Richard Aboulafia, aerospace consultant with The Teal Group, published his monthly two-page newsletter in which he gives five reasons why Airbus should proceed with the A320 New Engine Option (NEO). The newsletter may be downloaded here.
We disagree with one of his conclusions, and that is Delta Air Lines continues to be predisposed toward Boeing. This was certainly true under the previous management (the pre-bankruptcy one) and stems from an exclusive supplier agreement between Delta and Boeing signed c. 1996 and good for 20 years. Boeing agreed not to enforce the contract as a concession to the European Union for approval the following year to merge with McDonnell Douglas, but Delta only ordered Boeing aircraft anyway.
Following Delta’s bankruptcy, new management was brought in as a part of the reorganization. It happened that the new management is the old Northwest Airlines management that favored Airbus (A330s and A320s) and only ordered a small number of Boeings (757-300s). The current Delta management is not happy with Boeing over the delays in the 787 program, an ordered placed by the NWA management the followed what is now the Delta management (we hope you are following this). Delta inherited this order upon the acquisition of Northwest Airlines.
We do not believe that the current Delta management has any particular allegiance to Boeing, in contrast to Aboulafia’s conclusion.
We’re also not so sure about the new United Airlines, now run by the Continental management following this merger. Continental absolutely was loyal to Boeing, but the driving force of this, Gordon Bethune, is long gone. Like Delta (and American Airlines), Continental also had an exclusive supplier agreement with Boeing.
Having set the policy, and considering Continental’s size, there was no reason for Continental to add Airbus to its fleet. But United relied exclusively on Airbus for its more recent single-aisle airplane orders and it split its new twin-aisle orders between Boeing (787) and Airbus (A350). Continental management, now faced with a substantially larger airline that operates a lot of A320s and has a big A350 order on the books, may be willing to entertain Airbus going forward.
Back to Aboulafia’s original thesis: we think his fundamental five reasons are on target. We’d add another: the A320 is aging. Although the 737NG still has the 1950s-based fuselage of the Boeing 707 and some systems architecture of the 1960s, Boeing has continually updated the airplane and its reliability is just about as good as it possibly can get. We think Boeing has to proceed with a replacement airplane sooner than later to meet emerging competition, but Airbus has been slower to significantly enhance the A320 and this airplane is falling behind even the aging 737. Boeing went to winglets years ago, and while Airbus liked to boast its wingtip fences were there first (and they were), true winglets are coming only in 2012. These represent major improvements in fuel burn that have been very slow in coming at Airbus.
The prospect of NEO will further enhance the A320 family.