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Friday, March 1, 2024
March 1, 2024

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Airbus and Boeing execs maneuver for sales edge in long-haul jet market


SEATTLE — The Dubai Air Show opens Monday, a showcase for multibillion-dollar jet deals with the wealthy Gulf carriers and other major global airlines.

Next door to a volatile, brutal war in the Middle East yet a world apart in the ostentatious luxury of Dubai, United Arab Emirates, Airbus and Boeing sales executives will compete for deals in the lucrative, and now hot market for big long-haul airliners.

Boeing is offering a broad range of aircraft that on paper ought to give it the edge. Yet Boeing missteps and delays have given Airbus sales chief Christian Scherer an opening.

Boeing has already ceded supremacy to Airbus in the market for smaller aircraft — where the 737 MAX lags far behind the rival A320 jet family in sales. It’s critical that Boeing holds its ground where it still remains ahead, in sales of the bigger jets.

Seeking to maintain that edge in multiple sales campaigns for huge deals, in Dubai Boeing is offering the hot-selling 787 Dreamliners and its long-delayed giant 777X jets.

Darren Hulst, vice president of marketing at Boeing Commercial Airplanes, in an interview said Boeing can hold its grip on current customers.

“Half of our widebody orders are from customers already operating the same jet and ordering more,” said Hulst.

“There’s a lot of demand,” he added. “We’ve sold more 787s in the last year than any single year in our history.”

Airbus has a narrower range of aircraft available. Aside from a slow-selling revamp of its older A330, it’s placing a big bet on just two passenger versions and an isolated freighter model of its new-technology, all-carbon-composite A350 jets.

Yet this year Scherer enticed several Boeing widebody customers to defect to Airbus.

Boeing’s weak spot is the long wait to get those bigger 777Xs, which won’t enter service before 2025, fully five years late.

Philippine Airlines and, this week, EVA Air of Taiwan each bought A350-1000s instead of waiting for the 777X to replace their older 777s.

“Right now, there’s a lot of activity on widebodies with big names, big fleet decisions bubbling,” Scherer said in an interview. “We’re ramping up on the A350 as fast as we can.”

Airbus this week ticked up its planned A350 rate increase from the current five jets per month to 10 per month by 2026, matching Boeing’s planned 787 ramp-up.

“Our market penetration and expansion into new markets is very healthy,” Scherer said. “What else can an industrial firm dream of than increasing its production to the maximum limit of its capability?”

An Airbus chief on the rise

Scherer in January will ascend to the position of CEO of the Airbus commercial airplanes division as his boss Guillaume Faury, CEO of the entire Airbus group, focuses on fixing problems in the defense division and developing the broader corporate strategy.

If an AI program were asked to concoct a perfect executive background for the French and German-dominated Airbus, it might come up with Scherer’s résumé.

Born in Germany, he moved at the age of 9 or 10 to Toulouse in southern France when his father took a job at Airbus. In 1972, his dad was the flight engineer on the first flight of the first Airbus jet, the A300.

Scherer went to school in Toulouse and joined Airbus as an intern in 1984. During his 39-year career at Airbus he spent eight years in the U.S., working there with his famously brash sales chief predecessor John Leahy.

“The little I know I’ve learned in the U.S., frankly, in the 1980s,” Scherer said.

Leahy’s aggressive sales efforts first won Airbus a bridgehead in the U.S. airline market and later elevated the European jet-maker to Boeing’s equal.

At industry events, Leahy routinely talked entertaining trash about Boeing. Scherer is much more thoughtful and quietly confident in demeanor. No one describes him as brash.

Yet perhaps due to the imprint of his years with Leahy, he’s not above some quiet sniping at Boeing’s troubles.

“We don’t stop our assembly lines and we have not an accumulated inventory of undelivered airplanes,” Scherer noted pointedly. “We’re producing on time, to order.”

“There hasn’t been a 787 delivering on time for I don’t know how long,” he added. “And so every 787 comes with presumably, I assume so, a heavy, heavy ‘excuse-me’ check attached to it.”

Discussing the much delayed 777X — which Boeing launched at the Dubai Air Show exactly 10 years ago with big orders from gold-plated airlines Qatar, Emirates of Dubai, Etihad of Abu Dhabi and Lufthansa of Germany — Scherer said Boeing must have had to provide those airlines major compensatory benefits to hold onto those orders despite the five-year delay.

The 777X orders “survived with a lot of emergency-room life support,” he said.

Boeing still ahead

According to London-based aviation data analysis firm Cirium, airlines today are flying almost 9,160 Airbus short-haul passenger jets worldwide versus less than 7,900 Boeing jets.

In the bigger airplane fleet, the Cirium data shows Boeing still dominates. Airlines are flying nearly 2,500 Boeing widebody passenger jets worldwide to just over 1,800 Airbus widebodies.

However, in the past three years Boeing has struggled against multiple setbacks, affecting production not only of its 737 MAXs but also its widebody jets.

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Federal Aviation Administration certification of the 777X has been repeatedly pushed out.

And deliveries of the 787 Dreamliner were halted for many months by quality defects. More than 70 undelivered Dreamliners are still parked, awaiting repair.

The damage to Boeing was limited when the global pandemic shut down international air travel, collapsing demand for the bigger jets.

Now though, long-haul air travel is back, while post-pandemic supply chain problems have reduced jet production.

As a result, this year demand for the larger airplanes has soared. Saudi Arabia and India already this year placed massive orders.

Dubai will bring more as airlines try to pin down delivery slots.

“In a supply constrained industry there’s only a finite number of widebody airplanes that you can expect Airbus and Boeing to produce,” Scherer said. “There probably won’t be enough for all the appetite.”

Bjorn Fehrm, a France-based aviation analyst with Leeham.net, said Boeing must “clean house” and avoid further delays and quality problems.

“They have really good aircraft designs, but they need to deliver them,” said Fehrm. “Boeing needs to get its act together to deliver consistently good quality aircraft.”

The widebody jet market is open again. And it’s Boeing’s to lose.

The Boeing advantage in midsize jets

The market for bigger jets is bifurcated into midsize and giant aircraft.

In the smaller of those categories, Boeing has a key advantage: it offers 787 variants of three different sizes and ranges against, for the most part, a single jet model for Airbus, the A350-900.

Airbus also offers a derivative version of its older A330 — featuring new engines and wings extended with carbon composite wingtips — called the A330-900 or the A330neo.

But that jet doesn’t match the efficiency of the all-carbon, newer technology 787s and, though offered at a much cheaper price, the A330neo has sold poorly.

Hulst says Boeing has sold more than 800 Dreamliners to airlines as replacements for their older A330s while Airbus has managed to sell fewer than 200 A330neos to such customers.

Fehrm considers the A330neo no more than a low-cost effort to make sure Airbus doesn’t completely cede the smaller end of the widebody market to Boeing.

“View the A330neo as, ‘Let’s not give Boeing the chance to run away and earn a lot of money in this segment,’” he said.

However, the bigger, new-technology Airbus jet in this category, the A350-900, is a real competitor. In fact, it has more seats and longer range than Boeing’s most efficient Dreamliner, the 787-9.

“The 787-9 is a very good aircraft,” says Fehrm. “The A350-900 is even better.”

Boeing’s Hulst concedes that the A350-900 is a very good airplane, “the best widebody that Airbus makes.” But he points to a major drawback.

“The problem is it doesn’t fit with anything else Airbus is offering,” he said. “It doesn’t have the same engine as the A350-1000 and it doesn’t have the same flight deck as an A330neo.”

In contrast, an airline might buy the smaller 787-8 to fly a new route, and on a busier route fly a 787-9 if it’s long-haul or choose the biggest size but limited range 787-10 for a somewhat shorter route. Pilots can transfer seamlessly from one 787 model to the next.

Hulst calls the A330-900 “a one-trick pony,” that an airline will buy only if it precisely fits its route needs.

So in this segment, advantage Boeing. That’s why the 787, despite all the delivery delays and news of quality defects, is selling well.

Boeing has won more than 240 new Dreamliner orders and commitments so far this year.

And yet Scherer is not left in the dust.

The A350-900, with outstanding design efficiency and powered by Rolls-Royce’s ultra-reliable Trent XWB engine, has booked more than 90 orders and committments this year.

In September, Air France-KLM ordered 50 jets, including A350-900s for KLM, which has a largely Boeing widebody fleet, including 787-9s.

As Scherer notes, the airline parent group knew exactly the performance of each jet when it chose the Airbus model.

Uncertainty around a giant jet

The ultimate outcome of this widebody jet contest between Airbus and Boeing depends crucially upon the forthcoming giant 777X jet, built in Everett.

Until Boeing gets that aircraft certified by the FAA and delivered to customers, the larger end of the market will remain unresolved.

The success of the 777X depends upon it facing no further delays, and achieving the fuel efficiency and range promised to airlines.

Adam Pilarski, a senior vice president with aviation industry consulting firm Avitas, recently visited the 777X engineers in Everett and said he came away feeling positive about the direction of the program.

Still, he said airlines are putting orders on hold, waiting to see the performance data when the 777X finally enters service.

“That’s when we’ll find out,” Pilarski said, voicing the attitude of the airline fleet buyers. “When it’s a real plane, then let’s talk.”

Until then, Scherer can pitch the all-composite, efficient A350-1000 as a better airplane.

He diminishes the 777X as a mere derivative of the older metal-fuselage 777.

“It is not the latest technology,” Scherer said. “When it flies across the Pacific … the extra seats of the 777 do not pay for the extra 35 tons of weight that you carry.”

Fehrm of Leeham.net agrees to some extent. He said the heavier Boeing plane will burn more fuel and its bigger engines will be more costly to maintain.

The extra weight means “it’s not as efficient as the A350-1000,” he said.

Boeing’s Hulst counters that the heavier weight comes from the jet’s bigger passenger and cargo capacity and “pays for itself.”

The extra payload “turns into millions of dollars per year, just in cargo,” he said.

In addition, when it enters service the 777-9X will be the biggest airliner on the market. That alone will have a huge appeal to the biggest international carriers.

“They need a 400-seat jet for some of their markets. In that case, the 777-9X truly is the only airplane available,” said Hulst. “Obviously we’ve disappointed them in terms of timing, but they still want the aircraft.”

Still, as the world waits another two years before the 777X debuts, the A350-1000 has won 73 new orders and commitments this year.

And even in the one area where Boeing still vastly dominates Airbus — freighter aircraft — Airbus has made a play to change the game.

Cirium data shows there are more than 1,000 Boeing-built widebody freighters in service worldwide against just over 200 from Airbus.

Boeing currently sells three different sizes of widebody freighters — cargo versions of the 767, the older 777 and the 777X — while Airbus has just one, its forthcoming A350F.

But unless an extension is granted to an environmental restriction, Boeing won’t be able to deliver the 767 and 777 freighters after 2027.

That would leave only the two new freighters in the mix: the efficient all-new A350F set to enter service in 2026 and the 777-8FX version of the 777X in 2027.

Fehrm said the A350F has boosted Airbus in the freighter market from “non-existent to present,” and with 39 orders booked has sold better than most expected.

He said Scherer must be content.

“He’s basically running away with the single-aisle market and is competitive and has a good lineup in the widebody market,” Fehrm said.