally developed detailed plans and contracted with suppliers to build parts to exact specifications, to a ess that required suppliers to produce components that performed to build to performance" proc Boeing's requirements. In comparison with the 737 production process, in which Boeing was the main systems manufacturer and subsystems assembler, production of the 787 relied much more heavily on partnerships with strategic suppliers (see Exhibit 9). Tier 1 suppliers served as both designers of systems and integrators that assembled different parts and subsystems produced by Tier 2 suppliers (see Exhibit 10). Largesubassemblies wereconstructed around the world and transported to Boeing's facility in Everett, Washington, on a "Dreamlifter," a hollowed-out 747-400 passenger plane that reduced delivery time from one month to one day.s7 Boeing hoped to assemble each Dreamliner in only three days on the Everett production line. In all, Boeing outsourced more than 60 percent of the Dreamliner's production, including all 11 major subassemblies, using a web- based planning system to coordinate the activities of more than 100 suppliers in 12 countries.N Boeing believed that this system would keep manufacturing and assembly costs low while spreading financial risk to suppliers; for example, no Tier 1 supplier would receive payment for its development costs until Boeing delivered its first 787, giving suppliers a financial stake in the successful completion of the projeIn addition, suppliers gained experience designing and assembling large sections of a complex commercial aircraft, activities that were previously performed by Boeing engineers. Unfortunately, rather than speeding up the delivery, the new process resulted in significant delays. "We gave work to wl then we didn't provide the oversight that was necessary," said Boeing's commercial aviation chief Jim Albaugh.90 Some of the parts arriving in Everett did not fit together, and late deliveries by producers of crucialsections of the planestopped the entire assembly process. Some Tier 1 suppliers were unable to meet their output quotas, and other suppliers faced parts shortages from their subcontractors.9 As a result, Boeing was forced to reverse some of its original outsourcingdecisions; for example, in 2009 it spent $1 billion in cash and credit to acquire its fuselage manufacturing partner Vought Aircraft Industries.2 At the time of the purchase, Vought's CEO said that the firm had already invested twice what it had anticipated in its attempts to fulfill the Dreamliner orders. ple who had never really done this kind of technology before, and The delivery date for the 787 was delayed at least six times between 2006 and 2010 (see Exhibit 11).4 The plane was finally completed more than three years after the original delivery date-a delay that cost Boeing millions of dollars in fines and concessions to customers. Despite the lengthy delay, orders and excitement for the Dreamliner remained strong, and there were more than 800 planes on order at the end of 2011 Larger Regional Jets In 2002 Embraer introduced a new family of four "E-Jets" with seating capacities of 70 to 120 and a maximum range of 2,200 nautical miles. E-Jets quickly became popular with regional and low-cost airlines-U.S-based JetBlue Airways ordered 100 Embraer 190s in 2003.7 Embraer began manufacturing ERJ 145s in Harbin, China, in 2002 under a joint venture agreement with AVIC. In 2010 Embraer negotiated to extend the joint venture for an additional five years, but AVIC announced that it had developed a commercial plane with specifications similar to the E-190 that it planned to deliver to domestic carriers beginning in 2014. China agreed to purchase 20 E-190s manufactured in Brazil, and the Chinese government allowed Embraer to continue its joint venture with AVIC under the condition that the Harbin facility be converted to manufacture Embraer's business jets.S As it renegotiated its agreements in China, Embraer faced a rapidly strengthening currency in Brazil that put pressure on export profits. Expecting executive jet and defense jet sales to be "relatively flat," Embraer saw commercial airline growth as the only segment with short-term profit potential, and company executives began considering development of a new jet capable of carrying 130 or more passengers. An aircraft of this size would allow Embraer to compete on some of the busiest short-haul routes in the world: between European capitals and the shuttle between So Paulo and Rio de Janeiro.10 In 2008 Bombardier announced it would expand its line of aircraft and build a new series of narrow-body planes. CEO Pierre Beaudoin said, "The CSeries family of aircraft will revolutionize the economics and network strategies for airline operations in the 100- to 149-seat commercial market."101 Some industry analysts considered the CSeries risky: although it appeared there would be strong demand for fuel-efficient narrow-body aircraft in the next 10 to 20 years, it would be hard to compete with Boeing and Airbus on price.102 However, Beaudoin said the airplanes would be delivered on time -something Boeing and Airbus rarely accomplished "The CSeries family offers the greenest single-aisle aircraft inits class," said Gary Scott, president of Bombardier Commercial Aircraft "These game-changing aircraft emit up to 20 percent less CO and up to 50 percent less NOx, fly four times quieter, and deliver dramatic energy savings-up to 20 percent fuel burn advantage as well as up to 15 percent improved cash operating costs versus current in-production aircraft of similar size. The CSeries aircraft will set a new benchmark in the industry."10 Planes from New Manufacturers In 2008 COMAC announced plans to build the C919, a narrow-body jet with 160 to 190 seats (comparable to the Airbus A320 and the Boeing 737). When the company introduced plans to select suppliers of engines, airborne equipment, and materials through an international bidding process, it urged interested foreign suppliers to create partnerships with Chinese manufacturers.104 COMAC chose the LEAP-1C engine manufactured by CFM (a joint venture between GE and the French Snecma) and lined up an array of American and European suppliers, including Honeywell Crane AE, Rockwell Collins, and Parker Aerospace (see Exhibit 12).15 The first orders for the C919 were booked in 2010; customers included China's three largest airlines and GE Capital Aviation Services. In 2011 GE entered into a joint venture with AVIC to produce sophisticated avionics, the electronics for aicraft communications, navigation, cockpit displays, and controls-the same avionics used on the 787 Dreamliner. COMAC was also at work on a regional jet the ARJ21, which had its first flight in 2008-but deliveries initially scheduled for 2011 were delayed due to certification troubles. Describing the ARJ21, author James Fallows said the plane had "about the same number of seats as models from Embraer or Fokker-seventy-eight in a normal configuration-but because of various inelegant aspects of design and manufacture, it weighs about ten thousand pounds more. In aviation, this is a crippling disadvantage." According to aviation expert Richard Aboulafia, "We know that this plane, the ARJ21, is completely useless . . .It amounts to a random collection of imported technologies and design features flying together in loose formation."19 The challenges were daunting, but some competitors recognized China's determination to succeed. Jim Albaugh, who headed Boeing's commercial aircraft division until retiring in June 2012, said: "Whether [the C919 is] a good aeroplane I don't know, but eventually they'll get it right."0 Other manufacturers of regional jets included Mitsubishi and Sukhoi. The MRJ (Mitsubishi Regional Jet) was a 70-to 90-passenger regional jet that was in final manufacturing in 2012. The first aircraft to be designed and produced in Japan since the 1960s, the MRJ was expected to complete its maiden flight in 2013 Russian aircraft manufacturer Sukhoi, which in 2006 had merged with five other major aircraft makers into a single entity with substantial government control, developed the 75- to 95-seat Superjet 100 (SSJ 100). The plane undertook its first commercial flight in 2011 and was beginning to attract some interest from airlines outside of the formerSoviet Union, having received 170 orders, 42 of which were from Indonesia.11 However, the first planes delivered have suffered from reliability problems, and on May 9, 2012, an SSJ 100 crashed during a demonstration flight in Indonesia, killing all on board Future Outlook Expanding markets and growing demand for more efficient planes made for a positive outlook for aircraft manufacturers. Both Boeing and Airbus predicted 5 percent annual growth between 2011 and 2030, which would create demand for more than 30,000 aircraft.12 Although they disagreed about the makeup of the demand for large aircraft, they agreed that the majority of sales would be narrow-body (100 to 200 seats) and midsize (200 to 400 seats) wide-body aircraft Both companies expected a large share of the growth to come from the Asia-Pacific region, with China driving much of the increased demand. Boeing's forecast included 8.8 percent annual growth in domestic Chinese air travel, which would create demand for 3,400 new aircraft by 2026 nearly quadrupling the country's fleet. Despite the challenges Boeing and Airbus faced in developing and producing the 787 Dreamliner and the A380, and despite the new competitors that had begun to make a play for their share of the market, the two airlines remained optimistic about global sourcing in future aircraft development. Entry: - High fixed cost - Reputation important and costly - Government support Outsourcing of suppliers + Regional jet makers +Chinese >Not imminent threat Rivalry: Suppliers - Rolls Royce and GE Only 2 main competitors - Switching costs Lumpy sales and big-ticket items + Homogeneous products Buyers: - Over 200 airlines - Switching costs + Few airlines able to buy +Mixed fleets -> Moderate power complementors +Unions Minimal power Excess capacity + High fixed costs + Few non-price attributes Substitutes: Used planes Leasing planes Real threat >Not imminent threat Rivalry: IBERIA d GE ors Only 2 main compet+ Resale guarantee switching costs is Fleet included both plane types di+ Call/response with time to outbid IBERIA: er Exploited lumpiness rival + High fixed costs + Few non-price-.... - BERIA Substitutes;Threat of used planes