Airbus scored a big breakthrough October 7 (Tokyo time) when Japan Airlines announced an order for 18 A350-900s, 13 -1000s and options for 25 more.
This is a huge win for Airbus and a big blow to Boeing’s decades-long wide-body monopoly in Japan.
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Update, 06:15 am PDT: Here are a couple of stories about the order.
Reuters: Airbus clinches landmark deal.
CNBC: Deal shows loyalty fading fast
Reuters: Airbus sees JAL deal spurring R&D in Japan
AP via Seattle Times: JAL says deal unrelated to 787 woes
Reuters, 0800 PDT: 787 woes did contribute to JAL Airbus purchase, says Boeing exec
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JAL, and its rival, All Nippon Airways, had been reported nearly a year ago giving serious thought to ordering the A350 as a way to diversify its reliance on The Boeing Co., long the exclusive supplier for wide-body aircraft at the two carriers.
The lengthy delays for the 787, followed by the 3 1/2 month grounding earlier this year, are widely believed to be behind the consideration to buy the A350. John Leahy, COO-Customers, told us in advance of the Paris Air Show that he did not expect orders to be announced at the international event (and they weren’t) but he hoped to conclude something before the end of the year.
Boeing has a deep relationship with Japan and its international carriers. Japan provided around US$2bn in financing to the so-called Japanese Heavies to help fund their participation in the 787. It was suggested, but never confirmed, that Boeing might build the 777X wings in Japan to snare orders and keep Airbus from winning an A350 deal.
Relationships mean everything in Japan, and the strong one between Boeing, the government and the airlines combined to make Airbus a miniscule player there. Fear of offending the Japanese is why Airbus and the European Union didn’t include the government’s funding of the Heavies for the 787 in the bitter international trade dispute between the EU and the United States.
The 10-abreast economy of the B777X doesn’t go well with current cabin standards of JAL and ANA. The A350 is a better fit here. For Airbus vs Boeing: one lost (Lufthansa), one won (JAL), fair trade.
Boeing and Airbus did not lose anything at LH. One got to replace all of the LH B747s with its plane and the other got to replace all the a340s with its planes.
Certainly, this is a momentous strategic breakthrough for Airbus in Japan.
–
Meanwhile, in a non peer reviewed article in an alternative — or virtual — universe over at Strategic Aero-“Research”, the conclusion was seemingly quite different than:
777X Starts Assault On Ailing A350-1000
http://www.strategicaeroresearch.com/2013/09/20/777x-a3501000/
Aboulafia quote:
http://in.reuters.com/article/2013/10/07/airbus-japan-idINL4N0HX01L20131007
Do you know anything about the credentials of ‘StrategicAero Research’? Rather oddly, they seem to reveal very little information about themselves on their website?
Who is the ‘Saj’ person (sorry if I’m not getting the joke!)?
http://sajahmadfactcheck.blogspot.com/p/who-is-saj-ahmad.html
Thanks.
However, before he/they are dismissed, it would only be fair to give them the right to reply – can anyone out there verify his/their story (or can Saj do so directly)?
By all means have all the historic fun you want:
http://web.archive.org/web/*/http://www.fleetbuzzeditorial.com/
Just like with the VV site I wonder what the reward mechanism
for these sometimes intensive efforts looks like.
Is strategicaeroresearch “Saj” in a new guise?
Yes, that’s fleetbuzzsaj right there alive and kicking; well…… 😉
According to French news reports, the deal with JAL was not negotiated by John Leahy but by Fabrice Bregier himself.
A come-back of earlier Airbus’ sales strategy when the top guy was in first line (Lathière, Pierson, but not Forgeard nor Gallois)?
I guess in highly political cases like this Leahy pusheds forward the most suitable “sales person”. French Politicians / Embassies and their friends are better prepared for dealings like this then purely commercial folks.
This is a very big win for Airbus, Airbus was essentially locked out of the Japanese market. However, with Airbus being a European company, I wonder whether those negotiations are solely a French thing. German politicians and embassies are also likely to do their part.
Look at automobile imports into the japanese market:
http://www.thetruthaboutcars.com/2011/10/guess-which-cars-sell-in-japan-imports-now-guess-which-ones/
6+% of new cars are imports. every second a german make.
Ah, another TTAC reader … 😉
Remember EU’s WTO complaint that Japan’s subsidies to Boeing suppliers was illegal? It got thrown out, the complaint wasn’t against Japan, after all. Maybe some pressure could have been bought to bear here? Buy Airbus or we launch a WTO action against Japan? JAL was a govt. owned airline last I heard, unless I missed something? I think the a350 will beat the 777X for comfort and economics, but Boeing sends a lot of work to Japan in order to keep the market, so I think it might be more than just economics.
Wrong on a few accounts. The complaint was against Boeing, not a specific country. So subsidies in Japan that Boeing profits from could very well have been brought into it.
As per Scott’s comments above, the subsidies in Japan were never part of the complaint, though, in order to not offend the Japanese.
You clearly missed something here.
The complaint was against Boeing, not a specific country.
I am afraid this isn’t quite right either. I believe the WTO cases were formally taken by the EU against the subsidy regime that exists in the US and by the US against the subsidy regimes that exist in several countries in the EU. Of course the governments were taking instructions from their local manufacturers and targeting those planemakers’ competitors.
It was EU against US subsidies, not sure a company can take anything to the WTO. As Scott noted EU didn’t pursue the case against Japan in order not to offend the Japanese, but they had the potential to if they wanted, to understand the size of the potential case:
from
http://trade.ec.europa.eu/doclib/docs/2010/september/tradoc_146503.pdf
“In fact, Boeing benefits from a Japanese scheme for development and production of
Boeing’s 787 aircraft, which competes with the Airbus A350. In effect, 35% of the
B787 will be produced in Japan and it is understood that Boeing’s risk-sharing
partners have received financing from the Japanese government of up to 70% of
development costs (the ceiling in the EU is 33%). And this is on top of the other forms
of support Boeing receives.”
In fact I thought the EU had raised it in the EU-US case, but that is not relevant. Correct, I JAL was bailed out by the Japanese govt, not taken over, you don’t think it gives the govt a say in what they buy? Anyway, I think a350 is looking better than a350, I just believe something more than unreliable early 787s might have been needed to overcome the relationship between Boeing and Japan.
MartinA is correct, the companies can’t take complaints to the WTO, only governments can. But the US and EU were merely proxies for Boeing and Airbus, hence we skip the intermediary and go straight to who really was behind the complaints.
WTO litigation started with a “frivolous” case brought up by the US ( as servant to Boeing interests, probably. I don’t really see any benefit for the national cause as Boeing reduced workload in the US while Airbus expands )
Why then should the EU have expanded their counterclaim by drawing Japan into the equation?
RE WTO Issues. WTO complaints are country to country, and baselined against GATT 92. GATT92 ( Aerospace issues portion ) was put in place to allow “Airbus” Consortium to build up a viable competitor to U.S Dominace. Ground rules were established as to how ” subsidies” were to be counted and ‘ loans” were to be structured. GATT92 eventually morphed into WTO. At the time of GATT92, Japan was not really in the game re aeospace competition. The WTO cases filed around 2004 had no reason to include Japan since the issues were/are over how subsidies after about 1996-97 were handed out and counted by the EU” Airbus” consortium. Again Japan was not party to those issues. probably the ‘ straw” that overloaded the subsidy game was the A-380, although one could certainly argue against some prior developments.
In the early 2000’s- Boeing sold about 60 percent of its production overseas to EU aligned countries, and did not want to jepordize that arrangement by filing against Airbus via a CVD ( Countervailing Duties Petition ), and as a matter of record, prevented/ discouraged ( thru the back door ) SPEEA from filing such a petition.
That CVD petition was scheduled by SPEEA to be filed the second week in Sept 2001. Then came 911. All effort was dropped and nothing was done until early 2002. By that time, the whole U.S Commercial aerospace industry was hurting, and while prior to that date, Boeing had been hands off- that changed, and the petition was totally suppressed.
Of course the wheeling and dealing for tankers in NOV-DEC 2001 also was used by Boeing to stifle any such filing.
And on that issue – again – Japan was simply NOT involved.
How do I know this for a fact ? I wuz there.
What the hell!
All issues aside a great result for Airbus.
With around 1060 firm orders at the end of September, this plus the confirming of the SAS A330/A350 order must take Airbus past the 1100 mark with at least another 144 Chinese and Vietnamese MoUs to be confirmed. Traditionally, Airbus have always had strong last quarters to the year, so the record year must be within sight. If Boeing can secure big orders from Ryanair and Emirates they’ll be in the same ballpark too – it’ll be interesting to see who comes out on top!
Hey, congrats to Airbus + JAL. Though as a complete Boeing koolaider, I would have preferred to see this order go Boeing. Regardless, the A351XWB ostensibly seems like the best fit for JAL to replace their B77W’s. I’ve also been stating for 5-6 years the A359XWB is going to be a great plane and I’m not surprised to see JAL order it.
Many carriers are going via B787+A350 combo..not surprised to see this one either.
As Schorsch stated, “win some lose some”.
AFAIK, LH ordered 25 A359s, in addition to 30 options. Also, LH is a major long-time Boeing customer which incidentally also subscribes to the belief that having more than one supplier creates competition that is better for the purchaser. Hence, claiming that this is an Airbus “loss” sounds somewhat imaginative.
AFAICJ; with the 787 program, Boeing outsourced wing production etc., partly in order to ensure that Boeing’s WB monopoly in Japan would remain intact for another generation. Hence, it may look as if the 787 production imbroglio has backfired majorly.
–
http://online.wsj.com/article/SB10001424052702304171804579121090135500098.html
Brégier is saying the right things … you need to work hard to open the door. And maybe Airbus didn’t work at it hard enough before.
It’s a new game now, though.
I’d expect the US and Boeing were rather proactive on keeping that door
tightly shut. But you have to pair whip with _real_ carrot.
Whip alone doesn’t work in the long run.
( and reality distortion fields don’t cut it either )
Looks like the ” we don t care- we dont have to – we’re Boeing” mantra has been shredded. Lets all give a suitable round of LOW fives to the dysfunctional Boeing team !!
Such asinine tripe as such hasn’t existed for a long time. Maybe a more reasonble argument would’ve been appreciated.
Could be that Airbus got the cross section right with 9 abreast on the A350. I’m still not convinced Boeing hit it on the 787 or the 777-9.
I think Airbus hit the bulls eye with 2-4-2 & 2 LD3’s in the early seventies.
The 777 proved very successful in generous 3-3-3 and 2-5-2 configurations, as well as shorter 3-4-3 leisure cabins.
Now Boeing will have to convince the industry 3-4-3 on 777X, a little wider, is perfectly ok for premium scheduled > 10 hr flights & passengers just won’t notice. I think CX and SQ balked. Maybe JAL also and BA?
Is it just me, or does this only seem catastrophic to Boeing watchers who bought the Mike Bair line (http://leehamnews.wordpress.com/2012/03/19/odds-and-ends-787-ramp-up-istat/) that Boeing was on a march to drive Airbus out of the twin aisle space. Maybe, by his response, Richard Aboulafia reveals he was more in that camp than I would have thought.
To me, this writing has seemed to be on the wall for a while, now, as has the writing that Boeing has now got a serious fight on its hands to maintain enough imbalance in the widebody space to offset their weakness in narrow body. Particularly so, since it seems like this shift in the status quo comes even with Boeing committed to major aircraft programs several years further out than Airbus currently is with their current competing offerings.
The silver lining of this order will come if 1) it means that Boeing will not be outsourcing the 777X wing, and 2) they are actually able to execute the wing successfully and on time themselves. To my mind, it would have been a devastating indictment of the McNerney era if, after predicating his entire term as CEO on the task of breaking the unions of the ability to ever tie the company’s hands, he had turned around offered up those same hands to be permanently bound by a dependency on outside capabilities (in Japan or anywhere else) for wing development and manufacture.
Matt B, Wit the amound of XWB orders, I don’t see how Boeing was ever going to drive Airbus out in the first place.
Monopolies were going to be broken-it wasn’t a matter of “if”. With Japan and Europe wanting to forge closer ties via R&D, etc. and not to mention Airbus has a product which Boeing doesn’t it wasn’t suprising, nor a “no brainer”.
The bottom line is Boeing simpley doesn’t have a plane in the A359/A351 seat-range category.
Pardon the spelling errors. We need some way to “edit” our entries.
congratulations Airbus,It is payment time for Boeing;the last monopoly over a big market broken.
Off topic, but Vaidya you seem to have lost the gravatar (https://en.gravatar.com/) lottery. 🙁
This signals that from JAL’s perspective, something very bad has happened to their relationship with Boeing. Some gesture of supplication by Boeing is clearly in order to signal that the company “heard” the message JAL was sending Chicago with this sale. “Retire” a high profile exec or two? Place 777X work in Japan? Offer incredible price breaks on future sales? Something.
Boeing has hung its future on 17″ or less seats. I think that is a mistake. The gap between rich and poor in the developing markets is increasing even as more people join the middle class. While I can’t foresee everybody in the Chinese middle class affording premium economy, I can see them being able to afford $100 more on a 20 hour flight to get an inch extra space. While it seems, sadly, that airlines are not about to return to 18.5″ 777 and 787 seating, Airbus’ 18″ seems to be a happy median for “quality” airlines. Hay, even poor old me is happy to pay an extra 200 bucks to escape the worst of long haul travel, and I am as poor as they come!!!!!
p.s. seat width, and the demise of airfreight, is why I think Boeing needs a clean sheet 777 replacement, they need wider seating, a lighter airframe with less cargo and more seat space.
Well this is certainly a surprise and probably one of the biggest breakthroughs of the decade for either side. Congrats to Airbus, certainly wasn’t expecting this, but it’s great to see the much maligned A350-1000 get some orders. The fact that this has reportedly being in the works since 2010, shows how much Airbus wanted this.
More fallout from the 787 debacle. I thought Boeing could smooth things out but being three years late to EIS and the early poor quality control led to this shift in suppliers in my mind. Hopefully Boeing can hang on to ANA. The 777 is a proven frame and the 777X should be able to keep the 777 in the forefront of many fleets.
Boeing better get it right on the 787-9 and 787-10, and it appears they have learned something through all this development of the 787-8.
@cheapgreek:
Has either JL stated its due to the B787 debacle? NO! In fact, JL states the complete opposite.
” Ueki ( Japan Airlines President) said the decision to turn to the Toulouse, France-based manufacturer for the replacement of its retiring Boeing 777 jets is unrelated to the problems that have plagued Boeing’s rival offering, the 787 Dreamliner.”
“”We are sorry for the troubles we have caused our customers with the 787, but the decision on the aircraft was considered separately from that issue,” Ueki told reporters.”
http://seattletimes.com/html/businesstechnology/2021983260_apasjapanairbus.html?syndication=rss
Why let facts get in the way?
Corporate statements are not always indicative of what went on on during the selection process. This statement speaks volumes, ”We are sorry for the troubles we have caused our customers with the 787, but the decision on the aircraft was considered separately from that issue,” Ueki told reporters.”
Boeing caused a bad taste in the management of JAL and when companies have a string of bad experience’s with a product, they usually look for a new supplier.
I would also imagine these A350’s were sold at rock bottom prices to get a foot in the door. Its a loss leader many times with the hope it will lead to more sales.
If the 787 had an on time EIS, not three years late, and and fewer hiccups, It would have probably been Boeing’s order but all that is immaterial at this point.
Still more sales campaigns are going on and better projecting EIS dates are needed to avoid the scheduling headaches that were caused by Boeing’s inept management.
By the way, corporate statements are not always factually based.
@cheapgreek..now you are simply hypothesizing and making things up.
The fact of the matter is the CEO twice in one article stated that the B787 debacle had nothing to do with it. IF he had a problem with the B787 problem, he could have canceled and/or cut the remaining orders-that would have spoken volumes. JL hasn’t. He also could have not brought the B787 up but wanted to make a point of it.
Maybe some here shouldn’t be looking more into it.
I tend to view corporations somewhat the same as politicians. They will say what causes them the least negative press and they might still want to do more business with Boeing so why burn bridges behind them?
I might be cynical when it comes to big business, even more so with politicians, no matter what party as they are all cut out of the same cloth.
Their public statements are refined many times over so as not to offend business partners. You may take such statements at face value, many like myself do not, its just my take on such things gained from past experiences.
A few articles comment on the possibility that Airbus sold these aircraft at a loss. Has anybody heard any estimates of how many a350s Airbus have to sell to cover development costs? With over 700 orders I guess the development is already paid for, so to speak, once all theses orders are delivered. Quite an achievement without having entered service yet, and Airbus could probably make a very competitive offer, even without running a loss.
I am certain both A and B were offering heavy discounts, A to maintain its exclusivity at JAL, B to open the door. Whether they are heavy enough to push the price below unit production costs is something that we may never know.
And please swap A and B above … oh, if I could only edit the post! 🙁
It seems to me I heard that it is over 600 but I don’t remember where I got this sorry.
PROBLEM is defining what a “loss” is. Virtually all aircraft by BA and Airbus are sold at less than ” list” price. extra goodies like x years free maintenace, discounts on spare parts, payments for unused seats if range – fuel apecs are not met, etc make it difficult tom pin down
Add in what is called program accounting- as in BA 787 which means it will take over a 1000 787 to be sold to reach ‘ breakeven” on ALL program and development costs, and the picture is even greyer.
Typically 20 to 30 percent discounts from ‘ list” are commonplace.
eventually, annual reports will provide a clue as to what the then current ‘ profit” margins supposedly are.
The actual breakeven figures estimated and eventually met usually have a significantly higher classification then Super Top secret- cross your heart signature on access to such data.
We will never know, its secret, is true enough, but would you like to take a guess?
taking a SWAG.. from ‘ list’ price
5 % down to place order
20 % discount
10 % volume discount
PLUS
10 percent discount/rebate on fuel prices for first two years . .
AND
Free tire and oil changes for 3 years
Throw in chrome spinner hub caps, LED mood lighting, OEM rates on all leather seats for pilot and co pilot, no charge for double size airbus logo on tail and by each door , Choice of basic interior color scheme and 50 % discount on interior decals
No charge for le Marsille , Deutschland uber alle, and God save the queen background music
And dibs on first and second generation firstborn of local Airbus Salesperson.
You sound bitter, Don.
Flag waving or sticking them on accessible surfaces is an american thing.
Here unobtrusive “Made in Germany” stickers are all the rage 😉
( which in context has quite the telling background imho: http://en.wikipedia.org/wiki/Made_in_Germany#History )
I’d also remember Japanese culture detests embarrassing people, there is no way they would mention the reason even if it was true. The fact that he went on to appologise for the delays ( and the related shame) probably says a lot.
Quite true
Probably a combination of various considerations.
Like Jacobin777 suggesting Boeing doesn’t have an equally good 772ER / A340 /M11 replacement at this point. 787-10 and 777-8 both seem compromized and share little commonality.
Let’s not forget the biggest 777 operators (EK, AF/KL, BA, SQ, UA, QR, CX) reached the same conclusion. No upbeat boxing Airbus language swipes that away.
Now wait what ANA, Korean, Qantas and AA will do. Boeing will have to lower their prices, come up with financing, kicking and screaming. Benefit from the A350 beeing sold out. Like NEO vs MAX.
Going back to the main topic of the day, the loss of JAL and the potential loss of ANA as Boeing custumers seem to demonstrate that the bean counters of Boeing need to go. The present CEO of Boeing spends more time thinking about the return to shareholders than investing in quality products. He hesitates too much and he makes Boeing look really weak. In addition, how can John Leahy outperform Boeing’s sales team alsmost every single year since 2002? That James McNerney ought to be replaced by some guy who will spend time developing quality planes than spending most of his time fighting the unions, looking for ways to satisfy shareholders or worrying about building in Washington State or South Carolina. Look how long it takes to decide on where to build the wings of the 777x, how long it took to make a decision on the 737 MAX (loss of American Airlines), or when to launch the 787-10. This guy should be dropped and replaced by a guy who will focus on R&D and plane quality…. The 787-8 has been a serious embarassment for Boeing (under the leadership of James McNerney Jr….).
@Andre K.
I agree with you regarding current Boeing management. IMHO they haven’t been as effective as they could be and their pay/performance ratio is horrible.
I also do not believe this order is a “loss” to Boeing. Had JL cancelled its remaining B787 order then we can say “Houston(Chicago), we have a problem”.
Funny that the A350 is being treated as a given, its not even certified yet! (in the 900 let alone the 1000)
Time will tell how they deliver but its had its share of troubles and has zero margin for slippage ((whihc menas it will slip)
Gee Smoker, you could be right. They might not get the 900 certified in the time advertised. Maybe it will take another 2 or 3 years. Then again, maybe not.
I am also sure that you have a very valid point in that the 1000 will be more trouble than the 900.
What surprises me here is not the order itself but how fast it came in after the first signals were out. The Japanese people don’t normally act precipitously. Negotiations last over long periods of time and everything unfolds slowly. I understand that JAL needed those planes and the the long lead times had to be taken into account. Still, this order comes only six months after the Dreamliner returned to service following last winter’s grounding. And even if I expected this order it still comes as a shock. It is so soon! I can only surmise that this had been brewing for quite a long time. Possibly even before JAL took delivery of its first 787.
But what will be Boeing’s response to this? How important is Japan’s market to Boeing today? What would be the impact of building the 777X wing in United States? And what about ANA? Is it considering changing camp as well? I think we all agree that the 787 debacle had a negative impact on Boeing’s reputation. But what if this strategic change of allegiance had an even greater incidence on the perception that people have of Boeing’s omnipotence? Yet we have to keep in mind that the Boeing stock has continued to thrive despite the prolong grounding. That means a lot of people still believe in Boeing despite all its woes. But apparently JAL does not anymore. Who’s next?
The cost of loyalty has become to high.
Afaics handling of the battery problem broke the camel’s back so to speak.
And Boeing was not the sole load on that camel.
The senseless Toyota hazing for an allegedly dangerous gas pedal
that seems to have evaporated after the market share damage was done
will have counted into this too. No idea what other little acts of undeclared warfare
do count for the japanese in this change of allegiance.
I don’t see the Japanese airlines switching allegiances en masse. This is just what one JAL executive hinted at quite a few months ago; a bit of diversification in order to prevent themselves from being too dependent on one supplier. I believe this will be a more downplayed version of Lufthansa’s policy of diversification.
On top of that, it looks like Airbus has finally hit all the right switches to get this sale; aircraft spec, sales numbers, timing and who knows what else.
Of course it will be interesting to see if Airbus can get a foot in the door of ANA.
By the way, just how close a relation does the Japanese government have with its industry? Many allude to a situation more akin to the USSR than a modern day democracy.
Maybe JAL thinks the A350 is the better aircraft.
I heard JAL is going to order some pigs next. 🙂
plastic ones?
Flying ones.
Apart from ANA, QF isn’t far away from ordering and probably Korean neither.
http://www.ausbt.com.au/qantas-mulls-airbus-a350-boeing-777x-to-replace-boeing-747s
The most silent, efficient comfortable short haul 230 seater, Pratt powered, I wonder if JAL & ANA will ignore it for their domestic markets.
http://i191.photobucket.com/albums/z160/keesje_pics/A321NEO_zps18e275f8.jpg