The Globe and Mail of Toronto has this recap of one element of our new Bombardier CSeries Study, and this is the greatest threat we see to BBD is the prospect of a price was initiated by Airbus and Boeing that it cannot hope to win.
As discussed in our new Study, Airbus and Boeing have the ability to make the A319/319neo and 737-700 loss-leaders, should they choose, to out-price the CSeries. With a full family of airplanes, up to and including Very Large Aircraft, Airbus and Boeing can subsidize the A319/319neo and 737-700 either within the A320 and 737 families or as part of deals with the larger brothers.
If one assumes a 25% discount off list prices for CSeries sales (and certainly this could be deeper for all we know), Airbus will have to discount the A319neo a whopping 41% off its list price (including the $6m premium over the legacy A319) just to match the CSeries discount. This discount would not be unprecedented for Airbus, but it’s not something the company wishes to do on a regular basis.
As for Boeing, which so far is resisting the idea of re-engining the 737, it, too, has pricing power afforded it through a family of airplanes. Boeing, and Airbus, also plan to boost production to as much as 40-42 737s and A320s per month. The additional production efficiencies also lend weight to pricing power, as well as being able to flood the market with airplanes at production rates Bombardier can’t match.
Other press coverage:
Flight Global: Larger CSeries would be ideal for Southwest.
National Post: Build larger CSeries.