1.

Boeing held monopoly in VLA market in terms of its 747 airplanes. Airbus didnt have any airplanes to
compete with the 747s and hence wanted to enter this new segment.
Airbuss market research has predicted that the VLA segment will have unprecedented growth due to
increased demand of air travel and growing traffic at major airports across the world. The rise in
passenger / cargo traffic could be achieved by higher capacity aircrafts only.
Airbus predicted that growing economies like China and other Asian economies would contribute greatly
to the demand for VLAs in the future. Airbus also believed that a larger aircraft operating over long
distance flights had a better operating economy. It only costs 12% more to operate the flight as
compared to a 747 but provides 35% more space which was effectively a source of revenue.
Moreover the greater space and more efficient design allowed airlines to provide more services in their
aircrafts which could be used to charge premium to customers. The Passengers attributed a special
appeal to the state of art facilities provided in such aircrafts.
VLA Airbus A3XX would have 4 engines compared to the conventional 2 engine design which also added
a safety level in terms of long distance air travel.
It had better aisle space which was crucial in terms of passenger evacuation in cases of emergencies.
Overall, VLA aircrafts would provide the most optimum solution to the growing air travel needs.

3.
Boeing can respond to the situation in the following ways
a. Come up with a bigger version of 747 aircrafts.
b. Lower down its 747 prices.
c. Come up with a competing super jumbo jet.
d. Ignore the potential threat posed by Airbus and maintain status quo.
Cutting price is not a solution as it might only divert sales and, margins for Boeing would also reduce.
Developing a new super jumbo jet will require considerable development costs. The market for these
planes is not enough to sustain and earn positive NPV for 2 players in the segment. So, maintaining
status quo or coming up with a bigger version are the options they are left with. Developing a bigger
version would give the number of seats required but will not be able to match the newer technology,
style, comfort, and operating efficiency brought in by the Airbus planes. So, the best option would be to
maintain status quo and capitalize on their existing products.