Scribd
Upload
365 views1 page

Airbus A3XX Case Questions

Airbus is interested in building the A3XX very large aircraft to expand its product line. To break even on the investment, Airbus needs to sell a certain number of aircraft that is estimated to be less than or equal to the total demand over 20 years. As Boeing, the response depends on what actions Airbus takes; if Airbus commits to the A3XX, it should have a certain number of orders first to reduce the risk.

Uploaded by

Pradnya Salve
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
365 views1 page

Airbus A3XX Case Questions

Airbus is interested in building the A3XX very large aircraft to expand its product line. To break even on the investment, Airbus needs to sell a certain number of aircraft that is estimated to be less than or equal to the total demand over 20 years. As Boeing, the response depends on what actions Airbus takes; if Airbus commits to the A3XX, it should have a certain number of orders first to reduce the risk.

Uploaded by

Pradnya Salve
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 1

Questions to be addressed in the presentation:

1. Why is airbus interested in building the A3XX? What are its objectives?
2. How many aircraft does Airbus need to sell in order to break even on the investment? Is
this number greater or less than your estimate of total demand for very large aircraft (VLA)
over the next 20 years?
Hint: Consider all capital providers as a single entity and calculate the break-even
return to them collectively. To calculate the break-even number of planes, calculate the
present value of the required investment, and compare it to the present value of a growing
perpetuity of cash flows from planes sales beginning in 2008. Assume an equity risk
premium of 6% in your analysis.
3. As Boeing, how would you respond to this situation? How does your answer depend on
what you think Airbus is likely to do?
4. Should Airbus commit to build the A3XX? How many order should Airbus have before
committing to develop the plane?

You might also like