The Concorde Saga
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Case Details:
Case Code : BSTR084
Case Length : 13 Pages
Period : 1976 - 2003
Organization : British Airways, Air France
Pub Date : 2004
Teaching Note : Available
Countries : France, UK
Industry : Aviation
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Introduction Contd...
It was not that Concorde operations made losses. In fact, on an average Concorde made an operating profit of £30-50 million6 a year for BA. BA reportedly earned £1.75 Billion in revenue for Concorde services against an operating cost of around £1 billion during its 27 years of commercial operation.(1976-2003).
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However, analysts felt that it remained a niche product, patronized by the rich and the top level executives traveling on company expense accounts. Analysts said that Concorde was a good example of a superior service with a limited market potential. It was technologically superior to any other comparable product of that time (and even in the decades that followed), but it still was way ahead of its time. The market was not ready for Concorde. People did not feel the need to travel at supersonic speeds and were reluctant to spend huge amounts on such travel. In other words, they said, Concorde failed because it was not geared to meet the needs of the market. (Refer Exhibit-II for specifications of Concorde)
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Background
The history of Concorde can be traced back to the 1940s, when the first transonic aircraft capable of reaching Mach 1.5 (Refer Exhibit I) was commissioned in Britain in 1943. The aircraft, which was called Miles M.52, was almost complete, when the government cancelled the project in 1946 citing high risk to the pilot as the reason.
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The Royal Aircraft Establishment (RAE) of Britain was involved in supersonic research and had been holding discussions on the possibility of designing a supersonic aircraft for commercial purposes. The discussions led to the setting up of the Supersonic Transport Aircraft Committee (STAC) in 1956, comprising of various officials from the government to study the viability of a supersonic commercial aircraft. STAC comprised of several sub committees which conducted detailed research on several aspects of supersonic travel. In March 1959, the committee submitted its report consisting of its broad recommendations on the two types of aircraft, that it felt could be developed. One was a 100-seat aircraft with a cruise speed of Mach 1.2 (800mph) and a maximum range of 1,500 miles... |
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