Launching the A320neo versus 737

In your opinion, what do you think were the core reasons why the A320 started winning market share from the 737?

The 320 is almost 20 years younger. We tend to forget that. Airbus was a challenger and the challenger always eats market share from the incumbent. I think that the fly-by-wire decision in 1986/1987 on the 320 was a very good one. If I were to go back to my triangle, it demonstrated a lot of creativity and a lot of expertise. It was not dominated by the risk averse people and it paid back very quickly.

In the recent days, the NEO decision was a great decision. It deserves to be the subject of a full case study in management. What was the situation? In 2006, Boeing had started the Dreamliner, taking the whole industry by surprise, because they had been advertising, between 2003 and 2006, something called the Sonic Cruiser. Everyone was expecting them to go to the Sonic Cruiser. What they were expecting was to deceive Airbus, to push Airbus to start something like a successor to Concorde; so something supersonic.

Doomed. With the oil price, no way. So in 2006, when they started the Dreamliner, Airbus was completely caught by surprise. The reaction was to say, okay, we’re going to redo a 350. In fact, the first 350 was very bad. We had to revisit the 350 and go to the 350 XWB, extra wide body, and it meant billions and it meant investment and it was terrible. They decided, at Boeing – I’m guessing; I was not allowed to have any contact with them – we’re going to give the coup de grâce to Airbus. We’re going to drive them into thinking that we are launching a successor to the 737.

How do you do that when you are in their shoes? You start speaking to the supply chain, because this is the only link that exists between the two companies. You start speaking to the supply chain saying, if we want to design a plane that looks like this, what would it require? We started getting supplier intelligence, from all around the planet, saying, they are about to launch an NSR, a new short range. By the way, they have two models. One is called Little Boy and the other one is called Fat Man. One is a single-aisle airplane; one is a twin-aisle airplane. You, Airbus, need to do something.

The reaction at Airbus was very simple. Okay, let’s take our computer assisted design system and let’s start designing a plane. We had 150 people working on our own A30X, the new short range for Airbus. We had just made the decision to spend 20 billion on the 350 and we could not afford the 30X. We started having regular sessions, small groups of people. Today, if you speak to colleagues, each of them will tell you, I’m the one who invented the NEO. As a demonstration of humility, I will tell you that I am not the one who invented the NEO. We were talking and we were lost. We were almost desperate. We had to convince ourselves that there were other options.

What were the other options? Price war, saying, if Boeing starts something, we just bring the 320 prices down and we try to occupy the market. It’s not difficult to see that there is no future in this. Pushed by engine suppliers, pushed by one or two airlines, we started to have the idea about re-engining the 320. What do we want to achieve? We want to achieve less fuel burn. Okay, we can redesign some of the aerodynamics, but if we re-engine with much more fuel-efficient engines, it may do the trick. This is how the NEO was born.

Once we announced the NEO and we announced the first orders of the NEO, in fact, for the first time in the history of this industry, Boeing had lost the initiative. Again, chess playing. As long as you have the initiative, you’re leading. For the first time, Boeing lost the initiative. They had to react. They responded with the MAX; they stirred with the MAX. Had they not started talking about new short range, Airbus wouldn’t have launched the NEO.