Boeing Continues To Win The Long-Haul Game

If it seems like somebody’s always announcing an order for a new plane or fleet type, there’s a reason: Somebody’s always announcing an order for a new plane or fleet type. While there are countless  numbers of planes, two manufacturers dominate the market, Boeing and Airbus. And for now, Boeing is winning the war. Of course, that’s no different than it has been in the recent past.

“The Youngest Fleet in The Industry”

boeing

The Boeing 787                                                                  Photo Credit: Creative Commons

Naturally, a new plane can offer a lot of advantages for an airline, each of whom always seems to be bragging about having “the youngest fleet in the industry.”* Newly built planes offer more customization (either good or less good, such as the Slimline seats), significantly better fuel efficiency and more automation. And while anything from a narrow seat to a seat-back video screen can be installed on an older plane, retrofitting is more expensive on a unit basis than installing one on a new plane.

That, of course, doesn’t count for the cost of the plane itself, which can run over $100 million. As a general rule of thumb, big airlines pay about 50% of sticker and get at least some parts and maintenance thrown in for free. Many also have a “most-favored nations” clause, which means that, if the manufacturers give better terms to a competitor of a MFN airline, it needs to lower the price for the first airline, as well.

Boeing Is Leading The Duopoly

In theory, new airplanes should be like a game of leapfrog: Boeing makes a better plane than Airbus, Airbus then passes Boeing, Boeing regains the lead, etc. That’s not the way it works out, of course, since the planes are designed years in advance of their actual launch. The delay means that an airline can post a contingent order and, if circumstances warrant, make changes. A lot of it depends on performance, of course. The Boeing 787 was a plane designed for long, thin routes, meaning trips that were several thousand miles but didn’t have the overwhelming demand of the major cities. For instance, instead of JFK-Tokyo, it flies Boston-Tokyo. Because they hold fewer passengers (Some Japan Airlines 787s hold under 200 passengers.), the planes have to be much more efficient in the air and operate out of higher operating markets. Although there was some initial concern about whether the plane would be practical, it has become one of the most popular widebodies.** Recent orders from American, for example, included significant 787 orders.

If there’s a winner, there’s also a loser. Recently, that loser has been Airbus. Some of it can’t be helped. For instance, American is cancelling Airbus orders from US Airways, which it merged with several years ago.*** But they’ve also had their share of flops. Recent Airbus 330 upgrades haven’t matched the efficiency of their Boeing counterparts, while delays hampered the growth of the Airbus 380, a plane roughly the size of a small shopping mall.

Furthermore, it might be a long time before Airbus wins significant share. Once an airline has a relationship with a particular manufacturer, it tends to keep ordering from them, since they are already familiar with the fleet type and maintenance costs will be lower.

The Bottom Line: Airplane innovation will continue, and it may even accelerate. As airlines spend to acquire the latest and greatest toys, passengers should benefit.

 


*Best as I can tell, no planes are made in Lake Wobegon.

**Beginner’s Hint: Think of widebodies as the two aisle planes, narrowbodies as those with a single aisle.

***Technically, US Airways bought American, but American is the surviving brand.

 

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