Thursday, November 20, 2014

Chances Are... Airbus Makes A Date With Delta

Chances are Boeing knew it was on the outs 4 months ago with Delta Airlines. Airbus was in. Airbus received the good news yesterday, Delta had chosen Airbus for 50 A330's and A350's over Boeing's offering of 787-9's and 777X's. What happened to Boeing is that, they weren’t invited to the Delta Airline prom? If looking at side by side comparisons, then Boeing should go to the prom. However, Airbus exploited Boeing's order book weakness. Wait Time! It wasn't about who has the best, but it’s more about Delta's fleet expansion plans. It couldn't wait. Airbus said it could pull up to Delta's curb sooner than Boeing, by a long shot. They have a shorter order book line in the wide body division.

Boeing's success has them backed into a corner when it comes to timeliness. Airbus swooned right in with a sooner rather than later bid. Any solace found in that sentiment? No! Airbus now has the reorder high ground over Boeing when Delta needs more units later on. A Boeing disaster? Yes, to say the least. They just stepped in its own success having a larger order book and a developing 777X production line.

Delta must also have discussed new Airplane model risks, in light of the problematic 787 entry into service debacle. Airbus of course would pounce on that saying they have mitigated every possible new airplane mishap potential before first delivery. The only Airbus question mark is the daily wear and tear from operations any existing airplane goes through each day. “They will have no Airbus battery fires delays here”, says the Airbus team. They made its case months ago, and Delta was waiting until purchasing ducks were in a row. 

Boeing also knew months ago, it was late for Delta date and would not participate. However, Delta is not the only airline around even though she's very popular. Airbus gains some bragging rights. It gains a lucrative market place. It also makes it relevant in airplane wars once again. Boeing lost this one big time, a long time ago. Out flanked and surprised by a lessor foe. In war these things happen, when the big picture gets too big. Remember the Battle of The Bulge in World War II. An almost, but for want of fuel. The allies regrouped and came back.

Boeing has to keep on keeping-on, and balance the order book to keep in a relevant range of order response. The 840 plus 787’s in waiting is too big. They must keep it 48 months out not 84 months out. It’s more about the wait time then who has the best by judging size of order book. The airline parity is close enough, that timing may trump the differences. Even if Boeing is better on several important points, as found in fuel burn and amenities. An Airline expansion/renewal timing is more critical. Late order book departures kill an airline as fast as consistent late airport departures. Delta needed an on time fleet renewal. Boeing got burnt and will continue to get burnt with the current comparative back log with Airbus and Boeing. 

The current Delta order loss, as damaging as it is to Boeing, solves one problem. It brings comparative order books closer to equivalency. Boeing, in six more months of production of its 787 will have drained the order book sponge by fifty more units, putting the backlog between the duopoly in a pitch battle for orders when it comes to delivery timing. If Boeing could have delivered sooner rather than later with quality assurances, they would have, and should have won this bid. It’s a should of, would of, could of bid loss.