As the Paris show gets underway the orders are being announced and the sniping is in full force.  The sniping is not just Airbus vs Boeing.  CFM and P&W are also at it.  Great for the media as the sound bites are perfect for Twitter and drive readership.  Each snipe has to be as clever as possible to survive this week because next week the world will move on, back to real competitive issues.Take a look at how the two OEMs see the world. We suspect the big twin segment is going to see numerous derivatives.

Fist Airbus. Airbus sees its offering as the center of the big twin sweet spot.  The red arrow reflects where we see Airbus possibly stretching the A350-1000 to compete with the 777-9X. Stretches are great for economics, so when Airbus can get more powerful engines and a longer wing, it could (potentially) stretch the A350-1000.  That said Airbus is aware the A340-600 was a stretch too far and would be wary about doing this again.  At the lower end, the A350-800 is right in between the A330-200 and A330-300 in size, but biased to the -300.  Airbus appears unfazed by the 787-8, probably because it is able to compete against that airplane with its A330s.

The A330 is priced so sharply it can offset the 787’s better economics and, of course, Airbus has been delivering A330s faster than Boeing delivered 787s.  Which is why Airbus chortles about selling more A330s since the arrival of the 787.  A good line, but Airbus has not found great traction for the A350-800.  We suspect that this version of the A350 family is awaiting a disruptive technology to drive its economics.  It will have to do that because the 787-9 is going to have tremendous economics because it is a stretch.  At the lower end, Airbus has an new offering in the A350-800 which is seen as uncertain while its A330s are doing well – for now.

6-17-2013 8-36-53 AM

Boeing‘s offerings are pitched as bracketing the the Airbus offerings in the big twin segment. At the upper end it has the 777X and the 787 at the lower end.  It is a fair argument, but this does not mean it is a panacea. Take a look at this Boeing chart.

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Boeing seems to have two gaps; one under the 747 and one below the 787.  Even if the strategy of bracketing the A350 is successful (still too early to tell) Boeing has a critical gap in the segment covered by the 757.  The 737-9MAX and A321neo do not quite match the 757 performance.  The A321neo seems to close the gap better -American Airlines plans to use these to replace transcon 757s.

Above the 777X Boeing is clearly in a gap situation.  What looks like a big gap on the left column and a smaller gap on the right is not an improvement.  Boeing’s 747-8i is not competitive with the A380 now and will be less so in twenty year’s time.  This is not just our opinion, the market says so. The arrival of the 777-9X is generally thought to be 747’s replacement.  It is interesting to note that the 747 colors in the chart do not match the rest of the offerings.  Is that a message?

Boeing could respond that the VLA market isn’t a growth segment.  We think Airbus argument about mega-cities is the more compelling.  Emirates is already taking the airplane into secondary cities and thereby creating its own demand. The shortage of slots will drive VLA demand and the case for 787 sized aircraft going into secondary markets (Boeing likes to point to Tokyo-San Diego and Tokyo-Boston) will not slow down VLA demand.  New Yorkers, Londoners and residents of other big cities are not going to catch flights from out of the way airports.  We don’t see a San Diego-Osaka flight, or a Boston-Osaka for that matter.  In the hub-to-hub segment Airbus is on to a winner.

In summary both OEMs make compelling arguments.  In the big twin segment Boeing seems to have an advantage with its broader offerings.  But don’t count out Airbus, which is capable to tweaking derivatives to better match demand. That is is if (a big if) they have missed the center of the segment sweet spot.  At the lower end the A330 remains a low risk, low cost offering which improves every year and is tough to dismiss.

Both OEMs need to come up with better solutions to fill the 757 gap and the VLA segment looks to be a class of one, which suits Airbus perfectly.  Even as Boeing brackets the Airbus selection in the big twins, Airbus brackets this segment.  Choses restent les mêmes

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