Wirraway
10th Nov 2004, 06:13
Wednesday, November 10, 2004
Boeing cries foul again over pricing
By JAMES WALLACE
SEATTLE POST-INTELLIGENCER REPORTER
With Airbus set to win another big victory over The Boeing Co., the rhetoric from Boeing's commercial aircraft headquarters in Seattle is heating up.
Using some of its strongest language yet to describe the pricing of Airbus aircraft, Boeing claims its European rival is out to win market share at any cost.
"It's clear that Airbus is totally driven by market share and production goals, and as a subsidized company it can offer irrational pricing that convinces some airlines to forgo the superior value of Boeing airplanes," Boeing said in a statement.
A company spokesman said Airbus is engaged in "predatory" pricing.
To which Airbus yesterday had this response: "There is simply no truth to the charge."
The Airbus spokeswoman added: "This tired, old, baseless accusation seems to emanate from Seattle only when Boeing has just lost, or is in danger of losing an order. Airlines order Airbus aircraft because of their technology, comfort and economics, and if a carrier was not satisfied with those elements, they just wouldn't buy the plane."
The latest barrage from Boeing comes after it lost the year's biggest airplane order last week when German low-cost carrier Air Berlin said it had selected Airbus to supply it with as many as 110 jets, including options. Randy Baseler, Boeing's vice president of marketing, said Airbus won by offering huge discounts on its A320 jet, much as it did two years ago to win a hotly contested campaign to supply Britain's low-cost carrier easyJet with 120 jets.
Boeing said it had to walk away from the Air Berlin deal, just as it did with easyJet, rather than sell its 737 below costs to match Airbus on price.
And Baseler said Airbus is doing the same thing yet again to win an 80-plane order, including options, from Malaysia's AirAsia, the biggest and fastest-growing low-cost airline in Asia. People close to that campaign told this paper last week that Airbus appeared to have the upper hand. On Monday, the Wall Street Journal reported that Airbus was set to win the order -- one that Baseler has described as "critical" for Boeing.
Baseler linked Airbus aircraft pricing to the complaint about Airbus subsidies that the United States recently filed with the World Trade Organization. Under a 1992 bilateral agreement, European governments can provide Airbus with loans for up to a third of the development costs of a new jet.
Boeing argues that had Airbus sought commercial loans to cover what it has gotten over the years from the French, German and British governments, it would have many billions of dollars debt on its books -- and not be able to undercut Boeing on price the way it does now.
But as important as Air Berlin and AirAsia orders are to Boeing as it fights to regain sales momentum over Airbus, the company has much more at stake.
Boeing is worried that Airbus will use the same kind of pricing strategy in trying to sell its A350 as an alternative to Boeing's new 7E7. And that's why Boeing is starting to "raise the rhetoric" about pricing.
Airbus is looking at the A350 -- it would be a derivative of the existing A330-200 -- to better compete against the 7E7.
Several major airlines have said they will consider the A350 should Airbus go ahead.
Singapore Airlines recently delayed ordering the 7E7 in part to have more time to consider the A350.
And Airbus is known to be dangling the A350 at Qatar Airways, which has said it might order up to 60 7E7s.
Boeing has aggressively priced its 7E7 at $120 million, or about the same as its 767-300, one of the planes that 7E7 would replace. That's the list price. Any airline ordering the 7E7 is likely to get a substantial discount of perhaps 20 percent or more.
If Airbus can offer airlines an A350 at significantly less than the 7E7, it could gobble up some of Boeing's potential 7E7 market, much as it has been doing in the low-cost market, where Boeing's 737 once dominated.
Boeing's commercial jetliner operations have remained profitable despite the industry's worst-ever downturn. Boeing has managed this by streamlining its factories and its supply chain -- and by refusing to sell its planes at a loss.
But Airbus has sold more jets than Boeing in four of the past five years.
And Airbus will probably win the order battle again this year unless Boeing gets another big 7E7 order or two before the end of the year. Airbus has 217 orders this year to 192 for Boeing, and that does not include the 70-plane order from Air Berlin, which must still be finalized.
Boeing last won more orders than Airbus in 2000.
Airbus has apparently remained profitable while besting Boeing.
Just last week, EADS, the European defense giant that owns 80 percent of Airbus, said its Airbus division during the third quarter doubled its earnings before interest and taxes.
If Airbus can undercut Boeing on price and still remain profitable, then Boeing may have to rethink its strategy and on certain high-value campaigns be willing to compete with Airbus on price. Or it will have to find new ways to cut production costs even more.
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Boeing cries foul again over pricing
By JAMES WALLACE
SEATTLE POST-INTELLIGENCER REPORTER
With Airbus set to win another big victory over The Boeing Co., the rhetoric from Boeing's commercial aircraft headquarters in Seattle is heating up.
Using some of its strongest language yet to describe the pricing of Airbus aircraft, Boeing claims its European rival is out to win market share at any cost.
"It's clear that Airbus is totally driven by market share and production goals, and as a subsidized company it can offer irrational pricing that convinces some airlines to forgo the superior value of Boeing airplanes," Boeing said in a statement.
A company spokesman said Airbus is engaged in "predatory" pricing.
To which Airbus yesterday had this response: "There is simply no truth to the charge."
The Airbus spokeswoman added: "This tired, old, baseless accusation seems to emanate from Seattle only when Boeing has just lost, or is in danger of losing an order. Airlines order Airbus aircraft because of their technology, comfort and economics, and if a carrier was not satisfied with those elements, they just wouldn't buy the plane."
The latest barrage from Boeing comes after it lost the year's biggest airplane order last week when German low-cost carrier Air Berlin said it had selected Airbus to supply it with as many as 110 jets, including options. Randy Baseler, Boeing's vice president of marketing, said Airbus won by offering huge discounts on its A320 jet, much as it did two years ago to win a hotly contested campaign to supply Britain's low-cost carrier easyJet with 120 jets.
Boeing said it had to walk away from the Air Berlin deal, just as it did with easyJet, rather than sell its 737 below costs to match Airbus on price.
And Baseler said Airbus is doing the same thing yet again to win an 80-plane order, including options, from Malaysia's AirAsia, the biggest and fastest-growing low-cost airline in Asia. People close to that campaign told this paper last week that Airbus appeared to have the upper hand. On Monday, the Wall Street Journal reported that Airbus was set to win the order -- one that Baseler has described as "critical" for Boeing.
Baseler linked Airbus aircraft pricing to the complaint about Airbus subsidies that the United States recently filed with the World Trade Organization. Under a 1992 bilateral agreement, European governments can provide Airbus with loans for up to a third of the development costs of a new jet.
Boeing argues that had Airbus sought commercial loans to cover what it has gotten over the years from the French, German and British governments, it would have many billions of dollars debt on its books -- and not be able to undercut Boeing on price the way it does now.
But as important as Air Berlin and AirAsia orders are to Boeing as it fights to regain sales momentum over Airbus, the company has much more at stake.
Boeing is worried that Airbus will use the same kind of pricing strategy in trying to sell its A350 as an alternative to Boeing's new 7E7. And that's why Boeing is starting to "raise the rhetoric" about pricing.
Airbus is looking at the A350 -- it would be a derivative of the existing A330-200 -- to better compete against the 7E7.
Several major airlines have said they will consider the A350 should Airbus go ahead.
Singapore Airlines recently delayed ordering the 7E7 in part to have more time to consider the A350.
And Airbus is known to be dangling the A350 at Qatar Airways, which has said it might order up to 60 7E7s.
Boeing has aggressively priced its 7E7 at $120 million, or about the same as its 767-300, one of the planes that 7E7 would replace. That's the list price. Any airline ordering the 7E7 is likely to get a substantial discount of perhaps 20 percent or more.
If Airbus can offer airlines an A350 at significantly less than the 7E7, it could gobble up some of Boeing's potential 7E7 market, much as it has been doing in the low-cost market, where Boeing's 737 once dominated.
Boeing's commercial jetliner operations have remained profitable despite the industry's worst-ever downturn. Boeing has managed this by streamlining its factories and its supply chain -- and by refusing to sell its planes at a loss.
But Airbus has sold more jets than Boeing in four of the past five years.
And Airbus will probably win the order battle again this year unless Boeing gets another big 7E7 order or two before the end of the year. Airbus has 217 orders this year to 192 for Boeing, and that does not include the 70-plane order from Air Berlin, which must still be finalized.
Boeing last won more orders than Airbus in 2000.
Airbus has apparently remained profitable while besting Boeing.
Just last week, EADS, the European defense giant that owns 80 percent of Airbus, said its Airbus division during the third quarter doubled its earnings before interest and taxes.
If Airbus can undercut Boeing on price and still remain profitable, then Boeing may have to rethink its strategy and on certain high-value campaigns be willing to compete with Airbus on price. Or it will have to find new ways to cut production costs even more.
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