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Case Title:

BAE Systems Exits Commercial Aircraft Manufacturing

Publication Year : 2006

Authors: Kirti Nair, Joel Sarosh Thadamalla

Industry: Aircrafts and Ship Building

Region:Europe

Case Code: COS0054A

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
Hampshire, UK-based fourth largest defense and aerospace company, BAE Systems decided to sell its 20% Airbus stake for £1.87 billion to EADS. Airbus was going through crisis due to the delivery delays of super jumbo A380. Moreover, the valuation of BAE’s stake was much lower £1.87billion, half of what BAE expected. In the industry of defense and aerospace, governments played a major role by funding the projects or also at times being the major customer. BAE’s sale of Airbus’ stake marked an end of Britain’s contribution in European commercial aircraft manufacturing and thereby led to pressure from the government. In addition, BAE was considering focusing on American defense market. The proceeds from the sale of its Airbus stake were expected to be invested in developing its American business. Many analysts viewed BAE’s step a wrong move. BAE’s decision to quit commercial aircraft market altered its relations with the home government. The case aims to discuss the corporate goals and steps taken by the company in line with its strategy.

Pedagogical Objectives:

  • To understand defense and aerospace industry and factors affecting it
  • To understand the markets for military aircrafts and challenges
  • To understand Corporate strategies and Strategic Planning process.

Keywords : BAE Systems; Airbus SAS; Boeing co.; EADS; Commercial Aircraft Manufacturing; Defense industry; Commercial Aerospace Industry; Corporate Strategies Case Study; Markets; US and UK markets; Other markets; Industry Exit; British Government; MoD; Strategic Decision Making; American Defense Industry; Transatlantic strategy; Sale of Airbus stake; Commercial aircraft projects; Britain’s Future in commercial aircrafts

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