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What can Boeing do to continue competing with Airbus?

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To leave behind the bad year that this will be for Boeing after the incidents with the 737 MAX, a change of strategy is necessary

What can Boeing do to continue competing with Airbus?

The industry of commercial aeronautics is, at its highest level, a clear example of a duopoly. In weight categories like the airplanes with capacity for more than 100 passengers' one, between Airbus and Boeing, they are distributed around 90% of the outstanding orders. This means that if one of the two competitors has a bad year, the other will necessarily have a better one, being the only other option for airlines to acquire their main asset.

Leer en español: ¿Que puede hacer Boeing para continuar compitiendo con Airbus?

This year has been catastrophic for Boeing, the accidents of Ethiopian Airlines and Lion Air left the reputation of its best-selling aircraft, the 737 MAX, on the floor. A failure in the leveling systems, which in this vessel depended heavily on software, caused the boat to be forced to remain on land in dozens of countries.

Currently, airlines such as Southwest Airlines have extended the non-use of the 737 MAX until September, and others such as American Airlines have had trouble restoring the confidence of travelers in this vessel, which makes up an important part of its fleet. The US airline plans to show its top executives traveling at 737 MAX to demonstrate to its public that the plane is safe.

The catastrophe of the 737 MAX could have long-term repercussions for Boeing, as the new models for commercial aviation take a long time to develop and the orders of the airlines arrive sporadically. This means that if the blow to your reputation is so strong that it affects your sales in future models, you could lose the war against Airbus for a whole generation.

Two options to return to the top

On Sunday, June 16, an airfield north of the French capital, launched the Paris Air Show, one of the most important air shows in the world. Traditionally in the industry, these events have served as a platform to reveal new developments and launches, as well as to speak with airline representatives to secure future orders.

The plan of Airbus, until now, is to reveal a new long-range variant of its model A321. This move seems to aim to sentence the death of Boeing in the segment in which the 737 MAX competes, presenting what could be its permanent replacement as long as there is demand for an aircraft of its characteristics: long range and high fuel efficiency.

Read also: Airbus bets on Latin America

According to Bloomberg, Boeing has two options. It could invest enormous figures in the development of a new vessel that will serve to compete with the A321 within that medium range that it represents, with limited capacity but high scope and efficiency. It could also invest a figure close to $15,000 million, considerably less than the development of a new model would need, in the development of a true successor to the 737.

Henri Courpron, director and founder of Plane View Partners, says that the danger is real for Boeing if disappointed in the coming months. "Airbus is waiting, wants Boeing to reveal its hand first," Courpron said, adding that if the Boeing plan does not meet the needs of the market "Airbus has a free hand to access 60% of the market share over the next 10 years. or 15 years. "

Considerable obstacles for Boeing

The ideal thing for Boeing, of course, would be to produce both: a completely new mid-range boat that can compete with the A321 and replace its 757 and 767 models and a real successor to the 737. But the reality is that the financial situation of the company seems to indicate that this might be impossible at the moment.

The disaster caused by the 737 MAX caused Boeing to retain 500 of these aircraft in its facilities, which represents huge expenses. He was also followed by 73 lawsuits for which he will surely have to disburse funds to pay compensation.

Prior to the accidents, the Boeing 737 MAX was at the center of Boeing's plan to stay on top. According to Bloomberg, the proceeds from the sale of this model would represent a third of Boeing's total profits during 2019. In addition, the 4,550 orders that were pending to be met would keep the company occupied for years to come. Now, with the plane on the ground and with future orders in the balance, Boeing must carefully choose its flight plan.

 

LatinAmerican Post | Pedro Bernal

Translated from "¿Qué puede hacer Boeing para continuar compitiendo con Airbus?"

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