1. Case study in the INTERNATIONAL
MARKETING course.
Presented by: Ashraf Hatem Hlouh

2. IBERIA AIRLINES BUILDS A BATNA

3. THE CASE
 Iberia wanted to buy new jetliners
 Enrique Dupuy : chief financial officer and the man
who led its search for wide body jets, meant
from the start to run a real horse race. Dupuy
made it very competitive, His rule: “Whoever hits
its target, wins the order”.
 Bright (Boeing) : who had been appointed Boeing
777 as a "revenue machine" He insisted that his
could earn Iberia about $8,000 more per flight
than the A340-600 because it can hold more
seats and is cheaper to operate.
 Leahy (Airbus) : who is fumed at Iberia's pricing
demands. A New York City native and the
company's highest-ranking American, he pursues
one goal: global domination over Boeing.

4.  Two competitors: Airbus and Boeing are
competing for market share through price
cuts. In a volatile industrial market this
guarantees major advantages in the
bidding process. We, of course, cannot
and would not counsel collusion between
the aircraft makers. But, both firms would
be better off with less aggressive price
discounting. One of Boeing's failings is to
not have a European working on business
in that part of the world. Notice how
Airbus has hired an American (Leahy) to

6. IBERIA AIRLINES
 whom does it serve?
In 1944, the civil Aviation Conference was
held in Chicago, where fifty two states
sighed an International Convention that
established the basic principles for the
functioning of the air market: each country
could negotiate bilateral agreements with
other countries in order to regulate the
market conditions that would govern air
traffic. Before the 1980‟s, the planning
system used was basically “ point to point”,
that is to say, direct flights from one city of

7.  What value does Iberia Airlines deliver?
They used medium and low capacity
aircraft on low density routes. Generally
they only made domestic flights and rarely
international ones. They competed with
flag carriers and also with low cost
carriers, which had caused a decline in
their per passenger income. For that
reason, some regional companies decided
to go into partnership with flag carriers
which results to also low cost carriers.

8.  Why does Iberia Airlines matter?
It matters with the 1.9 billion passengers
carried safely by the airline, because of the
low cost but efficient carrier. The strategic
master plan II 2000-2013, established
customer service as one of its priority
objectives which in fact result with the
passenger‟s satisfaction that would be
converted to profit.
 What is Iberia Airlines ambition?
Its ambition is to suffice the need of its
passengers while giving low cost in a way
that their service will be still in the

9.  What is its difference?
Its difference is that it gives low cost
flights which gives the customers the right
satisfaction. They managed flights “point-
to-point”, both..Re: Sales Cycle Analysis.
Iberia's Dupuy played the game to
perfection. His critical task was to
strengthen his BATNAs (best alternative to a
negotiated agreement).
It had been a long time since Iberia had
bought Boeing. He went to great lengths
to bring the Boeing folks into the bidding

10. Another stroke of genius was to bring
the used Singapore Airlines 747s into
consideration. He also had done a good
job during the 1995 (another bad market
year for the aircraft makers) negotiations
with airbus by including the resale price
guarantees
Bright (Boeing) was in trouble from the
start. But, in a down market he could
hardly ignore a big order even from a
European airline with cozy connections to
Airbus.

11. Airbus and Boeing are competing for
market share through price cuts. In a
volatile industrial market this guarantees
major advantages in the bidding process.
We, of course, cannot and would not
counsel collusion between the aircraft
makers.
Both firms would be better off with less
aggressive price discounting. One of
Boeing's failings is to not have a European

12. TOP TEN STRATEGIES FOR NEGOTIATION
Prepare
Set an aggressive goal
Improve your BATNA
Establish a reservation price
Create a scoring system
Carefully analyze the client‟s BATNA
Negotiate at the package level
Make the first offer and build a rationale
Leave yourself room to concede
Make multiple equivalent offers
simultaneously

13. CRITIQUE THE NEGOTIATION STRATEGIES AND TACTICS
OF ALL THREE KEY EXECUTIVES INVOLVED: DUPUY,
LEAHY, AND BRIGHT
Dupuy: Manipulative, Strategic
Leahy: Better investment return
Bright: “Revenue Machine”, Wanted to
be considered on more than price

14. CRITIQUE THE OVERALL MARKETING STRATEGIES
OF THE TWO AIRCRAFT MAKERS AS
DEMONSTRATED IN THIS CASE
 Airbus (Europe)
• Better investment return
• Could be more easily integrated with
their current planes
• Helping to save money in the long run
• Already less expensive to purchase
 Boeing (USA)
• “Revenue Machine”, More seats
allowing additional earnings of about
$8,000 more per flight

15. WHAT WERE THE KEY FACTORS THAT ULTIMATELY
SENT THE ORDER IN AIRBUS’S DIRECTION?
They met the requirements Dupuy set up in
the beginning
“Later, Foreyard got on the phone with
Iberia‟s Irala, who said he still needed two
concessions on the financial terms and
economics of the deal. Airbus had already
agreed to most of Dupuy‟s terms on asset
guarantees and, with engine maker Rolls-
Royce PLC, agreed to limit Iberia‟s cost of
maintaining the jets. forgeard asked if
relenting would guarantee Airbus the deal.

16. “In the end, Airbus nosed ahead thanks to
its planes‟ lower price and common design
with the rest of Iberia‟s fleet. By offering
guarantees on the planes‟ future value and
maintenance costs, plus attractive
financing terms, Airbus edged out Boeing‟s
aggressive package. The deal‟s final
financial terms remain secret.

17. QUESTIONS
1. Critique the negotiation strategies and tactics of all three key
Executives involved: Dupuy, Leahy, and Bright.
 A good answer will recognize the skill and
professionalism of Iberia‟s Dupuy who appears
to have played the game to perfection. His
critical task was to strengthen his BATNA (best
alternative to a negotiated agreement). It had
been a long time since Iberia had bought
Boeing aircraft. He went to great lengths to
bring the Boeing executives into the bidding
contest, including offering to fly the 14 hours to
Seattle.
 Another brilliant move was to bring the used
Singapore Airlines‟ 747s into consideration. He

18.  Bright (Boeing) was in trouble from the start
but, in a down market he could hardly ignore a
big order even from a European airline with
strong connections to Airbus.
 He did do well on the creativity dimension by
guaranteeing GE concessions on engine
maintenance.
 Leahy (Airbus) probably gave away too much in
price and had neglected to include a
confidentiality agreement regarding the final
price.

19. 2. Critique the overall marketing strategies of the two aircraft
makers as demonstrated in this case.
 Airbus and Boeing are competing for market
share through price cuts. In a volatile industrial
market this guarantees major advantages in the
bidding process. We, of course, cannot and
would not advise collusion between the aircraft
manufacturers.
 Both firms would be better off with less
aggressive price discounting. A good answer
would explore other avenues for winning
industrial accounts such as after sales service,
guarantees, staff training etc. One of Boeing‟s
failings is to not have a European working on

20. 3. What were the key factors that ultimately sent the order in
Airbus’s direction?
 A good answer will recognize that the strong
personal and political relationships between the
top executives at the European firms clinched
the deal. This emphasizes the great importance
of relationship building .

21. 4. Assume that Iberia again is on the market for jet liners. How
should Bright handle a new inquiry? Be explicit.
 A good answer will recognize that price cutting
has its problems and competition for capital
intensive products can also take place on other
levels. In future negotiations with Iberia, real
consideration has to be given to bidding list price
and perhaps concentrating more on a „bundle‟ of
other benefits such as after sales service, pilot
training etc. One needs to consider all the
aspects of Airbus policy in this particular
 Transaction, in terms of the positive and minor
effects of massive discounts on list prices
coupled with asset guarantees on the re-sale of
second-hand aircraft, maintenance agreements
etc.
 Without proper consideration there could be