Where Does Airbus’s A320neo Sales Success Leave Boeing and its 737?

AIN Air Transport Perspective » July 4, 2011
Boeing’s continued skepticism over the A320neo program led EADS CEO Thomas En...
July 1, 2011, 4:13 AM

Last month’s Paris Air Show saw Airbus leapfrog its goal of extending the number of orders and commitments for the new A320neo airliner to at least 500 units, by taking the tally to date to 1,029. But none of this was enough to nudge Boeing to declare its hand in the contest to fill airline appetites for new-generation narrowbodies. In the face of the relentless flow of deals, Jim Albaugh, CEO of Boeing Commercial Airplanes, dismissed the Neo as no more than an attempt by his European rival to get the A320 up to the standards of its 737—prompting Thomas Enders, CEO of Airbus parent company EADS, to ask rhetorically, “What are these guys smoking?”

Enders admitted that the scale and pace of A320neo orders has taken him by surprise, but does Airbus’s flurry of sales really ratchet up the pressure on Boeing to declare whether it will launch its own re-engining program for the 737 and/or commit to developing an entirely new replacement? Yes, it does, according to Henri Courpron, CEO of International Lease Finance Corporation, who told AIN that a positive market reaction to the A320neo during the Paris show would mean “Boeing will have to get on with it.”

But Paul Edwards, managing director for UK-based Jefferies, an aerospace and defense investment bank, said that while “Airbus definitely has the advantage” and “Boeing is under intense pressure,” the U.S. manufacturer might well have taken the right approach not to rush into a decision over a major new aircraft with a life expectancy exceeding two decades.

But the incremental improvement route is not an option now for Boeing with the 737,” he told AIN. Pointing to the challenge posed not only by the A320neo, but also by other contenders such as Bombardier’s CSeries and the Chinese Comac C919, Jefferies argued that the 737’s successor will have to be “radically new—not just a new engine, but all-new aircraft systems, and a new way of building the aircraft and a new definition for what it means to be a passenger in it.”

On that basis, he concluded that Boeing could be right to bide its time. “Let’s say the narrowbody market is roughly 1,000 aircraft per year for 20 years, they’ve only lost out on 500 orders so far,” he stated, just a week before Airbus took the A320neo backlog of commitments into four figures.

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