Financially ailing Qantas Airways has deferred some of its order for Boeing 787s, a move that ordinarily would be seen as a negative to Boeing. But in this case, it comes at an opportune time that will actually help Boeing respond to the Airbus A330neo.
Qantas’ deferral is from 2016 to 2017 and only for a few airlines. But having posted a record loss and previously canceled and deferred aircraft, we wouldn’t be surprised if this happens again.
The A330neo is planned to enter service in 4Q2017. Airbus is counting on near-term availability to help sales.
Boeing is sold out of 787 positions until roughly 2020 but is scrounging with customers to free up slots much earlier. United Airlines swapped 787-8 orders for later deliveries with the 787-10. Boeing is asking lessors who have unplaced orders as early as 2016 to help counter Airbus. The Qantas deferrals will help Boeing find some early slots. There are 30 available lessor 787s from 2016-2018, according to the Ascend data base and 81 through 2020. Airbus announced commitments for 121 neos upon the launch, mostly from lessors.
Even if Boeing can find some slots through deferrals and lessor help, its challenge will be to price the airplanes at a figure that matches or comes close to what Airbus can sell the A330neo for: $100m or substantially less. The lessor’s airplanes are already priced–though in theory, since these are undelivered, Boeing could reprice the aircraft somewhat lower than contract, allowing lessors to offer lower lease rates. In today’s dollars, the 787s were probably sold to lessors for around $95m-$100m for the earlier timeframe (2016-2017) and $115m for the later ones.
Airbus, in announcing neo at the Farnborough Air Show, said it could offer the airplane for 25% less than the 787. Airbus uses assumptions of $125m for the 787; 25% less is $93.75m.
We believe Boeing will be hard-pressed to match this price, let alone persuade lessors to price at or below this level. But having once sniffed at the A330neo, it’s become clear Boeing is gearing up for a battle royale.