Case study

Airbus Industrie

Riding market cycles to deliver billion dollar savings

Established as a consortium organisation under French law, Airbus employs some 3,000 staff of over 30 different nationalities at its headquarters and subsidiaries. The commercial aircraft industry has long experienced boom and bust cycles. As an aircraft manufacturer fiercely competing for market share against industry giant Boeing, Airbus sought a better way to forecast aircraft orders over five to ten years in order to make critical decisions about production capacity and new product introduction. Airbus commissioned PA Consulting Group to develop a dynamic simulation model of the worldwide market for air transport and commercial aircraft manufacturing and used it to save billions of dollars.

The outlook for aircraft orders was uncertain

Like most businesses, Airbus had relied principally on traditional regression based forecasting in making key decisions about products and capacity. However, in its cyclical business, regression-based methods had failed to provide reliable information about the timing and magnitude of order peaks and troughs. At the time PA’s involvement began orders were higher than historical levels and rising. In this uncertain environment, Airbus sought to answer several key questions. When will the market peak? And when will it recover again? How much new capacity should we add, and when? When should we introduce the next major aircraft family?

The model represented the underlying causes of aircraft order cycles

PA developed a dynamic simulation model of the worldwide market for air transport and aircraft manufacturing to help answer Airbus’s questions. The model contained the key elements that drive aircraft order cycles and the interactions between them for the major regions of the world and the major size categories of aircraft. These elements include: passenger demand for air transport, airline response to demand and financial performance, aircraft manufacturer response to aircraft orders and production capacity decisions, and interactions with the used aircraft market and aircraft leasing companies.