Airbus Accuses Boeing of Price War - WSJ.com
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Airbus Accuses Boeing of Price War
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By JON OSTROWER
Airbus on Tuesday accused Boeing Co. BA -0.32% of trying to start a price war after the
U.S. company pledged to work aggressively to regain a 50% share of the market for new,
more fuel-efficient single-aisle planes.
The new Boeing 737 Max plane is competing with the Airbus A320neo aircraft, yet-to-fly
replacements for the companies' best-selling planes. Boeing executives said at their
annual investor day that they aimed to regain parity in the market within a year at the
latest after losing ground to Airbus.
"There they go again. Starting another price war to try to maintain 50% market share,"
John Leahy, Airbus' chief operating officer for customers, told The Wall Street Journal
after the Boeing event.
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"Can't they see that the natural market equilibrium is 60 to 40 in favor of Airbus on the
single-aisle and probably the same in favor of Boeing in the wide-body market until the
[Airbus] A350 arrives."
Boeing executives said at their investor event that the single aisle market had become
even more competitive.
"There is some predatory pricing out there," said Boeing Commercial Airplanes Chief
Executive Jim Albaugh of the sector, though didn't specifically mention its rival.
Boeing declined to comment on the remarks from Mr. Leahy at Airbus.
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The U.S. company lags its rival in orders for the new jets, which feature more fuel-efficient
engines and other improvements. Boeing holds more than 1,000 orders and commitments
and has converted 415 to firm orders. Airbus has won more than 1,300 firm orders for the
A320neo.
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"We're 48% they're 52%, pretty darn close to 50-50. We get paid a premium for our
airplane, we like that," said Mr. Albaugh, adding that Boeing aims to catch up with
A320neo sales and secure parity with the 737 Max by the end of 2012 or mid-2013.
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"We are not going to let Airbus position themselves where they have a disproportionate
amount of the market share."
He said the emergence of launch pricing—extra discounts to prime future sales—was
something the company was handling, and would not lead to lower margins at the
commercial aircraft unit, which accounts for more than half of company sales.
Boeing launched its 737 Max several months after the Airbus, dropping plans for an allnew aircraft, and the plane is due to be delivered to its first customer in 2017.
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Airbus Accuses Boeing of Price War - WSJ.com
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The keen competition reflects the extensiveness of the changes required to each aircraft
to achieve the desired efficiency gains. Airbus is wielding their minimum-change A320neo
against the comparatively more extensive and costlier changes on the 737 Max, said a
report from Bernstein Research earlier this year, claims Boeing has disputed.
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The U.S. company has over the past year seen some previously loyal customers—
notably AMR Corp. and Norwegian Air Shuttle NAS.OS +1.07% ASA—order Airbus planes
alongside new deals for Boeing.
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Mr. Albaugh said he is aware of the push by Airbus into Boeing's traditional customer
base: "It hasn't been lost on us that we need to play in their sandbox too," he said.
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He said Boeing needs to keep Airbus from achieving a dominant market share, adding
that the European company would gain pricing power in the single-aisle market if it was
able to boost its take to 60%.
Airbus is a unit of European Aeronautic Defence & Space Co. EAD.FR +1.21% EADS
N.V., which reports first-quarter earnings on Wednesday.
Both Airbus and Boeing have secured huge orders for their new single-aisle planes, and
are battling over further deals.
"Expect some really significant orders by the end of this year," said Mr. Albaugh.
United-Continental Holdings, parent company of United Airlines, is expected place a
significant order for the 737 Max later this year, The Wall Street Journal reported last
month. Steve Hazy, the influential head of leasing company Air Lease Corp., AL +0.09%
said Monday that he is also evaluating the plane, having already committed to buy
A320neos.
The 737 Max aims to deliver up to 13% improvement in fuel consumption over its current
737 models, through a new CFM International engine, a joint venture between General
Electric Co. GE +3.26% and Safran SA, new advanced winglets and aerodynamic
modifications to Boeing's best-selling jet.
Airbus has outlined a smaller slate of changes on its A320neo to achieve a 15%
improvement in fuel burn over its current offering, requiring fewer modifications to add its
own CFM Leap model and the geared turbofan engine from Pratt & Whitney, a unit of
United Technologies Corp. UTX -1.31%
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