April 16, 2018, © Leeham News: Airbus’ new top sales chief, Eric Schulz, was candid about losing American and Hawaiian airlines wide-body orders, according to a report from Flightglobal from the Airbus annual meeting.
In reference to Hawaiian’s switch of an A330-800 order to the 787-9, he admits: “Maybe we did not see the danger coming…we may have made the conclusion a bit too early that the best solution was to stick with us – which I think it was,” Flightglobal wrote.
American’s loss, Schulz told Flightglobal, was for a different reason: American was “already very heavily engaged” with the 787, adding: “I knew exactly where our competitors had to go in terms of pricing. I’m certain American did a good deal.”
I thought American and Hawaiian were predictable outcomes. But Airbus’ problem went beyond not seeing the “danger.”
Airbus shot itself in its own feet with the A330-800 and before that, the A350-800.
You never see Boeing doing this. Even when the market is clear it doesn’t want the airplanes (737-7, 737-9, 747-8), Boeing’s disciplined messaging nevertheless touts these as the best thing since sliced bread.
When you diss your own product and cast doubts on whether you’re going to build it, of course why would anyone buy it?
Airbus launched the A330-800 and then proceeded to tell the market it wasn’t sure it wanted to build the airplane after all.
The market question might have been inevitable. Sales of the predecessor A330-200 had dried up in favor of the larger A330-300. The A330-200’s long range wasn’t needed by most customers and the A330-300 could carry about 50 more passengers for roughly the same operating cost. Sales of the A330-300 were very good.
The A330-900 has more than 200 sales—not great, but low fuel prices and a push to sell more A330ceos to fill the production bridge hurt. Even the A330-200 won some deals.
At one point, the market understood that Airbus wasn’t going to proceed with the A330-800. Airbus officials even told me that they preferred selling the more profitable (higher margin) A330-900.
About nine months later, officials reversed themselves and said they wanted to proceed with the A330-800 after all. The messaging changed to say the A330-800 covered the top of the Middle of the Market, an argument that doesn’t really resonate with airlines because the airplane has far more range and is much heavier than a MOM airplane needs to be.
The damage had been done. With only one order, from Hawaiian, for the A330-800, there was no way this carrier was going to be the only customer for a mere six airplanes.
For Hawaiian, it had been down this road before.
The carrier ordered the A350-800. It was the right size, 250-270 passengers. It had the right range, more than 8,000nm to allow service to Europe. It was the plane it wanted; the A350-900 carried too many passengers, hence the choice for the -800.
But Airbus decided it didn’t want to build the -800 even though it had, at its peak, 162 orders for the plane.
Same excuse as later given for the A330-800/900 push: we’d rather sell the higher-margin -900/1000.
One customer that ordered the -800/900 said Airbus wanted to re-risk the A350 program by eliminating the -800. At the time, the A350 was running late and over budget, the A380 was still at a loss, the A400M was a disaster and the A320neo was in development.
Like the A330-200/300, the A350-900 carried about 50 more passengers for roughly the same operating cost as the smaller A350-800. Unlike the A330-200, the A350-800 didn’t offer significantly more range than the larger -900.
But for some thin routes, it was the airplane of choice. That’s why Hawaiian ordered it. When Airbus dropped the A350-800, Hawaiian was persuaded to switch to the A330-800.
The Airbus’ ambivalence happened all over again.
No wonder Hawaiian switched to Boeing.
American’s switch to Boeing also was predictable.
Although Airbus offered a combination of A330-800s and -900s in lieu of American’s desire to cancel the A350-900 order it had, this was an uphill battle from the start.
The A350 order, for 22 airplanes, was a legacy US Airways deal. US Airways also brought 22 A330-200s/300s into the American merger.
Legacy American ordered 42 787s and by the time the decision to abandon the A350 deal was made had taken delivery of 35 of them.
It made little sense for American to order the A330neo with 35 787s already in the fleet and seven more to go. Build on the 787s and eliminate the Boeing 767 and A330s from the fleet in the next decade.
American expressed its own doubts about the A330-800. Noting the sole Hawaiian order (prior to its cancellation), American had little appetite for ordering an “orphan” airplane.
Airbus’ ambivalence toward the -800 once again came back to bite it.
To be sure, Boeing took aggressive actions at Hawaiian and American to kill Airbus’ offers at each carrier.
But it was, in my view, less that Airbus failed to recognize the “danger” than it was Airbus’ own statements and actions years earlier that cast doubts over the future of the A350-800 and the A330-800.