Airbus vs. Boeing in Superjumbos: A Case of Failed Preemption

67 Pages Posted: 22 Mar 2002

See all articles by Benjamin Esty

Benjamin Esty

Harvard Business School

Pankaj Ghemawat

University of Navarra, IESE Business School; New York University (NYU) - Leonard N. Stern School of Business

Date Written: February 2002

Abstract

This paper looks at competitive interactions between Airbus and Boeing in very large aircraft. It concludes that Boeing attempted to preempt Airbus in introducing a new product in this space but failed to do so because of the incredibility, given the assumption of value maximization, of self-cannibalization. A theoretical model is used to illustrate this credibility constraint, and an assortment of evidence-involving pro forma financial valuations, product market data (on prices and quantities), capital market reactions to key events, and qualitative information on Boeing's organizational structure and recent changes to it-is assembled to support the hypothesis that the constraint on self-cannibalization ultimately proved decisive.

Keywords: Preemption, Airlines, Valuation, Entry, Game Theory

Suggested Citation

Esty, Benjamin C. and Ghemawat, Pankaj, Airbus vs. Boeing in Superjumbos: A Case of Failed Preemption (February 2002). HBS Strategy Unit Working Paper No. 02-061; HBS Finance Working Paper No. 02-061. Available at SSRN: https://ssrn.com/abstract=302452 or http://dx.doi.org/10.2139/ssrn.302452

Benjamin C. Esty (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

Pankaj Ghemawat

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

New York University (NYU) - Leonard N. Stern School of Business ( email )

Suite 9-160
New York, NY
United States

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