With order for jets, Airbus seen closing the gap with Boeing Two plane competitors are 'neck and neck,' according to analyst

The Outlook

July 12, 1998|By J. Leffall

US AIRWAYS, based in Arlington, Va., ordered 30 A330 planes this month from Airbus Industrie, the first order by a U.S. airline for wide-body Airbus jets and a major coup for the European consortium, which has been attempting to snatch market share from Seattle-based Boeing Inc.

US Airways had placed orders for more than 400 narrow-body Airbus jets -- 125 of the orders firm -- for its domestic fleet. Airbus also won an order from Air France, in a deal worth $900 million and is close to cracking another longtime Boeing client, British Airways. Is the US Airways purchase Airbus' ticket into the U.S. market? Is Boeing in danger of losing its market dominance?

William Fiala

Analyst, Edward Jones, St. Louis

It's really a momentum-gainer for Airbus. Two years ago, Airbus set out to gain almost 50 percent of the market share and people didn't really give the company any credit because of the prominence of Boeing. But with this move, Airbus is definitely closing in. The reason for that is that Boeing has slipped in recent years.

Boeing has sort of botched production. For that reason, Boeing lost money for the first time in 50 years. But I have confidence that Boeing can straighten out and recapture the larger percentage of the market if it gets its house in order. Right now at least, there are really only two players anyway.

You really have to give credit to Airbus for taking the initiative to make a shrewd move like that to show its presence in the industry.

There is no doubt that this purchase has an impact. Boeing has definitely given up ground. Some of that ground will be made up as Boeing tries to re-widen the gap. But some of the time and money and ground lost through this transaction is lost forever for Boeing.

I see the companies battling it out in the near future. Airbus has done an admirable job to acquire almost 50 percent of the market share.

We'll have to see what happens at the end of the year when all the dust settles. Two years ago, no one would have thought this could happen but now Airbus and Boeing are almost like Coke and Pepsi -- neck and neck, blow for blow.

Thomas Longman

Analyst, Arnhold & S. Bleichroeder, New York.

This is clearly a coup for Airbus because it has been gaining ground gradually and this is another step. One factor in US Airways choosing Airbus was price. US Airways had already ordered planes in the past from Airbus and training costs, particularly pilot training costs, was a main reason for this.

Many of the existing planes in US Airways' fleet are A320 model planes. This new order of the A330 is simply an upgrade and it makes it easier to train the pilots. It's not like switching to a 737, which takes up too much time and money.

Commonality in the particular model was definitely a factor in the purchase. Boeing offered 767s and 777s, which didn't have the cockpit commonality of the A330 and, of course, the A330 is only made by Airbus.

This could impact the market for Boeing in a grave manner. The gap is slowly beginning to close between the two companies.

Glenn D. Engel

Airline analyst, Goldman, Sachs and Co., New York

It's no surprise. US Airways had previously had deals with Airbus for narrow-body planes. Rather than have a mixed fleet -- and this always comes down to pricing, too -- US Airways wanted to consolidate its fleet into one type, which makes training pilots easier.

What this also did was help US Airways expand its transcontinental and trans-Atlantic flights. At present, they have a pretty good East Coast franchise but the airline hasn't been able to expand like it wanted to. These new planes are definitely suited for longer routes and will definitely help US Airways substantially.

As far as the purchase is concerned, it really came down to the commonality issue. It's extremely cost-effective to consolidate a fleet. They have 737s, MD-80s, DC-10s. If you, as a commercial carrier, can narrow your fleet type to one specific model, it helps a lot.

Of course, Boeing will stay dominant but the disparity between the two companies is not what it used to be.

Richard Aboulafia

Director of Aviation, Teal Group Corp., Fairfax, Va.

It's big but not as big as people think it is. What it comes down to is that Airbus had been jealous about Boeing's lock on United, American, Delta and some of the larger North American carriers. Airbus decided it needed to try to gain a foothold in North American business.

This A330 is a pretty good trans-Atlantic machine. It has the capacity to go 4,500 nautical miles carrying 330 people on board, in a very quick manner.

Still, I don't believe the deal was made solely on the technical merits of the A330 but more on price. Airbus simply gave US Airways a good price deal, which Boeing either declined or failed to match.

Boeing has definitely experienced problems with production and, as a result, has lost some business because of that.

Yet Airbus still hasn't nearly cracked North America like it should have. Sure, Airbus has done some work for Air Canada, that's North America, but the U.S. is still two-thirds of the world market. Airbus still has a long way to go.

I see this simply as yet another campaign in the long-running war between the two companies. In this case, the favor lands in the hands of Airbus.

It's good news for the European company. But it's not as big a strategic victory as people might think. Airbus still needs to go a little further.

Pub Date: 7/12/98

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