SKY-HIGH SHOWDOWN
737 Max crisis creates opening for rival Airbus
Boeing’s next moves with regard to its new jet are key in rivalry with Airbus,
Boeing Co. is coming to this year’s Paris Air Show with some hard choices that will go far in determining who comes out on top in the jetliner duopoly it shares with Airbus SE.
Reeling from the grounding of its most important aircraft, the 737 Max, in the wake of two deadly crashes, Boeing needs to reconsider its timeline and strategy for new models. Piling on pressure is Airbus’s likely unveiling of a long-range variant of its A321 model, potentially siphoning off more business from its U.S. rival in the increasingly important market for mid-range planes. The cat-and-mouse game over jets to be rolled out during the next decade is one of the top issues for Boeing chief executive officer Dennis Muilenburg as he meets customers and faces the public at the industry’s biggest gathering, which kicks off Monday on an airfield north of Paris.
His choices: spend big on a so-called midmarket airplane, or NMA, to stanch customer defections to the A321. Or plow that $15 billion (U.S.) or so into the 737’s successor — a scenario that has gained considerable urgency now that the Max grounding is in its fourth month and some customers are considering dropping their orders outright.
If Boeing doesn’t strike just the right balance, “Airbus has a clear path to 60 per cent market share for the next10 to15 years,” said Henri Courpron, chair and founder of Plane View Partners and a former executive in the aircraft-leasing business. “Airbus is sitting pretty and waiting to see Boeing show its hand.”
Airbus last year gained control of the A220, the most technologically advanced aircraft in the segment, from struggling Bombardier Inc. Boeing recently countered by forming an commercial-aircraft joint venture with Embraer SA.
Boeing wouldn’t discuss its plans for the NMA or an eventual 737 replacement.
“I feel very confident in the Max family of aircraft,” Muilenburg said May 29, when asked about a future single-aisle plane. “So we have not changed our expectations on the longevity of that line. But we’ll continue to keep an eye on those more distance future product opportunities, as well.”
Airbus declined to comment on its plans for any product announcements at the show, the first time that new CEO Guillaume Faury will oversee the action.
American, India’s IndiGo, JetBlue Airways and aviation entrepreneur David Neeleman have all expressed interest in the proposed A321XLR, the new model Airbus is studying to clip sales from Boeing’s proposed mid-range jet. The latest A321 would be available by 2023 or ’24, a year ahead of the NMA, with the range to cruise between, say, Central Europe and the middle of the U.S.
Airbus already leads in the lucrative sales of the narrowbody planes that form the backbone of most fleets and are favoured by budget carriers.
None of Boeing’s options is easy. It has spent years searching for digital production advances that could bring its planned twin-aisle design closer to a single-aisle jet’s costs. While abandoning that effort for a 737 replacement might seem right given the Max backlash, moving too soon could be financially ruinous, turning a trickle of cancelled Max orders into a flood.
“I think that would be a big mistake,” said Adam Pilarski, senior vice president with Avitas, and a former chief economist and director of strategic planning with Douglas Aircraft Co. “I’m not saying you don’t need it — the answer is you do. But do the NMA first, learn from it.”