Boeing Bullish About Its Slice of Asian Market

 - February 8, 2014, 8:00 PM
SIA subsidiary SilkAir took delivery of its first Boeing 737 on February 4. (Photo: Boeing)

Delivery of SilkAir’s first Boeing 737 a little over a week ago in Washington state marked the fulfillment of what Boeing Commercial Airplanes vice president of sales Dinesh Keskar characterized as a “major win” for the company in the Asian market. In fact, while Boeing would no doubt relish the chance to convert any Airbus operator, the contract with the Singapore Airlines subsidiary came as particularly satisfying given the impressive market share its rival from Europe has established in the region over the past decade or so. Keskar wouldn’t concede any leadership position to Airbus, however, noting that the high quality of the orders Boeing has collected in places such as Singapore and Australia more than offsets the raw numbers.

Even in India, where currency devaluation and increasing operating costs attributable largely to mounting taxation have curbed air traffic growth rates to about 4 percent, Boeing boasts what it considers a highly secure backlog anchored by solid customers such as Jet Airways and SpiceJet. Each has expressed serious interest in the 737 Max, the re-engined version of the current NG family that promises to burn 14 percent less fuel per seat by the time it enters service in 2017. Although Keskar wouldn’t comment on reports ahead of this week’s Singapore Airshow that Jet Airways plans to order as many as fifty 737 Max narrowbodies at the show, he did acknowledge that talks have advanced with both airlines.

“They’re now both looking at Maxs; they think they have enough NGs because they both have something like thirty-plus on order,” said Keskar. “We all know that [India is] going through [its] difficulties,” he added. “Certainly the Indian market is not for the faint-hearted ones. It’s hard to make money there…Nevertheless, everybody realizes that it’s a great market and that’s why more and more people are trying to get into that market.”

Of course, Boeing also enjoys an entrenched position in the Indian widebody market, where it has placed 777s with Air India and ten 777s with Jet Airways. Unfortunately for the U.S. airframer, Air India’s now 12-strong 787 fleet has earned–fairly or unfairly–a certain level of infamy due to a string of technical problems. The latest happened last Wednesday when a flight from Melbourne, Australia, to New Dehli was forced to make an emergency landing in the Malaysian capital Kuala Lumpur. According to the airline, the Dreamliner’s flight management system encountered unspecified software problems. On January 21, a transponder failure forced an earlier flight from London to New Delhi to return to the UK.

But Keskar insisted that the airline has already seen dramatic improvements. “Obviously we’re not pleased with the reliability of the airplane; improving the reliability of the eight-seven is our top priority,” said Keskar. “But we are making good progress.”

Now the third busiest 787 operator in the world, Air India expects its fleet to match the better-than-99-percent dispatch reliability the world’s 777 fleet averages by the end of the year. Boeing, in fact, expects at least as much from the world fleet with the help of system software upgrades and parts replacements, all of which, said Keskar, already appear on the 787s Boeing now delivers. As for Air India’s airplanes already in the field, by January 28 Boeing had completed the improvements on two of seven Air India 787s in need of upgrades. Delivery schedules call for Air India to take all 27 of the Dreamliners it has ordered by 2016.

Meanwhile, Boeing expects the larger 787-9 to enter service with launch customer Air New Zealand in the third quarter of this year. Later, another major Boeing customer in the region, Singapore Airlines, plans to accept the first 787-10 in 2018.

“If you look at widebodies, we think we are ahead in the game,” said Keskar. “Everybody is doing studies and to the extent I can tell you…the 777X will be focused on in this region because…it will have the range these people need.” Although Singapore Airlines has in the past flown business-class-only services to the New York area and Los Angeles direct from Singapore, those routes failed largely because of the economic inadequacy of the Airbus A340-500s SIA used, suggested Keskar.

“That’s well and good,” said Keskar, referring to the attempts to fly such long, direct routes. “But you’ve got to make money and you’ve got to have the number of seats and everything to make that work.” At more than 400 passengers, the capacity of the 777X changes the proverbial cost equation, he concluded.

Not surprisingly, Keskar ranks Singapore as perhaps the top market for Boeing in Southeast Asia, and one particularly suited to the 777X. But he also emphasized the potential embodied in the likes of Garuda Indonesia, which has expressed interest in the 747-8I, more 777-300ERs and, perhaps most notably, the 737 Max. In Australia, meanwhile, a need for more widebodies appears likely to result in new orders by as early as the end of this year, he reported, while, in Malaysia, the Max represents what he called the big candidate.

Although requirements vary from country to country, prospects abound for both Boeing and Airbus in the Asia-Pacific region. As Keskar suggested, the big challenge for the manufacturers will center on building enough airplanes quickly enough to satisfy demand. As much as pricing or performance, buying decisions could hinge on aircraft availability, particularly of narrowbodies.

“You have to understand, with orders for almost 1,800 Max 737s, we are going to have a situation where if these guys want airplanes when they want them, unless they want to go through the leasing channel, they need to step up and make their decision,” said Keskar.