Another white elephant has died. Competition between companies means that innovative products and processes are put before consumers. There are some spectacular successes, but there are casualties along the way. The market operates by what might in macabre terms be described as a selective death rate. The new offerings that customers take to thrive and prosper, but the ones that fail to attract a following are counted out. The process converges on increased consumer satisfaction.
Fifty years ago, Boeing bet the farm on a new type of aircraft, the 747 Jumbo-jet. It almost bankrupted the company, but they won the bet. A plane that could carry twice the passenger load did not have twice the running costs. It made possible lower fares for more passengers. Over 1500 of them were made.
Twelve years ago, its European rival entered service. The Airbus 580 was a bet that the future lay with even bigger aircraft, in this case a giant that could carry 550 passengers, and even in some configurations nearly 900. Airbus took on the 747, reckoning that its huge profits were enabling Boeing to cross-subsidize its smaller planes. The WTO, on the other hand, ruled that the EU had failed to comply with its order to end subsidies to Airbus.
Boeing took a different bet, anticipating that the future would lie in lighter, fuel-efficient, twin-engine planes that could avoid the big hubs and fly direct between secondary cities. Its 787 Dreamliner has high-tech innovations that give it the same range more efficiently.
Airbus lost its bet. It announced a target of 700 planes, and predicted it would make 1500. In fact, its total production might just pass 250. On Thursday, February 14th, it announced that production of the A380 will cease. It guessed wrong. The 747, whose success it hoped to rival, lives on. Some 536 of them are still in service, and the cargo version will still be in production after the last 380 has rolled out.
This is the market. It’s a tough place to inhabit, and you have to be on your toes all the time, in order to peer above the present and see what customers might like in the future. Airbus just guessed spectacularly wrong, and its white elephant has bit the dust.