The Wall Street Journal reported late today that COPA, Aeromexico and GOL are lining up for the Boenig 737 MAX.
The WSJ article is subscription-only but perhaps it will show up on Google News, as some do.
COPA was one of the original airline “commitments” for the MAX last year, which we reported. We reported that Aeromexico had been expected to announce MAX and 787 orders at the Farnborough Air Show, as its absence was a disappointment to expectations.
GOL, of Brazil, is a long-standing 737 operator but Airbus made a strong push to win this business.
The Seattle Times reported that United Airlines, which last week announced orders for 100 MAXes and 50 737-900ERs, has options that could mean 310 orders from Boeing. United also settled its compensation issues with Boeing over the 787 delays.
It looks like airbus is very confident about their A320 and is hellbound to win over loyal boeing customers. I wonder why boeing never try to win over loyal airbus operators. Boeing makes a lot of noise about the 737 having a lower operating cost and more seat capacity than the airbus, but why is it that loyal airbus customers are not willing to have a mixed fleet but boeing customers are willing to accept A320 in theirs? Just thinking out loud.
It has to do with what they pay for each new airplane. Boeing and Airbus have a pricing war between themselves.
So far, the NEO has outsold the MAX by a large number, but the MAX is
catching up fast, because:
1. The NEO is sold out thru 2020
2. Max deals like the compensation to UA for the 787 delivery delays.
3. Earlier available delivery positions and several other factors, but NOT
an operating-cost advantage for the MAX, will make it a success in terms
of airplanes sold.
Based on the above, I will admit that I was wrong about the wisdom of Boeing
moving ahead with the MAX last year, instead of a NAP and I do not think
that the MAX will catch up with the NEO in terms of the total no. of airplanes
eventually sold, but I am now convinced that the MAX will nevertheless be a
very successful program!
CM posted an interesting theory recently, postulating:
Airlines won’t commit significant purchases beyond 5years / 2017/18:
That is 3y/1500 easy sales for the NEO and 1y/500 for the MAX.
This sounds reasonable.
My interpretation: after the initial buying spree ( due to different availability
windows more for the NEO than the MAX ) sales in the next years will about
match future production capacity year by year.
Thus the next disruptive step will be about production capacities?
I think it’s closer to 7 years, but the principle remains the same.
The real constraint on production rate is the impact on market values and residual values. Neither operator can afford to alienate the lessor and lending communities by moving production rates to a point they gut the value of the people holding the titles to their airplanes.
We’re not sure that in the end, the OEMs are going to let concerns over RVs and MVs rule. Self-interest in production rates, market shares and cash flows will win out every time.
With NEO sold out and limited CEO slots remaining I hope Boeing is using the opportunity to get a good profit on new orders. Maybe in this case some of the potential profit will have been lost on the 787 compensation but with the other orders they have done recently and with the unclosed commitments. Could slow MAX sales be partly due to high asking price? No real reason for Boeing to discount much.
CS300 would be a god reason…
Whoa! all we needed was a good reason! 🙂
Against the economics of an B737-MAX? The CS300 would have to be sold at a very low price for a company to bite, and the Canadian already said that they are not interested in selling it below cost.
I meant the B737-8MAX
The CS-300 competes against the B-737-7MAX (and the A-319NEO), not the -8MAX, which is a larger airplane.
A lot of 9MAX and 900ER orders being made, CS300 is not in the same class here, but it might explain why nobody is interested in the 7MAX
In the best case, Airbus will have a 2 / Aircraft per week FAL in Mobile Al, its the complete original project; in the plans we can clearly see the shadow of the second equipment building, but politically, they may need to retain some times these infos !
So, if the Chinese negotiation, for the Tianjin FAL, follow this path too, they may build 50-100 A/C per year in China and in Mobile !
The Chinese want to build some more A320’s for regional re-export !
At the end, Airbus may easily go upward 50 A/C monthly , and I just think, John Leahy get the green light too late in June, to close sales for new early slots, during the Farnborough show !
The discipline to not bite the hand that feeds you is very relevant to long term profitability. When lenders tilt the market in favor of the product with the better long-term value, it makes a huge difference in what an OEM has to concede in terms of pricing. I would not underestimate this dynamic in the market, nor its effect on what the OEMs do (or do not do) in terms of production rates. Both have capacity to go higher than they are today, but they do not.
IMHO the value retention by way of “perception management” finds its limit when the better managed product squeezes the enduser ( airlines ) out of profit while those airlines using the more lossy but surprisingly more efficient product show better results.
The influence of banks and lessors may be seen as negative for productive activities.
( A water empire, actually )
Boeing is engaging in very aggressive pricing right now in 737 v A320 (all series) campaigns to preserve market share and prevent defections.
Does Airbus have to counter? How does Airbus counter? on price as in price war ;-?