DBEA55AED16C0C92252A6554BC1553B2 Clicky DBEA55AED16C0C92252A6554BC1553B2 Clicky
May 28, 2024
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At the Paris show, which is now in its final business day, we can expect Team Airbus to roll out their biggest deals.  We have been hearing of a blockbuster AirAsia deal for 200 neos plus 100 options.  Until its announced it is just a rumor.  But other sources triangulate to make us feel confident Mr Leahy is in for a busy day.

We, along with just about everyone else, have been asking the question – where is Boeing? Well they had a pretty good show.  They continue to sell the 737. Not in the volumes of the neo, but perhaps that is not crucial.

Let me explain. The explosive orders for neo perhaps suggest pent up demand by Airbus/CFM customers for something new and updated.  It is not like we have seen Boeing 737 customers defect en masse for neo.  Which perhaps supports the Boeing view that neo is more about catch up than a giant leap forward.

That is not to say neo is not better in economics than the current 737NG.  Boeing keeps tweaking relentlessly – a PIP here and a PIP there and they keep the 737 numbers improving and narrowing any benefit neo might have.

Important customers like Mr Udvar-Hazy want a clean sheet design and yet he bought more 737s at the show. So did ILFC.  Then there is a vocal customer like Mr Al-Baker who seems to enjoy pulling everyone’s ear, but his opinion on 737 can be overlooked, to be polite.  If the leasing firms keep buying 737s that tells us something.  The design may be old, but it still works very well. Remember leasing companies are likely to be a lot less influenced by nationality and other exogenous matters.  Theirs is a much more focused approach, its all about numbers and there has to be a margin allowing the airline to make some money too.  OEMs tell us lessors are the toughest sales.

So while everyone is clamoring for clarity on a 737 replacement, and some of Boeing’s most influential customers are increasingly outspoken about this, they really do have some time to think it through. Certainly until year’s end as they have been saying.

In this industry first mover advantage is not as crucial as it is in high tech, where things move very quickly.  Aerospace is more measured. Boeing has had a tough time getting 787 to EIS.  The 747-8 program also had hiccups.  Boeing is watching A350 carefully and plotting a 777 update.  No doubt they are also far down the road on a 737 alternative.  There is no need to blink just yet.

After all, the view from Mr Al-Baker yesterday – who actually buys a lot of planes, as opposed to just talking about them – was rather kind. It’s true he is playing a game to scare Airbus. But so what?

The 737 keeps delivering for its customers.  The aircraft is a workhorse and replacing it with anything else is going to be tough. The 737 has set a really high bar in terms of reliability. And it is a testament to the original design that the plane is still being built and sold – and remains competitive.

Given that airlines hate risk more than anything else, the 737 offers an incredibly reliable history.  Of course the neo news must grate.  But this is a serious business.  And second move advantage may yet play out very well for Boeing.  After all, Airbus is committed to nearly 1,000 neos.  Maybe even more than that by Friday evening.  And even as these are being delivered twenty years from now, Boeing could eclipse neo with a clean sheet.

Chess is best played slowly.  Which is why we enjoying watching it so much.

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