The cost model content includes these components:
Aircraft Loan Service Cost and Principal outlays+Aircraft Operational Cost/per year= Monetary Depletion/year when choosing current generation vs. Future generation models when conducting fleet renewal within a five year cycle.
Another way at looking at it, is breaking down how a $70-80 million advanced technology aircraft compares with 15% better performance than a prior generation optimize aircraft for $40-50 million. How far can you fly the $40 -50 million aircraft before the advanced technology advantages starts eating into the cost of capitalization for the lower cost purchase of a 737-800. Or in Delta's case they went for some cheaper A321's over some 737 NG's in the last single aisle battle, when Delta has a substantial fleet of Boeing. In this case it was a gamble using cash flows, interest rates, when borrowing and the operational cost offset. Delta went for the Airbus offered price which beat the 737 efficiency offset with price, that affects the bottom line and for it to stay competitive. Plus Airbus had to make follow on concessions to Delta in the next go round with wide bodies twin aisle market. Delta could opt out and go Boeing later with twin aisle offers, if Boeing sweetens the deal. Delta has no stomach for being an experimental customer like the first year's customers were with the 787.
However, they will find themselves in the same bind by buying the A-350, if they go that route. I believe the 787-10 is exactly suited for Delta's mission and will have a seamless launch to the first customers in waiting. Delta can step in easily with the 787-9 or 787-10 in the next year's ordering cycle. The A-350 has not teethed out yet, but should do so easily as it has not taken the difficult route that Boeing took with all new technology, and where Airbus walked the low road staying with what it knew except the Plastic part. They didn't even venture towards more complex barrel approach, but went with a simplified panel approach, which is consistent with today's automotive use of plastic bodies. Boeing absorbed the over the top high tech curve going beyond the known result when it integrated so many different technologies on the 787. Airbus only went in half measures from the known world of making a new airplane.
Delta could option towards Boeing. If they don't then, Airbus has purchased an American Customer through pricing, because they can and needed to score marketing points for bragging rights. They, Airbus, are hand picking its fights with Boeing who needs to research its potential customers for its mission and operational soft spots, before defending the home castle. I'm sure they did their homework, but didn't or couldn't give them an offer it couldn't refuse. Airbus is sensitive to winning specific markets. One is the US and the other Japan. They want to break Boeing's marketing back both foreign and abroad,
Counter measure that are on the table:
- Refer to Ryan Air
- Refer to Norwegian Air
- Refer to Lion Air
These are all front line symposiums to stop the nonsense. Boeing must advance the quality and consistency of its product. It must continue to undercut competition even demonstrating how buying current generation aircraft is an advantage over cost and even makes up ground using lower capitalization margins and favorable financial markets that will cut back against the higher efficiency future aircraft for the next 5 years.
Delta is the signal that no customer is a certainty, when sales commitments are on the line. Once, again Boeing knows this, but they also need to carefully select its battles and make in-roads on the European front. Delta's allegiance to Airbus is a case in point, much to Delta's delight. Boeing should determine who is Delta's chief competitor? They need to be knocking on its door and make an offer it can't refuse for new aircraft if Delta, Because it is playing one framer against the other. The market place will get it right eventually.
- Loyalty is rewarded
- Partnerships are important
- Commitment To Its Customer's Success Is Over Arching
- The Customer Vision is Boeing's Vision
- Boeing Mission Is Achieving That Vision
The message, its all about the customer, all the time, and Boeing is here to make that achievement of its vision realized through the product offering. Losing a sale is an indication of the customer's relationship.
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