Saturday, March 28, 2015

Boeing's 100 787 Order Year Depends On Emirates and the Devil

Hainan    30
Emirates 70
Total      100

It is a stretch thinking Emirates will come through in 2015, booking more 787. However the robust and trouble free last twelve months sounds promising for Boeing. Tied up in the Boeing order quandary is Emirates penchant for the A380 and Rolls Royce engines. They, Emirates wants the A380 NEO with rolls engine. Dangling a new A350 order in front of Airbus as an incentive since it cancelled an Airbus order for 70 last year. Is this a form of airplane thuggery or just a way  of showing money talks as the saying goes?

Somehow Boeing got messed up in these dynamics with its 787 offering. No other Airbus A380 customer really cares about what Emirates wants as a counterpoint for additional Airbus A380 purchases. Also, at some point the whole Boeing strategy could come unraveled with an additional 200 or more A380 ordered by Emirates. Simply, Emirates three years down the road may decided having 440 A380 on the books is not such a grand idea after-all. That becomes a big Airbus risk with Emirates. They are hesitant ramping up a Rolls equipped A380 NEO for the sake of one customer ideas. Emirates counters with "we are talking to your arch rival Boeing" on some more 787, savvy.

Airbus is between a hard place and a rock with the A380s. It has a dwindling backlog and a saturation of capable airports for landing the giants. Emirates offers a compliant hub for that matter, but that only represents one half of the travel side for a connection. It still has to fly to a destination capable of handling the A380 that may already be at max airport capacity. There are many moving elements when ordering 200 or more A380NEO's fitted with Rolls Royce engines. Emirates may not trump the market with its own strategy. The 70 A350 it had canceled, may stay cancelled, and the threat of a Boeing order may become a reality. As much as Airbus would like never turning down a customer, it may have to to save itself from its own greedy aspirations, and from ruining the company in the long run.

Two hundred more A380 NEO ordered doesn't take Airbus past a breakeven point for the program, after adding in NEO cost and testing resources to the program. A NEO A380 comes too soon in the A380 life cycle, as the first of its type are too new and are far away in time from replacing during its normal life cycle. Follow-on orders, after a Emirates A380 NEO initial order are non existent. A prospective 200 Emirates order is a non starter for Airbus, and will drive any profitability to the loss column. The threat of a Boeing order is the bait where Airbus should consider this as a rational consideration. Emirates already cancelled Airbus once. Boeing shouldn't never count on seventy 787 from Emirates. It should count on selling 60 787 worldwide with its other customers for the remainder of 2015.

The flirtatious order book for Boeing is making a deal with the devil. They should message Emirates as a serious contender who doesn't want to be played with faux kisses and winks, as the real goal of Emirates is ruining Airbus for its own gain.