The Boeing Airbus rivalry is as close to a modern day large duopoly as you are likely to get.
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By: Michel Merluzeau, Managing Partner, G2 Solutions
CNBC.com | Sunday, 17 Nov 2013 | 4:53 AM ET
The accelerating global commercial
aerospace market can find no better spokesperson than Dubai, Qatar and
Abu Dhabi. Over the past twenty years, a visionary public policy has
transformed the United Arab Emirates (UAE) into a distantly comparable
twenty-first century Florence when it comes to investment in
opportunities and talent.
This year will perhaps witness the apotheosis of the dominant role played by the gulf airlines with the much anticipated launch of the Boeing 777X aircraft. While there is little doubt that both versions of the aircraft will be launched at the show, some uncertainty remains as to the identity of the launch customers. While Lufthansa has announced its intention to move forward with the acquisition of 777-9s, it's all eyes on four airlines at the show: Emirates, Etihad, Qatar and perhaps also Turkish.
(Read more: Boeing in advanced talks to build 777X in Seattle area: Source)
Emirates President Tim Clark has made it very clear that if Boeing builds the aircraft he needs he would buy significant numbers. The question is, will Emirates actually buy, and what happens if they don't?
There is no doubt that 777X looks like a winner on paper: it builds on lessons learned from the 787 program and offers superb economic performance, generally estimated at 20 percent savings over the current 777 family.
The decision Boeing faces is not so directly connected to the aircraft itself as to whom you build it for? In short, hedge your bets. How the aircraft shapes up will tell us a lot about where Boeing believes growth will come from and who it believes will drive its production over the next twenty years.
(Read more: 'No comment' from Emirates on $30 billion Boeing deal)
If Emirates, Qatar, and Etihad all jump on the bandwagon, then the launch, albeit a little later than expected, should be a resounding success for Boeing and cap a year of challenges and successes for the enterprise. If Emirates does not order in substantial numbers it will be a disappointment, and clearly a sign that Boeing was unable to convince a critically important long-haul airline to sign on the dotted line.
What of the market potential for 777X? Our forecast suggests around 1,000 units as a realistic target. However, will air traffic growth and capacity constraints drive the market towards the A380, or will the 777X size and scalability win the day? A bit of both. After all, this is not a monolithic market in terms of infrastructure, routes and demographics, but we believe that the A380 will do much better than the doomsayers suggest and that the 777X strength will reside in its operational flexibility.
Airbus will be watching and argue, correctly, that its A350 is on target and that there are too many questions as to whether the 777X will be ready by 2020. Thus, Toulouse might have a strong argument that an A350 will come a few years ahead and make an impact in time for airline 777 replacement schedules. Hard to disagree with them on this one.
This year will perhaps witness the apotheosis of the dominant role played by the gulf airlines with the much anticipated launch of the Boeing 777X aircraft. While there is little doubt that both versions of the aircraft will be launched at the show, some uncertainty remains as to the identity of the launch customers. While Lufthansa has announced its intention to move forward with the acquisition of 777-9s, it's all eyes on four airlines at the show: Emirates, Etihad, Qatar and perhaps also Turkish.
(Read more: Boeing in advanced talks to build 777X in Seattle area: Source)
Emirates President Tim Clark has made it very clear that if Boeing builds the aircraft he needs he would buy significant numbers. The question is, will Emirates actually buy, and what happens if they don't?
There is no doubt that 777X looks like a winner on paper: it builds on lessons learned from the 787 program and offers superb economic performance, generally estimated at 20 percent savings over the current 777 family.
The decision Boeing faces is not so directly connected to the aircraft itself as to whom you build it for? In short, hedge your bets. How the aircraft shapes up will tell us a lot about where Boeing believes growth will come from and who it believes will drive its production over the next twenty years.
(Read more: 'No comment' from Emirates on $30 billion Boeing deal)
If Emirates, Qatar, and Etihad all jump on the bandwagon, then the launch, albeit a little later than expected, should be a resounding success for Boeing and cap a year of challenges and successes for the enterprise. If Emirates does not order in substantial numbers it will be a disappointment, and clearly a sign that Boeing was unable to convince a critically important long-haul airline to sign on the dotted line.
What of the market potential for 777X? Our forecast suggests around 1,000 units as a realistic target. However, will air traffic growth and capacity constraints drive the market towards the A380, or will the 777X size and scalability win the day? A bit of both. After all, this is not a monolithic market in terms of infrastructure, routes and demographics, but we believe that the A380 will do much better than the doomsayers suggest and that the 777X strength will reside in its operational flexibility.
Airbus will be watching and argue, correctly, that its A350 is on target and that there are too many questions as to whether the 777X will be ready by 2020. Thus, Toulouse might have a strong argument that an A350 will come a few years ahead and make an impact in time for airline 777 replacement schedules. Hard to disagree with them on this one.
© 2013 CNBC.com
8 comments:
The main point of the article is whether the Boeing 777x live up to the expectations or not. The main airlines Boeing is depending on right now are the big four airlines which include Emirates, Qatar, Etihad and Turkish. Even though Emirates president made it clear if Boeing makes the plane they want, they will buy significant numbers but the question is will Boeing be able to manufacture an appealing plane for the airlines? Looking at the past record, i think Boeing just might make a buck this time. I say this because the 777 was a huge success. Also since airbus penetrated the market successfully, Boeing has worked really hard and managed to hold on to a good part of market share successfully. Forecasts suggest 1000 units will be sold but due growing air traffic and capacity constraints can drive the market towards the A380. Some might agree with this point and some not. The opposing side would argue that there are so many airlines that dont make enough profit and shut down that air traffic growth wouldnt be a very significant problem. In my opinion it will really depend on the quality of the plane and how they persuade the airlines to purchase their plane. Only time will tell how well Boeing 777x will perform in the market but if i had to take a side, i think Boeing 777x will bring in some good revenues.
-Asfand Khan
Will Boeing 777x win over the other aircrafts. It looks like the winner on paper but does it offer the performance everyone thinks it does. In my opinion i think Boeing 777x will deliver a aircraft that people will enjoy and feel safe in. Boeing has been rising in the charts when it comes to the market. There is always an opposing side to everything and of course not everyone will not like this aircraft but i think if Emirates is saying that if Boeing 777x produces a aircraft he likes, he will be buying a significant amount of them. Although it is a race between Boeing 777x and A380, Boeing has high standards at this point but we will have to see how the aircraft is shaped for the growth of production.
-Vincent Barbetto
The main theme of this article can be summed up in one question: Who will take advantage of the Boeing 777X aircraft? The new design improves upon the 787 and projects a general 20& savings. It seems Lufthansa will acquire 777-9's. The four airlines which Boeing ought pay the most attention to, in light of releasing its new model airplane, are Emirates, Etihad, Qatar, and Turkish. Emirates claimed it would buy in large quantities if the new design fit the company's needs. If Emirates, for whatever reason, is unimpressed by the 777X (or finds it unsuitable) and does not place a large order, Boeing will suffer and it will appear as if Boeing "was unable to convince a critically important long-haul airline to sign on the dotted line." This may discourage other potential buyers. Preference for the A380 could be driven by air traffic growth and capacity constraints while the 777X relies on its size and scalability. At the moment, the A380 seems more promising. I believe Boeing's new design will be successful. Many airlines own Boeing 787's, and this new design improves upon the 787's design. Of course, Emirates is a key to Boeing's success,but I believe Emirates will make the purchase it promised, given the noted improvements in Boeing's design, as well as the company's reputation.
-Kaitlyn Szilagyi
It is very interesting to see the way both Airbus and Boeing compete for their market shares. Surely, there will be plenty of comparisons and claims made by each company in order to distinguish their product as superior. Perhaps there will even be some mudslinging. Overall though, I believe the most cost efficient plane will prevail; provided that the plane meets the buyers’ qualifications. If anything, I’m certain a company like Boeing would carefully take into account consumer expectations when designing its plane. When the article mentions Emirates President Tim Clark, it states that “if Boeing builds the aircraft he needs he would buy significant numbers.” Since Emirates represents a very large source of potential demand for the company, if Boeing is choosing to supply its planes to them it cannot afford to ignore what Emirates wants. Boeing also must take into considerations the demand of the other primary airliners. Their choice is a gamble because whoever they decide to produce the planes for can determine the amount of profit they will receive in the long run. If Emirates chooses not to buy the planes from Boeing, there are number of things that could happen. It might be counteracted because the other airliners would still demand the 777x. Or perhaps the other airliners would follow Emirates in their decision for fear that there is something wrong with the plane. Even if the 777x is the better plane on paper, I don’t think the A350 is totally disqualified. Like the article mentions the A350 will likely come a few years ahead of the 777x so it has the advantage of being the first available replacement. I think both planes will sell fairly well, but the better crafted and more efficient plane will likely sell better. Even if that is the 777x, I think the A350 will still make a profit because of different consumer tastes and through deals with certain airliners. One thing is for sure, with an industry as competitive as this, there will be constant requirements for innovation. Whoever innovates faster and better has the edge while whoever slacks will quickly fall behind.
-Anthony Riccio
This article speaks to the question off whether or not the launch of Boeing's new aircraft, the 777X, will be successful or not. It seems as if Boeing has a simple task lined out in front of them. They just have to engineer a plane that will satisfy the needs of the big airline companies such as Emirates, Etihad and Qutar. After all, Emirates President Tim Clark has said that he will buy the plane in great numbers if if it provides his company with what they need. In the past, nobody would doubt Boeing's ability to achieve this task but now with competition from Airbus and the planes they are making, Boeing is no longer a shoe in. The A350 plane from Airbus does have a few things going for it such as it will be made available before the 777X so it will be able to replace the outgoing models sooner. This would be a good way for airline companies to get ahead of the competition and its a huge advantage for Airbus. Nevertheless, in the long run i believe whichever company makes the better, more technologically advanced plane will have more success and greater sales.
-Michael Scalia
who knows if Boeing will live up to expectations with the new 777x? it is too soon to say. Boeing has a very good reputation, and has been around for over 70 years. they obviously know how to innovate and keep themselves ahead. its only real competition these days is Airbus. if they hadn't introduced their new model as well, Boeing would be a sure thing. they are a great example of a duopoly. they each have to act and react according to what the other one does. honestly, until i took this class, i've never even heard of airbus. i never gave it much thought, but whenever i've been on a plane the pilot said "this aircraft is a Boeing," and then the type of Boeing. now, since Emirates is showing potential for a large demand, Airbus and Boeing need to compete for it, otherwise one will have a substantial upper hand over the other. i feel it is too soon to say what will happen, but based on reputation and how well Boeing has done over the years, i would say that the new 777x will be successful for the company.
Benny Villani
Will Boeing be able to convince Emirates, Qatar, and Etihad to sign off on their new 777x aircraft? That's the most important question of this article. I believe the answer lies in the article where it states that the 777x is a learning improvement from the 787 and other aircrafts in the '700' family. The Airbus A380 may be a formidable foe but I believe Boeing will still be able to provide an exceptional aircraft. Hopefully the buyers will be able to make a fair as well as well thought out decision for the aircraft producers and consumers to make the market stable.
-Alonzo Goffe
Boeing, a company of over 70 years, is hoping that their new plane will be a success and that airlines will all want to buy the plane. They want all major airlines such as Emirates, Qatar, and Etihad to all jump on the bandwagon and prove they are all aboard. The 777x will be competing against the A380 Airbus. The main advantage of the Airbus is that it will be released before he 777x and will be able to replace older planes sooner. Boeing has to hope that in the end company's wait for their plane and trust that it will be better in the end. I think Boeing will be fine and sell a lot of 777x planes.
-Danny Prisciotta
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