Transaero disclosed a letter of intent for eight A320neo family aircraft at the MAKS Air Show in Moscow today, the first Airbus order for this Boeing customer. Engines for the aircraft have not been announced. Combined with the Qantas order, Airbus has made two incursions into the Boeing customer base today, which is reverberating in Seattle.


Transaero’s current fleet is primarily Boeing, along with a few Tupolev Tu-214 aircraft.

The question at hand is how well defined is Boeing’s 737 re-engining program, and whether airlines can effectively make a decision on the aircraft with apparently little hard information available.  After the article on the potential American Airlines order in Aviation Week casting some doubt on that transaction, we wonder whether Boeing has really put together enough about the airplane to truly compete, or whether Boeing was simply included because Airbus lacked the capacity to delivery the large quantity of aircraft that American desired on a timely basis.

The Airbus order book is filling so rapidly, that speculation about a US assembly facility in Mobile is rapidly increasing.  Having Airbus assembling neos in the United States would further exacerbate the results of Boeing’s indecision on the 737 while it wrestled with the 787 fiasco.  With shrinking market share for the 737, the 787 delays may have cost Boeing much, much, more than the additional capital investment and delay payments to airlines.  In our judgment, Boeing waited too long to compete with neo, made the wrong choice in re-engining late, and will face increasing competition from not only Airbus, but Bombardier as well as the economics of its CSeries improve.

Just as Boeing finally appears to be getting the 787 program under control, near certification and the first deliveries, it finds that it has squandered its market share lead in the narrow-body segment by failing to address market needs on a timely basis.  Southwest, Boeing’s largest 737 customer, has been clamoring for better fuel efficiency for three years or more, with its pleas apparently falling on deaf ears until the competitor across town needed a major fleet replacement. Boeing has a cultural trait of being arrogant and taking customers for granted, and the karma generated over the years is beginning to return as the competition has leap-frogged the 737 in technology and efficiency.  Should additional major defections be expected?  We believe they will continue until Boeing can more clearly define its plans in the narrow-body sector.

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