The Editor’s Corner #30 – Boeing Has Conceded Defeat To Airbus In The Narrowbody Market?

LONDON – From CEO Dave Calhoun’s comments, it’s almost like Boeing has conceded defeat to Airbus in the narrowbody market. Welcome to The Editor’s Corner.

The Editor’s Corner is an op-ed series from AviationSource Editor-in-Chief James Field, who is going to give his thoughts (Maybe controversial) on all things going on in the aviation industry.

In case you have missed the last 29, feel free to browse through them before you continue to read this piece:

Boeing Has Conceded Defeat To Airbus In The Narrowbody Market?

CEO Dave Calhoun’s comments at his investor’s conference this week show that a massive gamble is being staked at the casino table.

It’s clear that the American planemaker is still in the recovery phase caused of the 737 MAX crisis and will want to sort its problems out before approaching a new aircraft type.

Even so, this has worked well in the hands of Airbus, as they can now assert their already established dominance going into the next decade or so.

Calhoun Admits Boeing Isn’t Capable Of Developing A New Aircraft…

Citing AirInsight, Calhoun had this to say on the prospect of a new aircraft being developed by Boeing:

“We won’t contemplate a new airplane; we won’t even put it on the drawing board until we know we’re capable of doing that”.

“So this is a strategy for us. Capabilities. And then there’ll be a moment in time where we’ll pull the rabbit out of the hat and introduce a new airplane sometime in the middle of next decade.”

“What matters is the capability you bring to that airplane. Is it differentiable enough to put you in the leadership position?”

“I don’t want to fill a gap in a product line; I want to build a product that’s going to differentiate in a way that absolutely substitutes the airplanes that came before it.”

Such an admission from Calhoun isn’t that devastating, but it will be some news that Airbus will want to hear as we continue to progress through this decade.

This does mean, however, that in terms of the narrowbody market, Boeing is going to place great emphasis on the 737 MAX program.

But again, this isn’t that surprising due to the backlog that Boeing has in its arsenal currently. The American planemaker currently has 3,510 737 Family aircraft in the backlog.

So, they have revenues guaranteed for quite some time, with the majority of delivery slots filled up for the next few years ahead.

Will This Put Boeing Into A Corner?

In my personal opinion that Boeing is already in this corner, especially with the A320neo Family and A220 Family aircraft continuing to increase in market share.

Going back to that AirInsight piece, I am in agreement with Richard Aboulafia, Managing Director of AeroDynamic Advisory, where effectively Airbus’ aircraft are going to dominate the narrowbody market:

“The possibility of disruptive new technologies has provided a useful excuse for Boeing to do nothing. There may be new propulsion technologies coming in 15 years.”

“Or 20. Nobody can say. In the meantime, the middle market is the hottest segment the industry has seen in decades. And it now belongs to Airbus.”

“All that remains is for Airbus to develop the A220-500, gravely damaging MAX8 sales. That will knock Boeing down to a 25% market share. And being reduced to a 25% market share is the best excuse ever for continuing to do nothing.”

If the A220-500 does go ahead, then that is going to solidify Airbus’ position in this area for quite some time, as we will discuss next.

Airbus Dominance Certain For The Next Decade?

It does appear, as mentioned previously, that Airbus is going to be crowned the winner of the narrowbody market for at least the next decade.

And that is a sort of dominance that is rarely acquired, especially due to the competitive nature of the two plane makers over the last few decades.

This would give Boeing an opportunity to refine the 777X as much as it can to give it more of a competitive edge over Airbus’ A350 family, of which the Ultra Long Range is becoming popular with long-haul airlines.

It’s not all over from the widebody perspective as of yet, but Boeing really needs to get itself in gear if they are going to make this particular program a success, as well as its 787 Dreamliner program, which has had some teething problems too.

It’s A Major Gamble from Boeing…

I can’t help but think that this is a major gamble for Boeing to openly say something like that at an investor’s conference.

The commercial wing of their business is a big bulk of their revenues, and ruling out a new aircraft for some time surely has got to reduce the confidence of investors.

Even so, it is a smart yet risky strategy as they can now focus on getting the rest of the aircraft in their backlog delivered and continue to have a healthy revenue stream throughout this decade so then they can begin to think about a new aircraft type.

Maybe Calhoun believes that such a race in the narrowbody market isn’t something to be concerned about if they are lagging behind.

Overall: Decade of Repair Ahead for Boeing…

Regardless, it remains clear that Boeing is setting itself up for a huge stage of repair over the next 10 years, and to be honest, it is going to be needed if there is any long-term success to be had.

Boeing still has multiple options on the table and can make revenue easily from the high volume of aircraft that they have in the backlog.

They do, however, need to keep an eye out on what Airbus plans to do next and make sure they produce a competitor safely and at the same time as their European counterparts.

We don’t want a repeat of the MAX crisis, that’s for sure.

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