Sunday, September 14, 2014

Boeing Makes Commitment To China Sooner Rather Than Later

In airline parlance, airlines usually makes a "commitment" to an Airplane seller, leaving the back door open in case a change occurs in the market. These commitments can fold like a cheap suit with some cash exchanged. In a sense its a soft sell that airplane builders don't like to display as its feature during a Paris Airshow, because of risk for future embarrassment when an airline could back out and goes to its competitor maker (see the Emirates deal unravel for Airbus' 70 A-350 dropped).

However, if an airline maker makes a commitment to a region, it goes hard, and it can expect it to cross traditional  boundaries, and scoop up more sales than it normally would gain in its past. Boeing has made that hard commitment of pursuing both traditional customer strong holds and newly emerging airlines and markets in China.

What did they achieve? Hundreds of single aisle, and dozens of wide body commitments or sales in return of the effort. Those commitments will bloom on any given year during an airshow as sales. Boeing has nurtured a China Market, where notice is taken by Airbus over its formerly dominant market. Boeing has reached parity, and gone beyond Airbus, during the last two years with its order commitments in the market place..

A commitment is a two edge sward. It has the capability of a place holder for both price and production slots at the same time, or it becomes a price tease against a competitor like Airbus who tries to match it. However, the clock starts moving once a commitment is made. The customer has a drop dead date if reached, which will exclude them from an Aircraft makers special treatment list if they don't firm it into an order. The airline also loses its deposit made at the point of commitment, thus reducing potential temptation of going for "another" makers special offer. So commitments do matter as they are one foot and one leg in the sales transaction door. They have bragging rights for an extremely large order to its own competitors, as it will probably make a sales announcement at a reoccurring world class airshow from Asia to Europe.

Boeing has positioned itself well after its marketing team has committed to China in a robust effort from its sales minion during these two years. I can only surmise that Airbus was late getting out the starting gate, as it was attending over its own minion in the wide body debacle, when it lost ground to Boeing. Boeing has put boots on the ground in a military sales fashion in China. Its people have rallied to China's needs, during its own explosive market condition. The missing key to the situation is airplane war time customer production capacity. China needs single aisle sooner rather than later. Boeing needs 50+ single aisle production capability now rather than later, as it will scoop up more China orders and deliveries in a timely fashion.

Boeing's commitment to China is "we are talking the talk and walking the walk, let's do it together and now." China has begun a chorused response of, "yes, let's do it"!

That is first out of the gate China syndrome for Boeing, where Airbus states," Its just commitments and we will dominate China soon. We have, "blah, blah, blah aircraft in the region and have not yet begun to give away aircraft ". John Paul Jones was found missing during the French response. Boeing knows an Airbus counter offer is coming sooner rather than later too. Boeing has ground air to catch up in the NEO, NG and Max wars. I noticed Boeing isn't doing hoopla pressers over the MAX like they did with the 787 back in 2005. They are laying low with Max accomplishments, because they are making remarkable progress with the MAX design and suppliers. The targets Boeing has set are made with a sooner rather than later goals. Having "Project Hush", is well down the road. The China Syndrome is not atomic syndrome, as found in the Jane Fonda's epic movie. It is "can you get here faster, please Boeing"! Airbus is stuck in the starting gate with China during this go around. Boeing's commitment to China represents just as customer's commitment is that Boeing foot and leg in the commitment door as well.

Below is a detailed link from The Seattle Times for more market data information.

Boeing has recently won more orders than Airbus from China’s rapidly expanding start up airlines and claims a big spurt in overall China sales commitments this year. This follows years when the U.S. jet-maker’s fortunes flagged in what will soon be the world’s largest aircraft maker.

Seattle Times aerospace reporter