Premium #228 – Boeing’s challenge facing off with Airbus’ A321

Airbus’ A321 is outselling the Boeing 737-900 handily. Of concern to Boeing is that it appears this problem will continue in the future, as the same thing is happening with neo versus MAX sales as well. The 737 has been a best seller for Boeing and the core design is surely the most flexible in commercial aviation history. Boeing has been able to harvest this design for nearly 50 years. So why is the Airbus A321 outselling the Boeing 737-900 and A321neo outselling MAX9? We decided to take a look at this issue. Invariably when comparing aircraft it is clear that the “apples to apples” comparisons can run into limits. The most important factor is price. So we have discarded that issue - we assume that an airline or lessor is offered equal pricing. Airbus and Boeing are each masters at pricing to the point of economic indifference. We examined five key metrics and set these up for comparison. This data were then normalized, with the leader in each category earning a score of “1 with other being rated as a percentage of the category leader. The data for the 321ceo and -900ER are shown in the following chart. As the chart shows, the Boeing wins in two categories, range and cargo capacity. The Airbus wins in three, MTOW, number of passengers, and cabin width. The amount that Boeing wins by in the two categories it won is minimal, but where the Airbus wins, the lead is greater. The chart shows that the A321ceo is more capable than the 737-900ER. Consequently, an airline or lessor being offered the two aircraft at equal price, would select the A321ceo over the 737-900ER. By our estimate, Boeing would have to then cut the price on their offering by another 3%-5% to match the value of the Airbus. If the starting prices were already heavily discounted – say 55% off list - then another 3% is material. One has to consider that deals are typically for a number of aircraft, which multiplies the financial impact on margins. Although from the table the data suggest the aircraft are close, when the numbers are charted and equalized, there is a gap. Now consider what Airbus is able to do with its A321. Since the design is newer than the 737 by decades, Airbus has more options to tweak the design to get even more capability out of it. The following chart follows the identical logic seen above. Airbus is optimizing certain capabilities with the A321 to ensure the aircraft provides mission performance its customers might require. The LR version compromises on cargo space (with extra fuel tanks, the cargo space decreases 45%). The LR version has a specific mission requirement, and that is to offer customers a replacement to the 757. The 757’s range is what makes that aircraft’s second life so productive. Boeing has not offered anything that matches the A321LR. The A321 offers flexibility in terms of a range/payload as follows, where an ACT is a fuel tank equivalent in size to an LD3: A321neo with no ACTs: 1,829ft3 A321neo (non-LR) with two ACTs: 1,483ft3 A321LR with three ACTs: 1,282ft3 Operators an decide how much fuel or cargo they want and are limited by the maximum takeoff weight of 97 tonnes. Consequently, the A320 family is expanded by offering these new versions of the A321. As we have seen in the market, this has been compelling. The Next Generation is Providing Improvements Next let’s look at what the latest version of the two OEM’s offerings look like. The following chart shows the improvements of the new models over the previous generation. As we can see the A321neo was able to hit all the corners compared to the A321ceo. The 737 MAX does not hit all the corners compared to the ER. Airbus got more form its core design with no compromises. Boeing had to give up cargo space on the MAX. Finally let’s compare the neo and the MAX. The chart clearly shows that the Airbus is superior across the board. While the MAX is close, it does not match the number of passengers, which represents revenue potential. On the chart, the Boeing MAX9 is overmatched by the A321neo. This is not only our opinion of course; the market has spoken. The charts and data merely suggest why the market has chosen the Airbus product over the Boeing by a ratio of nearly five to one.

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