Tuesday, May 3, 2011

Boeing vs Airbus: Whose Strategy Will Fly?

Five years ago, I compared Boeing's future vision of the customer experience with Airbus's vision. Airbus was focused on giant hub-to-hub jets, while Boeing was betting on smaller city-to-city jets. At the time, my vote was for Boeing, because I didn't think customers wanted to be herded onto giant 500+ passenger planes. What's the current situation?

Boeing is sticking with its vision. Although its older 737s are being reevaluated after a hole developed in the ceiling of one operated by Southwest Airlines, the manufacturer remains firmly committed to this size/type of workhorse jetliner. The only question is, will Boeing redesign the 737 or simply add a new, more fuel-efficient engine?

Also, Boeing's long-delayed 787 Dreamliner jet (which was in the early assembly stages five years ago) is now in test flights, with first deliveries finally expected in the third quarter of 2011. This next-generation, fuel-efficient plane will carry up to 300 passengers on both intercontinental and transcontinental flights.

The 787 will also be a test of the strength of Boeing's vision: How many airlines will adopt this approach? In its program facts about the 787, Boeing anticipates that more than half of the advance orders for the Dreamliner will actually become sales. However, until the Dreamliner goes into service--and the economy picks up--Boeing won't have a definitive indication of purchase intentions.

Airbus, meanwhile, has revised its market forecast and says that demand for super-jumbo jets such as its A380 will only increase, in part because of sharply higher air traffic patterns in the Asia-Pacific region. By 2029, Airbus says, one-third of the world's passenger traffic will be generated from the Asia-Pacific area.

As a result, Airbus is remaining focused on its A380 jumbo jets, each capable of carrying 400 to 800 passengers. Five carriers are currently flying the A380 and 14 more have placed firm orders. Airbus thus has a lead over Boeing in this regard.

The bottom line: I vote for Boeing's strategy in developed regions (where convenience is likely to be more important for passengers) and for Airbus's strategy in developing regions with mega-metropolis airports (where price is likely to be more important for passengers).

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