Boeing started a year later than its European rival Airbus in a race to overhaul the $US2 trillion narrowbody aircraft market, and is fighting hard to restore balance to their tense duopoly.
With Boeing’s announcement this week that it has a launch customer — Southwest Airlines — for its upcoming 737 MAX, the two planemakers have officially squared off in the competition to make the best – and best-selling — narrowbody aircraft: the upcoming MAX versus the upcoming Airbus A320neo.
The two plane families feature new engines in their current designs. Both planemakers boast superior efficiency, and with Boeing’s announcement last week of the list prices and a better understanding of the capabilities of the three models of its 737 MAX, the company will have an easier time converting its 948 commitments from customers to firm orders.
“We are in a position to start firming up the 948 commitments we have so far and continue to meet Airbus in different campaigns around the world,” Boeing Commercial Airplanes Chief Executive Jim Albaugh said last week.
“We got off to a little later start than they did, but I think we’ve done very well in the four months since we launched the plane,” he said.
Speaking at the Reuters Global Manufacturing and Transportation Summit, Albaugh said Boeing has done enough work on the plane’s configuration to make performance guarantees.
Airbus has taken 1450 orders and commitments including some 1200 firm orders for its A320neo family, compared with 948 for the 737 MAX, which includes a single firm order for 150 planes from Southwest. Boeing says its remaining order commitments soon will appear as firm orders on its books.
“Right now, the stage is set for 50/50. You look at the numbers,” said Teal Group aerospace analyst Richard Aboulafia. “You look at loyalty and so far there’s been a very high level of loyalty displayed by customers on both sides.”
Airbus orders include 200 aircraft from AirAsia, an all-Airbus customer, while Boeing signed up its loyal Asian customer Lion Air of Indonesia for 201 737 MAX aircraft. The difference of just one plane illustrates the fierce rivalry between the two Asian low-cost carriers as well as their entrepreneur owners.
“I think you’re going to see a tremendous run-up in orders of the next six to 12 months,” Aboulafia said.
IT COMES DOWN TO ENGINES
The 737 MAX, due to enter service in 2017, will be powered by CFM International engines and promises to reduce burn and carbon dioxide emissions by 10 to 12 per cent current single-aisle planes. CFM International is a joint venture between General Electric and Safran.
Boeing says the plane also will have lower operating costs.
The A320neo is due to enter service in 2016, featuring engine options from Pratt & Whitney, a unit of US manufacturer United Technologies, or CFM International. Airbus maintains its aircraft is more cost efficient.
List prices for the MAX range from $US78 million to $US101.7 million. This compares with $US84 million to $US106 million for the three A320neo models.
“Either people are taking two different roads to the same result. Or someone’s right and someone’s wrong,” Aboulafia said.
“The only difference is that Airbus is hedged because they’ve got a choice of both engines,” he said.
Neal Dihora, an aerospace analyst at Morningstar, said Airbus still has a marketing advantage over Boeing simply because it started selling its plane earlier. Airbus unveiled its A320neo plans in December last year.
“Airbus is winning this contest because they’re showing that they have a product and the ability to actually get these fuel savings into the market place as opposed to just in the design phase,” Dihora said.
Boeing has yet to publicise the specs for its upgraded 737, but Albaugh said it is appropriate to view the aircraft as a replacement for the 737 Next Generation.
The current 737 models are the domestic workhorses for many airline customers, seating between 110 and 220 people for short- and medium-haul flights. The largest model of the MAX, the -900, can serve as a replacement for the discontinued 757 on most routes, Albaugh said.
“The 900 is an plane that in our view can do over 95 percent of the missions that the 757 did,” he said.
“In terms of a one-for-one replacement of the 57, it’s not one for one, but it’s pretty close,” Albaugh added.
HOW BOEING ARRIVED AT ITS DECISION TO RE-ENGINE
Until its surprise decision to re-enginne the 737 last northern summer, Boeing had made it clear that it preferred to build an all-new small plane to take the place of its 737 NG.
The company took the heat from analysts as it dragged out a decision over whether to redesign or re-engine. And it stood by as Airbus notched more than a 1000 orders for its A320neo and made inroads into US markets.
In July, Boeing finally bit the bullet and said it would re-engine the aircraft, a move many outsiders perceived as a reaction to interest by American Airlines, a loyal Boeing customer, in buying the A320neo.
American, which is restructuring after filing for bankruptcy protection, split its giant order for 460 single-aisle jets worth up to $40 billion between Boeing and Airbus.
In the Reuters interview, Albaugh said there were more considerations than American and that Boeing arrived at its decision on its own terms after consultation with customers.
“Everybody liked the idea of a new plane. But they wanted an plane with certainty on a precise date, and they also wanted to understand what the guarantees of that plane might be,” Albaugh said.
He said Boeing was confident it could build the plane and provide 20 per cent improvement in efficiency.
“But what we weren’t confident of was what the nonrecurring costs would have been for development,” he said.
“I was also concerned about the schedule risks associated with that plane,” he said, “so I think we wound up in a good spot.”
Albaugh said he believes the MAX has such a pronounced cost-savings advantage over the neo that it will quickly catch up in sales with the neo.
“Right now on the NG (Next Generation), we have more firm orders than they have on the 320 classic,” Albaugh said. “And I have I have full expectation that we will split the market on the MAX and the neo as well.”