Wednesday, December 23, 2015

What's Happening In The Used Market, What does It Mean?

Recently a used 777 was just sold to Delta Airlines when they already signed off on a huge Airbus order for both A330-900 NEO and A350's. 


Motley Fool Quoted:

"Delta's own behavior belies its contention that there is a huge bubble in the wide-body market. Just a year ago, Delta ordered 50 new A350-900 and A330-900neo aircraft -- planes that are in roughly the same size class as the 777-200." 

Delta went with Airbus in a daring maneuver contrary to market trends towards buying Boeing. It seemed Delta succumbed to the Airbus' offering through its price strategy for new acquisitions. Now a new exhibit has emerged with the $7 Million dollar (usd) purchase for a used 777 in the face of the Airbus $6. plus billion order it had just completed last year, when it bonded with the European giant. Crazy stuff on the tarmac (surface) in Atlanta.

After reading Motley Fool's carefully presented interpretation of the Boeing "used buy", and last year's Airbus fleet renewal buying, I came up with another hypothesis than Motley Fool's view. They are correct with its initial assumptions on what all this means.

The other interpretation comes from Winging It, and it goes this way: 

Delta made a decision within its own vacuum of its Vision/Mission statements:

"We invest in people and processes that ensure the reliable movement." 

Delta is at a point that it will shore up any gaps in its operation for its customers, through purchasing a 7 Million dollar acquisition with a used 777. It has nothing to do with Aviation's highly competitive air framer war or Delta's fleet renewal plan. It is an aberration coming from its Mission or Vision values thrusting forward. It's that simple. The initial plan with Airbus comes out of its many considerations observed before buying a "New" Airbus fleet. Unfortunately for Boeing this will have a lasting affect for many years to come.

A good exercise for Boeing is how to shorten "the many years to come" setting within any ten years goal, and win back Delta. It must look at Delta's Vision and Mission and match its offering with Delta at many levels of its vision/mission.

First: 

Examine what went wrong while competing with Airbus in the first place. This answer should be gained quickly. Price and value aligned with the Delta Mission Model significantly as Airbus proposed. Boeing must of had to stand its ground in the bid process, and did not competitively demonstrate a "Price and Value" within Delta's "Mission" scope. Boeing needed more sweeteners for future operations. They knew of the A330-900 but couldn't drop the 787 price enough, meeting Delta's corporate objective. Airbus made the case for long range travel while the 777X9 was too expensive for Delta's Vision, and year's far away. Airbus gave Delta a sweet deal for which Boeing could not approach at the time during the proposal year. 

Conclusion: Boeing needed the 777-8X at an introductory price sooner rather than later. Delta did not like the 787-10 middling range or high price, but may have even liked the airplane. The 787-9 once again too expensive, even when packaged with the 787-8 pricing, or against the A330-900 NEO. The whole Boeing package came in higher and not ready for delivery for Delta's top to bottom fleet coping with Delta's "Mission" and its five year plan!

Finally, Boeing is already squeezing down time with each passing day. The 787 breakeven point is rapidly approaching during 2016 where it could offer a special deal covering Boeing's family of aircraft. The 777X is so developmental, and many cost risk exists where it can't offer a Delta-Vision-Deal until cost are closed down, or when commercial production begins. The whole time, price and value components will be achieved by 2018. By 2025, Boeing can rule many a company’s "Mission Statements", thus win more battles. 

Used 777 are just used 777's costing Seven Million and fitting in a Mission Statement's parameters. This is the Used market not affecting the New Airplane Market.