The battle of the jumbojets
By BRYAN CORLISS
We’re talking baseball: Boeing and Airbus in a true worldwide series.
A quick recap for those tuning in late: Airbus led off the top of the inning with a big blast, a long ball from its new big bopper, the A3XX, that carried clear to Singapore. My oh my.
The home team has its own aging slugger at the plate, the 747. But Boeing team management says it’s revamped its lineup. Rather than loading ‘em up and waiting for the big guy, they’re relying on speed to get from point to point.
And that, is the key to this game between Boeing and Airbus.
Airbus sees the aviation world as sort of a global Safeco Field, which has ever-shrinking fences conducive to big planes carrying 550-passenger loads through the world’s air travel hubs.
Looking at the same playing field, however, Boeing sees an opportunity to play small ball, with mid-size jets bypassing the hubs to fly from point to point.
Whoever’s right will be in line for new contracts that will dwarf the $200 million Mariner shortstop Alex Rodriguez stands to land in the off-season.
"The issue is airline strategies," Tim Meskill, Boeing’s director of airline industry analysis, said last week.
Singapore Airlines’ decision in September to buy the Airbus A3XX superjumbo jet instead of Boeing’s proposed 747X Stretch was widely seen as a big win for the European consortium, which is trying to break Boeing’s stranglehold on the big-plane market.
Singapore’s $8.6 billion order for 10 planes puts Airbus at the verge of having enough orders to make the $12 billion A3XX program viable, industry analysts said.
And its reputation in the airline industry means other carriers are going to look twice at the A3XX, analysts said.
"The 747 is a very fine airplane, but it’s built on 1960s technology," contends John Leahy, the chief of Airbus’ commercial division. The message to Boeing is clear, he told the New York Times: "Spend the money, start out with a clean sheet of paper and build yourself a new airplane."
That’s exactly what Boeing isn’t going to do, Meskill said.
"How many airlines can use an airplane bigger than the (747-) 400?" he asked. "Why are you going to spend $12 billion for an airplane when the demand is not growing?"
Meskill has a multimedia presentation, with charts, graphs and streaming video, to illustrate his objections. Here are the highlights:
Today’s system of international air travel is built around the capacity and capability of late-20th-century jumbo jets like the 747 and DC-10, Meskill said. For most of the past three decades, the big 400-plus passenger planes were the only ones with the range to cross oceans and fly between continents.
In addition, international air travel was tightly regulated, so only a few airports were open to those ocean-hopping planes.
Given that, the industry evolved a system of hubs: Each airline would use smaller jets to funnel international travelers to central points, then would load all these people onto a jumbo jet and fly them overseas to another hub. From there, travelers would switch to another plane to carry them to their final destination.
These hubs now are crowded and at capacity, and the world needs superjumbo jets, like the A3XX, to carry the load and reduce congestion, said Pierre Jeanniot, director of the International Air Transport Association, the world body for airlines.
"Rather than have five 747s a day between these points, we’ll end up with three A3XXs," he told Asian officials in a lecture on the future of the aviation industry, detailed in a report by The Associated Press. "This airplane (the A3XX) is required. There’s no doubt about that."
Well, there’s plenty of doubt at Boeing headquarters, where officials see new developments throwing a sweeping Aaron Sele-like curveball at traditional airline patterns.
New technology now means that smaller, 200- to 300-seat planes like Boeing’s 767 and 777 and Airbus’s A330 and A340 can make the transoceanic treks that only the jumbos could handle before, Meskil said.
And decreased international regulation means there are more airports available to handle those international flights, he said.
So in Boeing’s view, the question is this: Why fly from Los Angeles to New York to board a superjumbo jet to fly to London then change planes for Paris, when you can fly from Los Angeles to Paris direct on a smaller jet?
And if everyone’s flying direct, how many superjumbos are airlines really going to need?
Not so many, according to Meskill, the guy Boeing pays to study these issues.
There are some routes for some airlines where the only way to grow is to go with a bigger plane, Meskill said. Singapore is one of those places, he said. The city-state has only one international airport.
And on high-volume routes that now require 747s to handle the traffic, it’s likely that airlines could fill a larger plane like the A3XX, Meskill said.
But there are only 20 airlines in those positions, he said. And if Boeing and Airbus split the market, that’s only nine or 10 customers each.
"Is this worth an all-new airplane?" Meskill asked rhetorically. In Boeing’s view, no.
Market analysts are asking similar questions, in the wake of the Airbus-Singapore deal.
"Our understanding from our industry sources is that Airbus priced the planes very aggressively and at a price we believe would appear to be uneconomic," Dain Rauscher Wessels analysts Robert Toomey and Laurel Johnson reported to clients recently.
These "irrational pricing tactics" Airbus seems to be using to drive sales of the A3XX don’t make sense given the small number of superjumbo planes likely to be sold over the next 20 years, and the high cost of developing these planes.
In fact, Boeing may have been more interested in driving down Airbus’s sale price than actually winning the Singapore bid, said Jordan Green, president of the consulting firm Avmark Services Limited.
"Would they do things just to force Airbus to bite the bullet? Yes, they would," Green told the Reuters news service. "With the A3XX, Airbus is not making money on the first 10 aircraft. That’s for sure."
Boeing’s not reeling from the Singapore decision, said Bear Stearns analyst Steve Binder. "Our meeting took place just hours after the Singapore Airlines loss, (yet) we found management to be upbeat, focused and confident," he reported to clients recently.
You might say Boeing views the lost sale as more of a lead-off solo home run, rather than a game-ending grand slam.
"Are we drowning ourselves? No," Meskill said. "Are we looking at our competitors and smarting at the loss. Yeah."
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