Introduction

In January 1976, the Concorde, an aircraft capable of traveling faster than the speed of sound,
completed its first commercial flight, thus making supersonic flight available to customers
around the world. By many measures, the Concorde offered customers a truly superior flying
option. By traveling close to Mach 2 for the majority of a flights duration, the Concorde was
able to complete a transatlantic flight from Paris to New York in 3 hours, 45
minutes. Traditional subsonic aircraft completed the same journey in approximately 8
hours.1

Additionally, the Concorde provided a unique, cool flight experience.

The

Concordes cruising altitude was 56,000 feet, whereas traditional subsonic aircraft traveled
below 40,000 feet. At this height, the curvature of the Earth was visible to passengers and the
sky took on a dark blue, almost purple hue. These views were previously limited to military
pilots and astronauts. Lastly, when the Concorde traveled at supersonic speeds, passengers
no longer heard the noise from the engines, contributing to a more peaceful inflight
environment. The expectations for the Concorde were tremendous because the performance
of the aircraft was so dominant over other existing options. Of course, the upfront
development costs and ongoing flight costs made operating the Concorde expensive and
necessitated that tickets be expensive as well. A roundtrip ticket from Paris to New York
cost an average of $9,000 on the Concorde, as compared with $3,800 for a business class
ticket on a Boeing 7472 . But given the improved flight experience offered by the Concorde,
Britain and France were confident that the Concorde would generate customer appeal.
However, by October 2003, the Concorde was retired, largely considered by the world to be a
commercial failure. What factors led to the demise of the Concorde?
History of the Concorde Following the first supersonic flight by Chuck Yeager in 1947,
multiple countries began to explore the possibility of creating a commercial aircraft capable
of supersonic flight. In 1956, Britain formed a Supersonic Transport Aircraft Committee to
consider options for supersonic commercial flight and subsequently formed the British
Aircraft Corporation (BAC). The BAC emerged from a conglomerated effort from the
Bristol Aeroplane company, English Electric, VickersArmstrong and Hunting, all major
aircraft manufacturing companies in Britain.3 The Ministry of Aviations design contract
stipulated that the BAC would attempt to mitigate the risk of the project through international
collaboration. As part of this plan, Britain attempted to attract partner countries to be
involved with the project. The BAC eventually reached a collaboration agreement with
France, who was already in the process of developing supersonic transport systems for

medium haul flights. The BAC, however, believed that the benefits of supersonic
transportation could only be achieved through long haul flights. This initial difference of
opinion was a critical factor in BAC/France tensions throughout the Concordes development
and implementation. By 1962, a formal agreement was reached between the two countries
that agreed upon the aircraft specifications and divided responsibilities accordingly. The plan
was to develop a longrange supersonic commercial aircraft focused on long distance,
international travel. Britain and France faced many challenges during the development phase
of the Concorde. First, the project faced significant technological hurdles. While traveling at
Mach speeds, the Concorde experienced heating issues, specifically regarding the nose, skin
and cockpit windows. The Concorde team overcame these challenges by constructing the
nose out of a special aluminum alloy that could withstand the heat. They also required the
plane to be painted with a white, reflective paint to reduce heat absorption within the skin of
the aircraft (leading to the white look that the Concorde is known for today). Given the
aircrafts delta shaped wing configuration, the Concorde had to be structurally more rigid
than conventional aircraft as well. The second challenge the countries faced was in the area of
costs. Supersonic flight is significantly more fuel intensive than subsonic flight, given the
drag and friction that results at high speed air travel. This meant that the Concorde burned
over 4 times the amount of fuel per passenger, as compared to a traditional commercial
airplane4 . Given that fuel is a fixed perflight cost, this already meant that flying the
Concorde was going to be expensive. Additionally, the Concorde needed unique parts and
maintenance that were completely different from other types of aircraft. The Concordes
parts suppliers thus were not able to achieve scale by manufacturing Concorde parts, which
kept these parts expensive. Lastly, the Concorde required specially trained pilots and crew,
which added even more cost. The third was in the area of regulatory acceptance. Primarily
because of noise issues related to sonic booms, engine noise and turbulence at takeoff and
landing, the Concorde faced concerns from environmentalists, citizens and government
agencies. The effect was to limit the scope of the Concordes potential flight
destinations. For instance, due to restrictions that disallowed sonic booms over land, the
Concorde could not fly from New York to Los Angeles or other overland routes.
Additionally, noise complaints led the governments of India and Malaysia to not allow the
Concorde to enter their airspace, eliminating potential destinations such as Mumbai, Delhi
and Singapore. Despite these challenges, production proceeded. The actual construction of
the Concorde was divided among four companies: BAC and Sud Aviation (France) were
responsible for building the frame of the aircraft and Bristol Siddeley (Britain) and SNECMA

(France) were responsible for developing and producing the jet engines.5 Importantly, no
single, separate company was created to produce the Concorde. Rather, the British and
French governments created a management structure that represented both governments and
representatives from the four companies.6 As we will see later, this managerial structure
aligned entities with radically divergent interests. Public vs. private tensions arose between
the governments and private companies. Purpose of use tensions arose between the
short/medium haul supersonic aircraft focus of France and the long haul focus of
Britain. Lastly, time intensive tensions arose as the development of supersonic aircraft would
require both a longterm financial commitment, as well as longterm patience to arrive at the
goal of sustained profitability. In effect, the Concorde project was doomed to fail from the
outset

given

the

disparate

demands

and

goals

of

the

various

managerial

factions. Nevertheless, construction of the Concorde under this joint agreement began in
1962. From 1962 1967 various Concorde prototypes were created and unveiled, beginning
in December 1967 with the Concorde 001, debuting in France, and then later in 1968 with the
Concorde 002, which was unveiled in Britain. Test flights began in 1969 and in November
1970, the Concorde 001 and Concorde 002 both reached Mach 2 speed for the first time. In
September 1971 the Concorde 001 made its first transatlantic flight to South America. In
1972 the Concorde 002 went on a tour to 12 countries in the Far East and Australia. Later
that year, BOAC (the predecessor to British Airways) ordered five Concordes and Air France
ordered four production models of the aircraft. Developing a supersonic transport system
required tremendous resource allocation from the French and British governments as well as
British Airways and Air France. The primary investments were made for Research and
Development; in total four prototypes were designed costing 1.134 Billion which was split
by the two governments. 7

After carefully refining the prototypes the Concorde was put

into production, which included a run of sixteen aircrafts. Of this production run, two
aircrafts were used for testing and training and fourteen were put into service. Of the
fourteen aircrafts put into service, British Airways purchased five and Air France purchased
four. To the demise of the British and French government viable buyers outside of British
Airways and Air France could not be identified to purchase the remaining five aircrafts. As a
result the aircrafts were given to British Airways and Air France for pennies on the
dollar. The total costs of the sixteen aircraft production run totaled 654 Million; the British
and French governments were only able to recoup 278 Million and were left to writeoff the
production run losses and the development costs.8 Due to a conflux of exogenous and
endogenous factors, these turned out to be the only orders ever received for the Concorde.9

The oil crisis of the 1970s caused many airlines to stay away from purchasing (or leasing) the
gasguzzling Concordes. United Airlines and Continental Airlines both withdrew their
decisions to purchase the aircraft. In addition, in 1973 the Russian government suspended
production of a potential competitor for the Concorde after a crash occurred in the Paris Air
show. Lastly, in 1975 the United States government imparted a six month ban on Concorde
landings in the United States because of the noise created during takeoff and landing (in
addition to general concerns of the negative externalities created by the Sonic
Boom).10 Despite problems inherent in the Concordes design with respect to fuel costs and
structural integrity, the Concorde secured commercial approval and offered services between
London and Bahrain, as well as Paris and Rio in 1976. Later in the year, the Concorde
received special permission to operate two services per day to New York and one service per
day to Washington, D.C.11 Despite limited appeal and low ticket sales, the Concorde
operated throughout the latter part of the 1970s. The 1980s, however, were a challenging
decade for the plane itself, as well as for the managing companies who undertook the
project. In 1984 the British government announced its decision to phase out support for the
Concorde. The late 1980s and early 1990s saw a series of accidents plague the
Concorde. Safety became an important issue for the Concorde, especially since many of the
planes were already 20 years old at this point. High altitude flights and Mach 2 traveling
speeds placed a significant amount of pressure on the structural integrity of the
plane. Consequently, the Concorde underwent a costly series of rudder and window
replacements. The final undoing of the Concorde occurred on July 25, 2000 when an Air
France Concorde crashed during takeoff near Paris, killing 113 people all of the passengers
and the entire crew. The culprits of the crash were shredded pieces of tire that damaged the
fuel tank, causing a massive fire. Problematic design issues were the real culprit however, as
the rear tires were located right next to both fuel tanks. After the crash, the Concorde was
grounded for 16 months as both British Airway and Air France invested 35 million in
repairs to develop shredresistant tires and line fuel tanks with Kevlar to provide greater
strength.12 However, the events of September 11, 2001 in the United States, a rudder failure
in 2002 and 2003 and a forced emergency landing in Canada by an Air France Concorde in
2003 spelled doom for the Concorde. The Concorde flew its last commercial flight on May
31, 2003 from New York to Heathrow and was retired to museums around the world.13 As it
stands now, the Concordes main legacy is the technological experience gained in design and
manufacturing

which

later

became

the

basis

for

the

Airbus

consortium

of

manufacturers.14 In order to better understand the rational for introducing the Concorde and
the reasons for its subsequent demise, we will investigate the construction of the Concordes
supply chain, as well as the real and perceived value creation and value capture by the
managing entities of the Concorde. Construction of the Concorde Supply Chain As described
earlier, the Concorde was a joint venture between the British and French governments, as
well as from four private companies: BAC and Bristol Siddeley from Britain, and Sud
Aviation and SNECMA from France. BAC and Sud Aviation collaborated on the design and
production of the aircrafts exterior/interior frame, and Bristol Siddeley and SNECMA
collaborated on manufacturing the engines needed to costeffectively attain supersonic
speeds. The Concorde was a deltawinged (triangular) aircraft designed with a unique
innovation in the center of drag pressure, atypical from conventional passenger airlines. The
aerodynamic nature (and high price tag) of supersonic commercial aviation necessitated a
small number of seats on the plane. Heavy pressure was applied to the Concordes basic
structure during banks and turns, causing the plane to twist and have a reduction in structural
integrity. In addition, the narrow shape of the plane meant that the aircraft flexed, especially
during takeoff and landing. With sole design responsibility shared jointly between BAC and
Sud Aviation, competitive sourcing from a price standpoint of the basic frame was essentially
impossible.15 In addition, with almost no competition there was little pressure to upgrade the
cockpit or internal passenger features of the Concorde, despite many upgrades to Boeing
planes of similar vintage years.16

The engine needed to propel the Concorde was a

technological marvel, the result of an improvement from an engine originally designed by

BristolSiddeleys and improved by SNECMA and RollsRoyce. The high airspeeds caused
by supersonic flight required a sophisticated intake mechanism for the jet engine and
consequently, the proprietary nature of the engine and limited production output necessitated
an exorbitantly high price tag.17 The last piece of hardware necessary for the Concorde was
the braking system, which was specially designed by Dunlop. The rapid deceleration needed
for landings would bring the brake pads athemselves to temperate ranging from 300 C to
500 C. Typically, the brakes required several hours to cool before they could be cleared for
use again. Failure of the Concorde The Concorde served British Airways and Air France,
profitably, for nearly three decades while taking travelers transatlantic at twice the speed of
sound. Yet, despite this technical success and longevity, the Concorde failed as a major
innovation in the airline industry. At its conception, it was hoped that the Concorde would
represent the dawn of supersonic travel in the civil air industry. By the time the first

prototype took flight, sixteen airlines had signed contract options to purchase seventyfour
airplanes. It appeared as though the Concorde would be welcomed into service by airlines
from around the world. However, the Concorde never achieved such commercial success as
only fourteen planes were ever put into commercial operation, and by only two airlines:
British Airways and Air France.

To determine how the Concorde failed as a sweeping

introduction of supersonic travel, it is necessary to examine the motivations for its

development. As detailed earlier, the British and French governments provided the initial
conception and financing for the development of the Concorde. However this was a forced
partnership of institutions with divergent goals. At the outset France preferred to develop a
mediumhaul supersonic transport system, whereas the British preferred a long haul
supersonic transport. These differences were resolved in order to reduce the development
costs to the respective governments. It is important to note that the development of
supersonic commercial transport was driven by government, not the corporations that would
eventually purchase and operate the aircraft. Further illustrating the fact that the Concorde
was not developed to meet the market needs of a particular corporation or organization, the
management structure of the development effort consisted of representatives from the British
and French government, as well as the four companies that were involved in the development
process. The comingling of divergent political and corporate interests made it difficult to
create a single product that would meet a particular market need.

Undoubtedly, the

development of the Concorde was at least partially motivated by international competition

and the desire for countries to demonstrate technical expertise and superiority around the
globe, and particularly in a divided, postwar Europe. It should be noted that the Soviet
Union was simultaneously developing the Tupolev Tu144, a Russian supersonic transport
aircraft that was ultimately abandoned in 1973 after a crash at the Paris air show. While the
U.S. raced the Soviets to space, the British and French raced the Soviets in commercial
aviation. Unfortunately for the British and French, success in commercial aviation required
the participation of the average individual. While such motivations can undoubtedly drive
technology advancement, it is less likely that these innovations will see commercial success
when their development does not consider all of the practical, market, and economic factors
needed to create an innovation that will flourish in the private sector, where demand and
profitability are paramount. While it may be easy to blame the failure of the Concorde on the
misguided ambitions of politicians, it should be noted that in development there was interest
from sixteen worldwide airlines. Such initial demand indicates that at the time of

development there was some sense that supersonic transportation would be a breakthrough
technology that would change the face of air travel moving forward. An examination of the
history of travel development may indicate why so many looked to the Concorde as a major
innovation in air travel. Throughout history, the pace of travel has increased. From wagons
and ships to railroads, automobiles and airplanes; innovations in travel had consistently made
traveling faster and/or more convenient. In many instances, the new innovation replaced or
significantly reduced the importance of the dominant transportation technology of the
time. For personal travel that last century has seen the automobile and the interstate system
replace trains and transoceanic flight replaced individual transport onboard oceangoing
ships. Given this backdrop, it is understandable that many people believed that the ability to
increase flight speed more than twofold would be a competencedestroying discontinuity in
aircraft development. Its developers assumed that the Concorde would herald the beginning
of supersonic travel that would become the dominant form of longdistance travel in the
future. This did not come to be. The retirement of the Concorde in 2003 was the end of
supersonic commercial travel for the foreseeable future. In retrospect, it is easier to see that
longdistance travel had become a mature industry in which the consumer was more driven
by price than performance. In 2003, at the retirement of the Concorde, a typical roundtrip
ticket on the Concorde cost $8,00012,000, where a typical transatlantic flight cost
approximately $4,000 for business class and less than $1,000 for coach. Even if consumers
judged speed as the only performance metric, a twofold increase in speed increases the cost
to the consumer by twotothree times. Given the high cost of operating the Concorde (the
Concorde required four times as much fuel per passenger as a subsonic aircraft), the
Concorde was unable to deliver an increase in value to the consumer (as defined by
speed/cost).

As illustrated in Figure 1, the Concorde only appeals to a demographic that values

performance over value and price. As a result, the Concorde was not the competence
destroying innovation that many suspected. Instead, it enhanced the airlines capability to
offer service to the clientele that desired rapid service at any cost. Unfortunately, this proved
to be a very small demographic that could not support more than a small niche in the overall
air travel market.
The introduction of the Concorde effectively demonstrated that air travel had matured to the
point where value and price mattered far more than performance to the mass consumer. As a
result, the Concorde was not able to be a disruptive technology, because it delivered
performance in excess of that demanded by the average user.
While the flight restrictions resulting from the sonic boom limited the total market of the
Concorde, the aircraft was never able to capture more than a fraction of the overseas travel
market.
This further illustrates that the commercial failure of the Concorde cannot be attributed to
failed technology development. It was, undoubtedly, the failure to recognize the maturation
of the transportation market that led to the commercial failure of the Concorde. The technical
superiority of the Concorde had a value proposition that was not valued by the average
consumer.
Retirement
Despite failing in the mass commercial market, the Concorde did maintain a market niche for
24 years before a crash in Paris plunged the Concordes safety rating from the best to the
worst. The subsequent maintenance costs and safety upgrades yielded a significant increase in

the aircrafts operating costs. Furthermore, the terrorist attacks of September 11th caused a
significant drop in demand for international travel. This compounded the reduction in
demand that followed the 2000 crash. Despite all of these setbacks, British Airways and Air
France continued to operate the Concorde until Airbus announced in 2003 that it would cease
to support the aging aircrafts. With no technical support for the Concorde, it was retired from
service at both airlines in 2003, ending the period of supersonic commercial travel for the
foreseeable future.