When
it comes to selling jets to domestic US airlines, Boeing may just have lost the
precious ability to make the crucial “last phone call,” according to the sales
chief of its rival Airbus.
John
Leahy, a determined New Yorker who helped make Airbus the world’s largest civil
jetmaker, forged his career by winning over the boards of US carriers but
failed to win the same market success in his homeland as he did globally.
Airbus
has almost 20 percent of the US market, the largest for jets like the A320 and
Boeing’s 737, the backbone of most airline fleets, compared with a global
market share of 53 per cent. On Monday, Airbus announced plans to build its
first US assembly line in Alabama with a goal of prising open the lucrative
replacement market for older jets.
Airbus
and Boeing compete for jet sales worth almost $100 billion annually and nowhere
more fiercely than in the medium-haul segment, where they enjoy a virtual
duopoly, unlike the market for larger jets where Boeing has an edge.
Airbus
hopes its presence in the United States will add the capacity to respond to
extra market demand but also allow the European company to play the US jobs
card whenever that helps. “I haven’t found an airline CEO yet in the US who
thought building airplanes there was a bad idea,” Leahy told Reuters.
“Virtually everyone has said this is game-changing and fantastic and takes a
lot of pressure off them, because all things being equal, if you buy the Airbus
airplane you have got to explain to your congressman and politicians and unions
... Well now you can say ‘Hey, I just bought the plane from Alabama.’”
Analysts
say the US is not widely regarded as a market where national identity plays a
big part because airlines are so focused on carving out savings in the
operating costs.
Boeing’s
80 per cent US market share in narrowbody jets is also said to reflect the
737’s incumbency stretching back more than 40 years. Both manufacturers claim
their aircraft are cheaper to operate.
But
Leahy said he had sometimes found himself outmanoeuvered when talks went down
to the wire and Boeing was, according to him, awarded the all-important last
move in a close negotiation.
“I
think we just leveled the playing field here. I don’t think Boeing is entitled
to that last call any more,” he said. He declined to discuss examples where he
felt Boeing had won customers by calling in favours based on its nationality.
Boeing
was not immediately available to comment.
Aircraft
like the A320 or 737 carry list prices of $80 million to $90 million but are
usually offered at discounts whose size is a closely guarded industry secret.
Still, given the volumes involved, big deals can stack up in tens of billions
of dollars.
Market share
Airbus estimates US airlines will need 4,600 single-aisle planes like the A320 or 737 worth more than $300 billion over the next 20 years. Boeing will update projections on Tuesday.
Airbus estimates US airlines will need 4,600 single-aisle planes like the A320 or 737 worth more than $300 billion over the next 20 years. Boeing will update projections on Tuesday.
In
France, union sources said Tom Williams, executive vice president for
programmes, had briefed them that Airbus aimed to double US market share to 35
per cent but gave no time frame.
An
Airbus spokesman said such a progression made sense based on the experience of
an Airbus assembly line in China but that it did not represent a formal target.
Leahy
said the plant would increase Airbus’s market share in the United States by
more than a few percentage points.
Airbus
produces 40 single-aisle aircraft a month and aims to reach 42 by end-year,
having suspended earlier plans to move quickly up to 44 a month amid Europe’s
debt crisis.
Output
in the United States and China must fit within the total target, but Airbus
said there is enough room for growth to allow the Alabama line to move up to
its initially planned level of four a month without causing disruption.
Airbus
Chief Executive Fabrice Bregier told reporters in Alabama he would not be
surprised if the overall production rate went up to 46 a month once the line
was up and running.
Leahy
said he expected revamped models of A320 coming to market from mid-decade would
eventually sustain output above 50.
Airbus
says the overall cost of assembling at the U.S. plant will be the same as in
Europe but that it hopes to benefit from reduced exposure to swings in the
value of the dollar. (Additional reporting by Karen Jacobs; Editing by Steve
Orlofsky)
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