Airbus, Boeing intensify competition for market

 - February 5, 2007, 8:11 AM

Battle lines are being drawn as Boeing Business Jets, which saw sales of its BBJ series slow to a trickle over the past couple of years, now faces the serious challenge of an aggressive competitor in a reviving economic environment.
The opening rounds came at the NBAA Convention in October when Boeing Business Jets and archrival Airbus traded barbs.

At the convention, Boeing announced it had sold all five of its BBJ positions for next year, and in a recent interview with AIN, the company’s new president, Steven Hill, made it clear he will lobby hard for additional BBJ positions on the production line. “At this point, we have six aircraft a year dedicated to Boeing Business Jets, and going forward, our intention is to get the production up to 10 to 12 airplanes a year,” he said, adding, “I have access to that many positions.”

Hill noted that quoting an airplane delivery into 2006 offers the company the advantage of designing, engineering and pre-building interior components, “so when the airplane arrives at its completion center, the interior cycle time is cut.” Hill said the cycle time is now six to eight months but could be cut to as little as four months. He also noted that BBJ buyers typically have another airplane already in service, “so it isn’t critical that [the airplane] be delivered tomorrow.”

The only “white tail” airplane for sale, said Hill, is a BBJ still in service with fractional ownership provider NetJets. However, he said “NetJets now appears to be interested in keeping the airplane, which is something of a change of heart that reflects the economic recovery.”

Demand, he said, has prompted Boeing to lease one of its own BBJ demonstrators to a buyer, pending delivery of the customer’s airplane.

Competition from Airbus

Also at the NBAA Convention, competitor Airbus was aggressively marketing its Airbus Corporate Jetliner (ACJ), an airplane based on the A319 airliner platform and priced at about $44 million. In a press conference, Airbus v-p of executive and private aviation Richard Gaona claimed that Airbus took the lion’s share of orders for that category of aircraft this year by booking firm orders for 10 ACJs in various configurations, plus an option on one more. This, he said, represents a 91-percent market share of all announced sales in this category this year, leaving Boeing with 9 percent–or only one airplane. Hill disputes the numbers.

Gaona also noted that Airbus allots eight positions a year to ACJ production, and that all but two are sold out for next year. He added that by the company’s estimates, the annual total market for aircraft in the ACJ category is 15 aircraft at most.

Hill countered that the Airbus numbers are skewed and inaccurate. Boeing, he said, has taken firm orders for five BBJs this year. What’s more, he added, Boeing lists only those BBJs sold as executive/VIP aircraft, for use in a corporate, private or government role. While Boeing Business Jets works with customers who want an executive/VIP interior in any Boeing product, up through the 747-400, the company does not include these airplanes in its BBJ order book. In contrast, he said, Airbus includes among its ACJ orders the A319LR, which is configured with an all-business-class interior.

An AIN interview with Gaona in October would seem to confirm Hill’s contention, at least partially.

Gaona said two of the 10 ACJs on firm order this year were the A319LR, an all-business-class airplane in scheduled service. The single option is also for an A319LR.

According to Gaona, the ACJ line is divided into four groups. The original ACJ is configured for private, charter and government use. The A319 Executive is a basic A319 with a VIP interior. The ACJ with the VVIP interior uses both the A319 and the A320 platform. Finally, there is the A319LR, configured in an all-business-class shuttle configuration. Two of the last are currently in service with Lufthansa German Airlines and a second is scheduled to enter similar service next month with Swiss International, all on scheduled transatlantic routes. A third A319LR is in service as a corporate shuttle with Airbus Industrie, and a fourth is operated by Lufthansa as a transatlantic shuttle on behalf of DaimlerChrysler.

“Our market share is much, much stronger than theirs in the private market,” said Hill. And he added, “Some of the Airbus airplanes in service did not start out as new ACJs but began life as A319 airliners with an airline that didn’t make it.”

Boeing launched the BBJ program in 1996, when Boeing Business Jets’ founding president, the late Borge Boeskov, estimated the market to be about 45 airplanes. So far, Boeing has received orders for 91 aircraft in its two variants–the BBJ based on the Boeing 737-700 fuselage and the BBJ2 based on the 737-800 fuselage–and 79 airplanes are now in service.

Airbus launched its program a year after Boeing announced the BBJ. Gaona said of 38 airplanes ordered, 30 are in service. The firm orders Airbus logged for 10 ACJs this year mark the first time the company has broken into double digits for any single year, he added.

Hill took over as president of Boeing Business Jets in August this year. Well aware of the challenges facing the company, he has a number of strategies in place to retain its market share.

The company, he said, is working more closely with yacht show organizers, yacht builders and yacht buyers. “Most of the individuals buying those superyachts are also buying, or already have, a business airplane, and with the right relationships we will have greater access to that market.”

Boeing is also making greater use of the company’s demonstration aircraft to show the BBJ more widely, particularly in the People’s Republic of China, which Boeing sees as an emerging market.

Finally, Hill is aiming for a greater BBJ presence at industry trade shows and at major events such as the Super Bowl and U.S. Masters golf tournament…“anywhere there is a fly-in of individuals who might be interested in the BBJ.

“The economy continues to improve and we’re moving airplanes again in a big way,” said Hill. “I think the future for this market looks really good.”