737 vs A320 – the quarter century race

It is amazing to think that these two aircraft families have been competing for every deal for 25 years. What is really interesting is to see how this race has evolved. More specifically, how Airbus has impacted and, dare we say it, improved Boeing. Take a look at this chart which shows years in five-year increments as an age group. Our data is up to the end of the second quarter of 2018. The key here is how the market was once dominated by Boeing. Even when Boeing absorbed McDonnell Douglas, it could not hold off the growth at Airbus. Bear in mind this is the largest part of the commercial aviation market. You might be as surprised as we were to see that Airbus was the leader (even if its a marginal lead) for the past decade. It is the most intensely fought battle space between Airbus and Boeing. How has Airbus managed to pull off this win? The next chart shows how Airbus grew its A320 into a family on both sides of the base model. Initially, the A319 proved to be popular. The A321 took a lot more time to gestate in the market. Whereas the A319 had a great range to make up for its lower payload, the A321 struggled against the much more capable 757. But the market for the A319 waned within a decade. It is to Airbus' credit that it saw in the C Series not only the threat it was to their A319, but they swooped in for a deal that may be unmatched in commercial aviation. Boeing's interest in the E-Jets is a response to this move by Airbus. Meanwhile, Boeing dropped the 757 without a reasonable replacement and Airbus kept improving the A321's performance. The outcome has seen the A321 become the leader in its segment because the 737 models have proven to be less capable. Despite Boeing's argument that their 737 is more efficient and lighter, airlines have been drawn to the A321. In the age group zero (0-5 years) the A321 accounts for 35% of the fleet. This means the A321 has taken over from the importance once held by the A319 in the A320 family. What happened at Boeing? Boeing's 737 is the DC-3 of the jet era. In production for 50 years (half the life of the Boeing company) we can see that Boeing has tried to get the 737 to fit in everywhere under 200 seats. It was the -800 that hit all the airline industry buttons. That's the good news. The less good news is that the 737 in other sizes did not grab attention quite the same way. The -700, like the A319, was a shortlived thing, and in the case of the -700 highly dependent on one key customer Southwest Airlines. Southwest is going upmarket. Even when we look at the rising star in the MAX, it is important to consider that nearly all of those in service are MAX8s. Boeing's attempt to stretch the 737 to close the "757 gap" has proven to be less successful. The A321 closed the gap better and the market went to the A321. Boeing's MAX9 and MAX10 are attempts to try again where the -900 went before. Boeing will argue they have the right combination. But the A321neo and LR close the "757 gap" almost completely. The A321 continues to outsell the bigger 737s. For Boeing to snatch away the A321's lead requires the NMA. And crucially to have it priced like an A321. That is a tall order, and for a growing number of firms in the supply chain, it is a goal that are unwilling to fund. The middle of the market is evolving and Airbus has an offering at both ends. Boeing is taking a long time to come up with its solution. We understand that will emerge next year. Boeing will win orders for its NMA. The analysis of that program is something for next year. It is clear that Boeing has a tough path going forward. The summary of this article is that the success at Airbus has been a hard-won thing. Airbus and Boeing products are highly competitive and this has been a great benefit to the industry. The A320 of today is vastly better aircraft than it was 25 years ago. And if we can make that case, how much more so for the 737? Airbus and Boeing continue to improve their products because the race is so close.

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