Like The Herald Business Journal on Facebook!
The Herald of Everett, Washington
Customer service  |  Subscribe   |   Log in or sign up   |   Advertising information   |   Contact us

The top local business stories in your email

Contact Us:

Josh O'Connor
Phone: 425-339-3007

Maureen Bozlinski
General Sales Manager
Phone: 425-339-3445
Fax: 425-339-3049

Jim Davis
Phone: 425-339-3097

Site address:
1800 41st Street, S-300,
Everett, WA 98203

Mailing address:
P.O. Box 930
Everett, WA 98206

HBJ RSS feeds

  • Airbus Chief Executive Fabrice Bregier (left) and Japan Airlines President Yoshiharu Ueki hold a model of the Airbus A350 at a press conference in Tok...

    Junji Kurokawa / Associated Press

    Airbus Chief Executive Fabrice Bregier (left) and Japan Airlines President Yoshiharu Ueki hold a model of the Airbus A350 at a press conference in Tokyo Monday.

How Airbus wooed Japan Airlines

SHARE: facebook Twitter icon Pinterest icon Linkedin icon Google+ icon Email icon |  PRINTER-FRIENDLY  |  COMMENTS
By Andrea Rothman and Robert Wall
Bloomberg News
TOULOUSE, France -- Three decades after he began his business career selling aluminum in Japan, Airbus Chief Executive Officer Fabrice Bregier tapped his experience of the country to land a $9.5 billion deal for a plane made of plastic.
Bregier logged 50,000 miles on four trips to Tokyo in his first year at the helm of the European planemaker, working to penetrate a market that's been Boeing's preserve since World War II. His reward came Monday when Japan Airlines placed its first Airbus order for 31 long-range A350 jets.
Bregier had already lobbied incoming Japanese Prime Minister Shinzo Abe when the balance began to tilt in Airbus's favor with the Jan. 16 grounding of Boeing's rival 787 after two battery fires. Bregier stepped up his campaign in an encounter with JAL Chairman Kazuo Inamori days later at the World Economic Forum in Davos, Switzerland. With Boeing's dominance broken, the Frenchman can hope to also convince ANA Holdings, the 787's first customer, to join JAL in switching camps.
"This goes beyond an order for 31 A350s," Bregier said in an interview from Tokyo. "It's a major event. Japan is a country where personal relations are essential. I've spent more time there than in any other market."
JAL is buying 18 A350-900 aircraft and 13 larger A350-1000s, plus options for 25 more planes. The A350, which flew for the first time this year, is Airbus's response to Boeing's 787 Dreamliner, which is also made of composite plastic material that's lighter than traditional aluminum. The largest A350 is aimed at the popular Boeing 777.
Success with JAL may up the pressure on ANA to cease its reliance on Boeing for long-range jets, the aircraft type that's in high demand in densely populated Japan. The A350 order takes the company's share of the Japanese market to 20 percent from 13 percent, Bregier said yesterday, adding he's confident he can build on the success for more deals in Japan.
"With the A350 order there's now the risk of JAL getting a 777 replacement years before ANA does," said Richard Aboulafia, vice president at the Teal Group, an aviation advisory firm in Fairfax, Va. "Therefore, an ANA A350 order is likely,"
Such inroads in Japan were unthinkable only a few years ago, with more than 80 percent of all airplanes ordered by Japanese customers a Boeing product, according to the Chicago- based planemaker. Japanese suppliers make up about 35 percent of the 787 Dreamliner, giving Boeing a large advantage in a country where long-standing industrial ties are cherished.
In a global market now valued at $100 billion annually that Airbus and Boeing have roughly split for a decade, Japan remained an outlier. Even as U.S. aircraft makers increasingly turned to Airbus for new jets, Japan's two leading airlines remained Boeing loyalists.
Bregier in December made the 13-hour flight to meet JAL executives for the first time in his new capacity as CEO and also secured an audience with future prime minister, Shinzo Abe. Only a month later, the Frenchman made a sidetrip to Davos, the biggest gathering of government and industry leaders, to hook up with Inamori.
At Bregier's side in Switzerland was Stephane Ginoux, Airbus's head of Japan. A Karate expert and fluent Japanese speaker, Ginoux spent three decades in the country and knew that getting beyond Airbus's 5 percent market share would require patience and working at relationships.
"In Japan, one is judged for duration," Ginoux told Bloomberg in 2011.
The timing of the Davos meeting, where drinking sake was replaced with Swiss wine, was fortuitous, coming only days after JAL was forced to park its fleet of Boeing 787 Dreamliners in a global grounding. One of JAL's own planes had caught fire on the ground in Boston that month, prompting U.S. regulators to suspend Dreamliner operations.
By March, Bregier was back in Japan, and he invited a team of JAL experts to Toulouse for visits in May and again in June. The prospect of winning in Japan moved from a long-shot proposition to real possibility.
"The real challenge was getting them to develop confidence in Airbus," Bregier said. "We went to a lot of trouble to really build that confidence, working not just with commercial people, but with management, with engineers, with technical support people, with flight-test crew, who until this point really knew us hardly at all."
JAL had 166 Boeing jets at the end of June, equivalent to 78 percent of the 214-aircraft fleet. ANA has also favored U.S.- made planes, with its 199 Boeings equating to 84 percent of a 238-strong fleet as of Sept. 20.
As both airlines were operators of the Boeing 747 jumbo jet, breaking into the market for very large aircraft may be Airbus's ultimate achievement, according to Rob Stallard, an analyst at RBC Capital Markets. Skymark Airlines Inc., Japan's largest discount carrier, has ordered six of the world's largest passenger plane and will start taking delivery next year.
"This would be a far more important order for Airbus, as the A380 has some vulnerability in its backlog," said Stallard, who called the JAL win a "high profile tactical victory for Airbus over Boeing."
JAL is due to receive its first A350 in 2019, giving Airbus time to expand its support network to a country where it now has little infrastructure. The A350-1000 has a list price of $332.1 million and offers 25 percent better operating economics than Boeing's best-selling 777-300ER, Airbus says.
The airline's commitment Monday comes with the required training for pilots, on-board and ground personnel, Airbus said.
"We made it challenging for them in introducing the 787 and we'll work to correct that," Kostya Zolotusky, Boeing's managing director of capital markets and leasing, said after the JAL announcement. The loss to Airbus is "a heartbreak."
Story tags » AerospaceBoeingAirbus




Share your comments: Log in using your HeraldNet account or your Facebook, Twitter or Disqus profile. Comments that violate the rules are subject to removal. Please see our terms of use. Please note that you must verify your email address for your comments to appear.

You are logged in using your HeraldNet ID. Click here to update your profile. | Log out.

Our new comment system is not supported in IE 7. Please upgrade your browser here.

Market roundup