Wednesday, June 25, 2014

Emirates Cancels Airbus and Then Reconsiders Within the Month.

Emirates said to mull u-turn on $16bn Airbus A350 order 

Emirates is becoming the players player. They first canceled 70, A350 orders, and then a few weeks later it considers a new A350 order with Airbus. Its a recapitalisation move and an opportunity for Boeing to be invited back into the match. Emirates has a plan and its not by the Markus of Queens-bury rules. They would like to milk the best offer from either Airbus or Boeing. Emirates remains ambivalent to both players in this round. Either the cost per plane or sweeteners over-all are going to be offered. The stressful part, will other airlines fallow suit and come back by dropping orders just to renegotiate a better deal.

Recently, I blogged an opportunity for Boeing after this Airbus order cancellation with this snarky post per usual:

The Airbus Stopped At Emirates and Boeing Gets ON

Something wicked this way comes for both framers from duo aisle, and duo engine, builders of plastic airplanes. After these points, the commonalities stop between airplane framers. Note: Qatar has way more A350's on order than 787's. Its a 70 to 30 ratio in its mixed fleet order book, where Qatar has already received 13 of its 30 787. The desert kingdoms are are competing with each other based on the sames schemes, fly anywhere in the world from its kingdom. They also are ambivalent towards who supplies them, just so they meet a superior standard at a "special price". The special price is the catch, as Emirates cancels and then seeks a special price, so they may compete with its neighbors, like Qatar. The door opened back up for Boeing, but who will win the bidding war with price and/or sweeteners?

The answer is stressful, since both air framers are invested way too deep to give away 787's or A350's. If Boeing offers some sweeteners with its Edge or fleet training support, it may tip the point towards the 787. However what could Airbus do for Emirates coming back for a round two of salesmanship that did not appear in the first round? You may know it as Emirates buying 70 copies of the A350. Desperation is a strange bedfellow. The Airbus contingent will throw a lower capitalization price which buys a lot of fuel in the scheme of things for awhile. The depreciation of lower pricing will drive Airbus' A350 break-even point to the brink as new orders have softened for both Boeing and Airbus. If they (both) undercut its customers by selling to Emirates at lower prices on the next big order, it may start a pricing war nobody will win.

Emirates , stated it has informed Boeing at the same time it informed Airbus. With an intent of listening to both parties presentations, on its offers for selling airplanes. That is a key point, since they may have shut out Boeing on the original Airbus order that was just canceled, which in hindsight, Emirates could have made in haste with Airbus  when Emirates originally ordered the 70. Now that the Boeing mishaps and problems are settling down, this has become a do-over round for an Emirates order book. The thing to note on this opportunity, is when a 787 or A350 might be delivered becomes a sweetener. That is another plus that Airbus could play well with, since Airbus could maintain its Emirates production slots that it had just given up from its recent order cancellation. What could Boeing offer since it is in the 800's with unfilled 787 orders? I haven't heard of any Airbus money refunded back to Emirates with regard to its original cancelled order. The Emirates team will be looking at the following points when considering a winner on the next reorder.
  • Price (?)
  • Product Sweeteners (?)
  • Quantity (?)
  • Delivery Slots Timing (?)
  • Lastly, performance (Boeing 787 wins that one)
The reorder will be a significant battle which will point towards future battles within the region where you have many Arab based airlines vying for the high ground due to Arab states location in the world, money and opportunity. The motive is the central theme, making more money.

Here is what passengers pay attention to, and what both makers do the same and what customer think of when buying a ticket.

Boeing                                                   Airbus
Amenities*(windows,air,lights)       Amenities
Quite Ride* Quieter than A350         Quite Ride
Engineered Amenities*                      Engineered Amenities
Window Dressing                                Window Dressing* (Airbus Make-up)
Room                                                       Room

* represents it leads the industry in passenger impact
Both having not having a  * is a push.