Bloomberg News

Boeing-Airbus Duopoly Tightens Order Grip Over Upstarts

June 20, 2013

Boeing-Airbus Duopoly Tightens Jet-Order Grip as Upstarts Falter

A Boeing Co. 787 Dreamliner aircraft passes behind the engine of a Airbus SAS A380 aircraft after landing on the first day of the Paris Air Show in Paris, France. Photographer: Chris Ratcliffe/Bloomberg

Boeing Co. (BA:US) and Airbus SAS reasserted their dominance at the aviation industry’s largest trade expo as challengers including Bombardier Inc. (BBD/B) failed to win any orders for single-aisle jets, the workhorses of global airline fleets.

The two biggest planemakers ran neck and neck after four days of the Paris Air Show, each with about $40 billion in new orders, according to tallies released today. The deals included scores of Boeing narrow-body 737s and Airbus A320s.

Bombardier’s CSeries and models from challengers such as Commercial Aircraft Corp. of China and Russia’s Irkut Corp. are being shut out of a single-aisle market projected at almost 25,000 planes in the next two decades. Brazil’s Embraer SA (EMBR3), a Bombardier rival in regional jets, has avoided a confrontation with the Boeing-Airbus narrow-body duopoly and won $16 billion of business this week for upgraded small planes.

See complete coverage of the 2013 Paris Air Show

“It’s one thing to have yet another air show where the CSeries doesn’t do anything,” said Richard Aboulafia, vice president of Fairfax, Virginia-based consultant Teal Group. “It’s another thing to have their biggest direct competitor do more in an afternoon than they’ve done in five years.”

New Engines

Embraer garnered 365 orders and options for its revamped regional jets, led by SkyWest Inc. and International Lease Finance Corp. The planes will have new engines, and the largest will stretch to accommodate 132 people.

Bombardier introduced the CSeries in 2008 as it sought to move up from its signature regional aircraft. China’s state-owned Comac and Irkut had national backing in taking on Chicago-based Boeing and Toulouse, France-based Airbus. Commercial success has yet to arrive.

The CSeries, designed to carry as many as 160 people and compete with the smallest Boeing and Airbus offerings, was shunned by buyers this week even with its first flight scheduled to take place within days.

“It is an entirely new plane. I can understand that the airlines are waiting,” said Egon Behle, chief executive officer at Germany’s MTU Aero Engines AG (MTX), a partner with United Technologies Corp. (UTX:US)’s Pratt & Whitney on the CSeries’ power plant. “Bombardier does not have a track record like Embraer, Airbus and Boeing.”

Industry Workhorse

Bombardier has booked 388 CSeries orders and options, according to the company. That compares with 317 orders for Boeing’s upgraded 737 Max this year through May and 391 for the new Airbus A320neo in 2013 up until the beginning of the air show, the companies said.

Those are the newest and most advanced narrow-bodies from Boeing and Airbus, part of a class of planes typically flown on shorter routes with multiple takeoffs and landings daily. Airbus won firm orders for 135 A320s from EasyJet Plc (EZJ), plus an option for another 100 this week, while Boeing signed an accord in Paris for 175 737 airliners with Ryanair Holdings Plc. (RYA)

Spirit Airlines Inc. (SAVE:US), based in Miramar, Florida, said today it would take 30 current-version A321s with a list value of about $3.22 billion. United Airlines, a unit of United Continental Holdings Inc., booked wide-body planes with a list value of $11.6 billion.

Bombardier’s show successes were limited to smaller business jets and the sale of three regional aircraft and four turboprops to Nigeria’s Arik Air Ltd. The Canadian manufacturer said an absence of CSeries orders at Paris’s Le Bourget airport doesn’t indicate airlines’ disinterest.

‘Potential Customers’

“We are discussing with dozens of potential customers, they’ve been here this week visiting us,” Mike Arcamone, who oversees commercial aircraft for Montreal-based Bombardier, said in an interview in Paris. “We are not scheduling orders for the air show since we must sign orders that are beneficial for both parties.”

A lack of CSeries sales is among the reasons Los Angeles-based ILFC hasn’t placed an order yet, CEO Henri Courpron said yesterday in an interview. Lessors depend on active markets for used planes to maximize the value of their investments.

“We don’t feel confident enough to invest in that plane,” Courpron said. “There’s no customer base on which to build. They have to invent it themselves.”

Comac and Irkut have struggled to find traction for their new planes outside the companies’ home regions.

Irkut’s Challenge

The Irkut MS-21, due for delivery from 2017, should have its first flight in 2015, said Mikhail Pogosyan, CEO of Moscow-based parent United Aircraft Corp. It may be difficult to entice buyers already flying Boeing and Airbus jets, he said.

“Airlines with large Airbus and Boeing fleets will buy the Max and Neo,” Pogosyan said in an interview. “I believe we will get more orders once we are in flight test.”

Comac has secured agreements for the sale of 380 jets from 15 buyers, according to the Shanghai-based manufacturer’s website. The customers are largely Chinese, with the exception of General Electric Co. (GE:US)’s aircraft leasing arm, which has signed on to take 20 of the C919 planes. The company didn’t respond to an e-mail sent before normal business hours in China.

“The ones who’ll be serious competitors will be the Chinese,” John Leahy, sales chief and chief operating officer at Airbus, said in an interview yesterday. “This is an industry that requires billions and billions of investments per year. I don’t think the Canadians are capable of doing that and perhaps the others aren’t interested in the long haul.”

Ryanair, Europe’s biggest discount airline, reckons Comac will bring its current model to market and CEO Michael O’Leary, who has a development agreement with the company, predicts the planemaker will go on to build a more competitive successor.

“If they do nothing more than sell a lot of aircraft into Chinese sphere-of-influence airlines, that will put pressure on Airbus and Boeing,” O’Leary said. “By the time airlines are looking at deliveries into the early 2020s, we can have three credible alternatives. It’s in everyone’s interest.”

To contact the reporters on this story: Tim Catts in Paris at tcatts1@bloomberg.net; Robert Wall in Paris at rwall6@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Benedikt Kammel at bkammel@bloomberg.net


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