Boeing pricing seen as too high

  • By Bryan Corliss / Herald Columnist
  • Tuesday, September 14, 2004 9:00pm
  • Local News

You find the strangest things on the Internet: low-cost Cialis, chances to bid on bubble gum chewed by Britney Spears, and a really insightful look at the battle between the Boeing Co.’s 777-200LR and Airbus’ A340-500 in an English-language newspaper from Bangladesh.

At least, that’s what I stumbled across this week.

The A340-777 matchup is has been overshadowed by the trans-Atlantic subsidy debate and the dueling new jet question – A380 vs. 7E7.

But with the new, ultralong-range A340s and 777s, you’re talking about airplanes that are pushing the envelope in terms of technology and commerce. Some of these planes are capable of carrying hundreds of passengers for more than 9,000 miles – so far, in fact, that as a practical matter there are no two major cities on Earth they can’t connect.

So far, Airbus is leading the way. The 280-seat A340-500 is already in service, and earlier this year Singapore Airlines used one to fly the longest nonstop route ever, from Singapore to Newark, N.J. The 777-200LR, on the other hand, is still about two years away. Boeing will start assembling the first one later this year, here in Everett.

And so far, Airbus is leading in sales. It’s taken orders for 19 A340-500s, while Boeing has orders for only five 777-200LRs, even though the Boeing jet will be able to carry about 20 more passengers and fly more than 10,000 miles, based on the most recent projections.

Those aren’t huge sales numbers, and analyst Richard Aboulafia says that shouldn’t come as a surprise.

The 777-200LR is “a niche aircraft,” he said. “Very few people have a need for that range requirement.”

He added, “If you need something right away, the A340-500 has a lead.”

But it does reverse a trend. Boeing has dominated in the 300-seat category ever since it brought the 777 to market in the ’90s, and it is counting on its new extended-range 777-300ERs and 777-200LRs to keep that edge.

However, Airbus has been getting wins in the longer-range segment with its A340-500 and A340-600. The report in The New Nation of Bangladesh may have some answers as to why.

The story was first published in 2003, shortly after the Paris Air Show. At Paris, Emirates – a major 777 operator -placed firm orders for 20 A340s, including 18 of the new A340-600s that are competing with Boeings 777-300ERs.

Emirates chief Tim Clark, according to the publication, told reporters that his airline “loves” Boeing’s basic 777-300.

“It’s a mean machine,” he said, according to New Nation. “On routes that have been a bit marginal, as soon as the 777 hits, we go immediately to profits. It’s a beautiful airplane.”

The 777 flies faster than the A340, has a wider fuselage and has an interior that’s popular with passengers, he continued.

So why not order the longer-range versions, the 777-300ER or 777-200LR? “In a nutshell, the Boeing planes were more expensive,” Clark said.

The A340-500 lists for between $185 million and $190 million, the Bangladeshi publication reported. The 777-200LR – before last week’s Boeing price hikes – listed for $188 million to $213.5 million.

All the advantages of owning the Boeing plane – lower maintenance costs, better range, more payload – are “negated by the cost of ownership,” Clark told New Nation.

Along with having a lower sticker price, Airbus cut a better deal, he added.

“We tried our best to persuade Boeing,” Clark continued, “to make them understand that when your competitor is seducing you with a range of benefits for an order this size, why wouldn’t they (Boeing) do that? But Boeing had to draw a line in the sand.”

The 777-200LR “will be a great machine,” Clark said. “But they have to address pricing issues.”

If you want to read the full story from The New Nation, I’ve posted a link on The Herald’s online service, www.heraldnet.com. Click on the link for Blogs in the left-hand column of the first page, then click on aerospace. Look for the link to “A340-500 vs. 777-200L.”

Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.

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