Commercial plane maker Airbus remains modest, even as Boeing flounders. There’s a reason for that, BA

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109882436FILE – Visitors pass by a Boeing 777X aircraft on display during the ‘Wings India 2024" biennial aviation event at Begumpet Airport in Hyderabad, India, January 18, 2024. In the latest round of their decades-long battle for commercial aircraft dominance, Europe’s Airbus has built a clear sales lead over Boeing as the US company faces the consequences of production problems and ongoing safety problems. (AP Photo/Mahesh Kumar A., ​​file)

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FILE – Visitors pass a Boeing 777X aircraft on display during the biennial aviation event ‘Wings India 2024’ at Begumpet Airport in Hyderabad, India, on January 18, 2024. In the latest round of their decades-long battle for dominance in commercial aircraft, Airbus has built a clear sales lead over Boeing as the US company deals with the fallout from production problems and ongoing safety concerns (AP Photo/Mahesh Kumar A., ​​​​File).

In the latest round of their decades-long battle for dominance in commercial aircraft, Europe’s Airbus has built a clear sales lead over Boeing, before the US company was further impacted by production issues and ongoing safety concerns. Airbus has surpassed Boeing in aircraft orders and deliveries for five years in a row, and just reported a 28 percent quarterly increase in net profit. The company has already been gaining market share by beating Boeing to develop a line of fuel-efficient, mid-size planes that will help airlines fly more cheaply. And now Boeing is facing a government-imposed production limit on its best-selling plane.

Still, the European company is unlikely to extend its lead much further in the Airbus-Boeing duopoly, despite customers clamoring for more commercial aircraft, aviation analysts said. The reason: Airbus is already making planes as quickly as possible and has a backlog of more than 8,600 orders.

The ability to exploit Boeing’s problems is therefore “very limited,” said Jonathan Berger, managing director at Alton Aviation Consultancy. Due to strained supply chains and long lead times for a hugely complex and highly regulated product, a jet ordered today from Airbus may not arrive until the end of this decade.

Boeing also has a huge order book for more than 5,660 commercial aircraft. The mismatch between post-COVID flight demand and the aircraft supply pipeline is bad news for travelers and airlines alike.

“This has been an incredibly strong market recovery, and people need more planes than they are getting,” said Richard Aboulafia, managing director at AeroDynamic Advisory. “And until they get those jets, you don’t have enough capacity. Guess what’s going up? Ticket prices.’

Early this year, Boeing appeared to finally be recovering from two Max jet crashes in 2018 and 2019 that killed 346 people in Indonesia and Ethiopia. Then, on January 5, a door plug blew out of an Alaska Airlines 737 Max 9, and the company has been reeling ever since.

Boeing has since slowed production under orders from the US Federal Aviation Administration. It lost $355 million in the first quarter due to a drop in aircraft deliveries and the compensation it paid to airlines for the temporary grounding of Max 9s. The Max was Boeing’s answer to Airbus’ A320 family of aircraft.

Airbus, which is registered in the Netherlands but headquartered in France, is taking a remarkably cautious and even modest attitude to its recent success and its rival’s woes. CEO Guillaume Faury has said he is “not happy” with Boeing’s problems and that they are not good for the industry as a whole.

In a phone call with journalists on April 25, Faury was cagey about the extent to which the company could accelerate production even if it had 8.7 billion euros in cash available. Airbus had to face “a variety of challenges” in obtaining the parts it needs, he said, and must “ensure we ramp up at a pace that is compatible with the weakest suppliers.”

Faury emphasized that any move to expand production would be done with “our core pillars of safety, quality, integrity, compliance and security in mind.”

Airbus and Boeing face production constraints in part because the two companies are less aircraft manufacturers than “aircraft assemblers” that rely on thousands of parts made by other companies, from the fuselage and engines to electronics and interiors, Alton Aviation’s Berger noted. Because “supply chains are moving as fast as they can,” Airbus is in no position to step in and take over Boeing’s customers.

However, the European company scored a symbolic victory when United Airlines set up leases for 35 Airbus planes due to delays Boeing faces in getting approval for its new, larger Max 10 from U.S. regulators.

Considering that “Airbus is playing it well. They are very, very modest. It’s smart because they can’t exploit it,” Berger said.

Last year, Airbus led Boeing in the order race for the fifth year in a row, with 2,094 net orders and 735 aircraft delivered. Boeing had 1,314 net orders and delivered 528 aircraft.

Airbus currently leads Boeing by 80 to 20 percent in sales of large single-aisle aircraft, according to figures from Alton Aviation Consultancy. The match between the smaller Airbus A320 and Boeing’s 737 Max 7 and Max 8 is more even; Airbus is ahead in terms of aircraft delivered, but Boeing is 54 to 46 percent ahead if the European company’s order book is included.

Airbus’ success is not solely due to Boeing’s missteps. The company is benefiting from the decision to launch the A321neo, a single-aisle aircraft with 180 to 230 seats. “Neo” stands for new engine option, i.e. very economical engines that save airlines money on one of their biggest costs. Boeing rushed to match the Max, a 737 equipped with new, more efficient engines, but ran into problems with the crashes and the door plug.

Airbus also benefited from a deal to acquire the smaller A220 developed by Canada’s Bombardier. Boeing has no competing product in that niche. Analysts say Airbus has another edge with the upcoming A321XLR, a model that will allow airlines to use cheaper narrow-body jets on long-haul flights.

Yet the company has already pushed back its deadline to produce 75 A320 and A321 jets per month from 2025 to 2026, and pushed back the promised delivery date for the A321XLR from the second quarter of 2024 to the third.

“Boeing is taking some orders because Airbus can’t deliver the planes,” said Scott Hamilton, director of consultancy Leeham Company. “So Airbus really can’t gain much more market share because they’re sold out.”

The current rate of production at the two companies means that older, less fuel-efficient planes will have to fly longer before retirement, preventing airlines from reducing fuel costs. And older aircraft require more maintenance to keep flying, which costs money but does not compromise safety if the maintenance is done properly. For travelers, this means that discounted tickets are more difficult to obtain.

Could another newcomer shake up the duopoly, as Tesla did for cars? Not in the coming years, analysts say.

Brazil’s Embraer makes smaller regional jets and has so far not competed with Boeing and Airbus. China’s COMAC has won more than 1,000 orders for its C919 narrow-body aircraft, but is “at least a decade or two” away from presenting a strong competitor, according to Berger.

That means a race between two companies will remain the game for now, even if one of them underperforms.

“The airlines need at least two,” Berger said. “They don’t want to put themselves in a monopolistic situation. So everyone is cheering that Boeing is getting its act together.”

  • Published on May 6, 2024 at 3:05 PM IST

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