IAG’s super MAX deal likely means super discounts, services

June 20, 2019, © Leeham News: Boeing gets a Letter of Intent for 200 737 MAXes from International Airlines Group (British Airways, et al), announced Tuesday at the Paris Air Show.

Today, Airbus complained the deal came as a surprise—there hadn’t been a tender, Airbus had no chance to bid.

Christian Scherer, meet John Leahy.

Scherer is Leahy’s successor, and like Scherer, Leahy was blindsided in 1996 when American Airlines signed a 20-year exclusive procurement deal with Boeing.

Then, Delta and Continental airlines did the same.

Leahy complained bitterly that he didn’t know of American’s deal and had had no chance to bid.

Terms and conditions

Terms and conditions are confidential, of course, and in the case of IAG, the LOI means T&Cs may not be anything more at this point than a broad outline.

But in the American/Delta/Continental cases, “Most Favored Nation” pricing was guaranteed.

This means nobody else gets a lower price and if a customer does, Boeing had to send a check to the MFN customers.

It’s likely IAG will have an MFN clause.

Then there’s the price.

It’s common knowledge that key campaigns draw discounts of 50%-60% from list prices. LNA is aware of some deals in which discounts run as high as 65%.

You can bet IAG is at least in this ballpark.

No doubt, there is a component from Boeing Global Services for parts and MRO. “One Boeing” has aggressively wrapped BGS into deals, too.

While the above is speculative, it’s based on previous known deals.

122 Comments on “IAG’s super MAX deal likely means super discounts, services

  1. Couldn’t it also be a bit the other way around? IAG takes MAX’s in return for MRO rights?

  2. If this is the only way Boeing is able to sell aircraft, it’s not a great endorsement. Just what does Boeing expect to get from such behavior? Everyone knows it’s a sign of desperation. It sounds like letting the customer chose their own price, in the hope of snaring them for something else down the line, or hoping for a halo effect. Tricky thing is that the halo is not very shiny…

    • Most if not all iag sa pilots are airbus trained, thats alot of training required to change over to the max, ie vueling, air lingus and ba. I cant/dont see the end of this yet, im sure a rate hike by airbus will accommodate iag and a sufficient discount will poohoo the max agreement.

      • Yes . Thats 300 current Airbus single aisle planes , excluding the new Neos.
        Could be 2500 pilots based on numbers at Easyjet.

    • We probably don’t know anything of the contract specifics. How do we know its not profitable for Boeing?

      Until the current fiasco, one thing we know is that Boeing has had excellent profit margins (>10%) – from both of their civilian and defense divisions.

      Even with the current fiasco, Boeing has >4,000 MAX planes for delivery.

      IMHO Boeing will be making some kind of profit on this if they deliver the 200 planes to IAG.

      • You are indeed correct, we cannot know of this is a profitable deal for Boeing, either on the basic contract for the aircraft or for the future spares/maintenance ancillary contracts.

        But I think you would agree that logic dictates that Boeing, in the hope of getting a blue chip customer to show some sort of faith in the MAX, has much less wiggle room on any such order, and IAG would know that.

        As many have already mentioned, there is some disbelief that Ryanair has not taken advantage of this situation. Or maybe they tried to and Boeing decided to let one of their older, more “blue chip” customer reap the wind of the circumstances.

        • Ryanair is more a vulture (a good one, thats what they are supposed to do) than Blue Chip.

          IAG is a true Blue Chip (Delta, Lufthansa etc)

          So Boeing did he smart thing and primed the pump rather then drink the priming water. Thank you kindly Desert Pete.

      • Hmm….4,000 Max to delivery, the industry ratio for pilots to aircraft is about 10 to 1, now “if” global country airworthiness authorities require simulator training like Sully recommended to Congress, that’s 40,000 pilots to have training. Ooops…most of the worlds existing 737 flight simulators are not MCAS compatible. Now bring that back to today for the Maxs- 394 grounded 140 park…that’s 5,000 pilots that need immediate training Oh by the way, Southwest has over 9,000 active pilots as a reference point.

        So, let’s go back to 2011 then Boeing was consider a new replacement aircraft for the 737. Should this have been the sales pitch, the updated 737 Max will require MCAS systems based on engine configuration and placement and all your 737 pilot will require flight simulator training and by the way, your flight simulator is not compatible with the new MCAS software so you need to buy new simulators. Do you really think any of the existing 737 operators would have purchased the Max or have push Boeing to replace the 1965 designed 737 aircraft?

        • Making a 737NG simulator work as a good 737MAX simulator might not be that complicated and Boeing with the simulator manufacturers might already have defined the software and boxes with the simulator Service Bulletine to convert it to a 737MAX-CN simulator. As soon as the SB is out and simulators modified Airlines could start sending droves of pilots for 737MAX Full flight simulator training and when the flight ban is lifted later on there might be another minor simulator trianing required for those who had the MCAS 2.0 training done for the MCAS 2.1.b final workout.

    • Well, they apparently haven’t stooped to bribery as has Airbus. Which reminds me, when will we finally see the old Airbus exec crowd in handcuffs, doing the “perp walk”? It’s long overdue! LOL

      • So Boeing wasn’t ‘paying a top Pentagon official upfront but later’?
        Now suddenly its the F15C the USAF didn’t want last year, it’s now ordering some new ones. I suppose those Pentagon officials can change their minds very quickly

        • I think the analysis of what the F-35 can do by itself (payload, range, weapons, self defence) and how it works together with F-22’s and F-15’s mixed into the squadron finally reached the top brass and the conclusion was that for many missions that is not just a stealth bomb truck 2-4 medium size bomb mission having fully armed F-15’s and F-22’s around at defined distance and altitudes saves the day as they can come in after the radars are down and finish the job with heavier goods.
          So all the countries swapping out F-16’s for F-35’s migh need to call McAir for their own set of F-15’s clearing the sky after the slightly annoyed enemy send off his Mig’s and Su’s in M+2.2 with heat seaking missiles. Israel, Saudi, Korea, Japan and Singapore will have this effective mix “White Russian” besides the US.

      • Duke: You are aware Shanahan is going to spend more time with his family?

        Or that the consensus is that a mix of good 4th gen Fighters is a real good thing to go with the fewer 6yh gen.

        Or the F-35 is range limite4d and an F-15 had a combat radius unre3fuled of two or three times the F-35?

        Or an F-15 costs half as much to operate per hour and is available and the F-35 is lucky to break 40% on a good day?

        Or that the US has an Air Defense mission that does not require stealth?

        Or while an F-35 is touted as CAS it has all of 2 seconds worth of ammo? Let alone that CAS stuff mucky up your stealth coating.

        • The USAF/Pentagon werent saying that last year….oh you are now suddenly wake up to the reality of the USAF/NG still flying 8 squadrons of planes introduced into service 40 years ago. …and they arent even the oldest type!
          Its pretty clear Shanahan was the prime mover to to make McDonnell great again.

    • IAG is one of the most reputated and trusted airlines around.
      They just have A320 fam. aircrafts, now in the biggest B737 crisis, they switch their airlines fro A320 with some neos already delivered to B737 max.

      What a signal. What a deal.
      Boeing doesn’t earn a dime with this deal, more likley, the will even need service fee to not loose money, as it’s propably a 70% discount.

      But this is an icebreaker for customer and PAX trust.

      • Airbus needs to take a leaf out of Boeing books.
        Accuse Boeing of dumping, as Boeing did to Bombardier in the case of the C Series so the EU could the justify the imposition of draconian Trump type tariffs.

        Sadly, such action would be well justified given the recent appalling behavior by both Boeing and the US to its former allies.

  3. Im wondering how many of the ‘737 LOI’ are really placeholders for 797 orders down the track. It serves to keep the airlines intentions under wraps and if it doesnt want to be a launch customer, gives it places in the line. For Boeing it serves many purposes including saving the 797 big reveal till a later airshow and giving the Max a boost right now that say an order for say 75 wouldnt.
    Its seems very common these days for order/MOI of one type to end as a ‘firm order’ of a completely different one from the same manufacturer. A new wrinkle in the strange smoke and mirrors world of plane ‘orders’

    • That is a possibility, and a variation is that IAG are aiming for the effectively making a bet that Boeing are going to be forced to develop NSA sooner rather than later.

      Or it might simply be a brutal way of opening up discussions with Airbus for a big discount on A32x’s. That’s possibly going to backfire; Airbus don’t exactly need IAG’s order, and can call their bluff.

      Either way it’d be Walsh playing silly buggers in the marketplace, and that can easily go wrong. Look at Ryanair, a cheeky deal on NGs cemented their dependency on Boeing for the long run, which has got them into a strong position in the market. However the price now is that no one enjoys flying with them and now they’re cancelling flights and losing business because Boeing has let them down with the MAX. If you were to assess the possibility of being let down in this way, the supplier with the 60 year-old dead end design would be your first bet.

      Another aspect is that at some point in the future the MAX will be replaced with a new design, at which point all of the pilots will have to be retrained. They’re not going to replace the MAX with another 737 derivative, that’s surely impossible now. Whereas Airbus can make substantial changes to the A32x design and keep the same cockpit.

      So if IAG and Ryanair found themselves with large obsolete fleets of MAX’s and pilots, how would they transition? They’d lay off the pilots and recruit new youngsters for the replacement aircraft – that’s cheaper. Thus being a MAX pilot in, say,15, 20 years time could easily be seen as a career trap. They might find it difficult to recruit. There’s no long term future in it for the pilots, so there isn’t for the airline either.

      IAG might think they’re going to get a good deal but there’s risk and cost down the line. So at least it’s only an LOI, they can walk away.

      • Ryanair doesn’t have any Max delivered yet, they were the 200 seat version

        • Indeed, but because the MAXes have not arrived as per schedule, Ryanair have reportedly been cancelling flights that were supposed to be being serviced by them.

          One inference from that is that Ryanair had run some of their NGs right up to the hours life, expecting MAXes to come in as a hot-swap almost. Another is that they’ve got new flights that required additional aicraft beyond their current NG fleet, and the MAXes were to provide that expansion. Either way, MAXes were part of their fleet plan, and they ain’t got them.

    • I think you might be right. BA could block Ryanair/Easyjet/Wizz/Norwegian by swapping 737MAX orders to the first 200 produced 797’s for Europe. The others have to wait in line or order A322’s that still lack a suitable engine or use A330-900’s with charter airline configrations of around 400pax.

  4. Here is a company that bribes and cajoles its customers to buy their products, and when Boeing take away one of their customers through a better deal, they complain and run crying to the public for redress. What a bunch of cry babies.

    • Boeing hasn’t got them as a customer yet; there’s no order and IAG haven’t given them any money. Also I don’t think Airbus are desperate for the business. However they certainly going to say that IAG never called them, it’d be bad business not to do so.

      However IAG shareholders might not be pleased with the company making an unknown deal of unknown risk with unknown shirt and long term consequences without at least glancing at the wider market. Airbus won’t mind IAG shareholders questioning their chairman’s actions.

      For instance if the MAX never flies again (a distinct possibility), IAG have got no fleet extension plan and have annoyed the only currently viable supplier who doesn’t need the business in the first place.

      Effectively Walsh has taken a bet on the MAX flying again, when there’s zero evidence to support that hypothesis. There’s historical precedents for problem aircraft recovering, but the MAX’s and Boeing’s problems are unprecedented. Also the timescales for a return to flight are slipping without explanation… So it’s a courageous bet on Walsh’s part, and it certainly shouldn’t be seen yet as a sound business decision.

      • There is an elephant in the room that has barely been noticed or mentioned so far, namely that the NG also shares the same high speed recovery problems as the MAX in case of runaway stabilizer.
        Will ALL the NG pilots need retraining AND simulator time ? FAA, EASA etc, are faced with this dilemma and Boeing is apparently lobbying hard.

        • There may also hardware changes to the 737NG. The trim wheel required is way too small to exert the forces needed to bring the plane back to horizontal in case of stabilizer runaway. No simulator training provides the needed muscles required.

        • That’s a mighty big elephant. There’s an awful lot of people hoping that it doesn’t lay an egg…

        • Many have noticed, uncluding me. Relative to the NG the MAX takes the instabiliy further. The question is it too far?

          • The correction is that the simulators were allowed to be setup such that they did not reflect the actual force needed.

            that is being or has been corrected.

            To say you can’t fix it in a simulator is wrong, its a matter of tension seeing under the circumstances the load increases.

        • DT – isn’t that somewhat hypothetical: ‘ in case of runaway stabilizer…’? While such are not unknown, including on 757s, this hasn’t been the case with Max x 2, has it?

      • Walsh doesn’t take any risk here. Offending Airbus? Nah.

        This LOI grants grants him a very, very special price at the price of being in the center of attention – which probably just suits him well. Other than that he doesn’t pay a penny.

        If whatever Boeing does to the MAX suits him, he can use this LOI to turn it into a firm order. In case he doesn’t like it, then he can simply renege it.

        In the meantime he will certainly talk to Airbus, asking them to match that offer. Which they wont.

        Besides, I don’t think this deal will go through, for all the reasons mentioned above.

    • Better deal than what? Airbus weren’t asked to make an offer.

    • No one’s desperate for business when they have close to 60% market share and no slots available. It’s just a blow because IAG was a all-Airbus narrow body operator, and this gives them a way in for future deals too.

      It also means IAG can play Airbus and Boeing against each other to extract deeper discounts for future orders, as the manufacturers know it can go either way. And as for underhanded behaviour… well that’s just the pot calling the kettle black. Have a look at the corruption in the tanker contract.

      I think Airbus have been too civil or politically correct. They should have been far more aggressive in taking on Boeing. I can guarantee you that if Airbus had a MAX type of problem, Boeing won’t show any restraint, courtesy or mercy.

      • One more example for the cultural differences between Europe and the US.

        • Yep, arrange this so we don;t have to actually compete

          Clearly Homey don’t play that game

      • I don’t think it was a matter of courtesy that Airbus didn’t go after Boeing, I think it was because of where the MAX issue partly stemmed from- certification, something which Airbus falls under too. Therefore, Airbus probably remained mum as they knew stricter or divisive certification as a result of Boeing’s negligence with the MAX could affect them too.

      • I think you do not know anything about the about the aerospace market.

        Having attended 13 Paris Air Show between 1989 and 2017 and numerous NBAA, Heli Expo and AHS conventions, Boeing bashing is a tradition with the people from Airbus especially the French ones. Boeing and Americans in general are too kind toward Airbus designed by Charles DeGaulle to blast the US dominance in aerospace.

        I could make up a list of the mean and nasty words and sentences against Boeing at the PAS, NBAA BACE, Heli Expo or AHS Forum.

        At an Airbus press conference I attended at the Paris Air Show at the height of the A380mania, Airbus Philippe Jarry said to the press ‘The only 747 at the Show is at the Museum’ referring to the Air France 747-200 siting at Le Bourget aviation museum.

        • Philippe – It was very interesting at Le Bourget in 2005 to have the arriving A380 parked beside a 747 as if deliberately placed for contrast; seeing the latter’s one and one half cabin configuration compared with the full-blown European double decker made one wonder which was the more pleasing solution.

  5. Will be interesting to see if the issue of ‘non-compete contract’ comes up. Not sure about Spanish law but in most cases today a corporation that signs a deal with zero formal competition is heading for some trouble with stockholders.

  6. According to FlightGlobal they are destined for Level/Vueling, 50 MAX 8s for each and 50 MAX 10s for each. So they won’t be used by BA, Iberia or Air Lingus

    This may be Willie Walsh’s Tim Clarke moment.

    Willie Walsh’s timing is lousy. He should have waited until the suspension lifted.

    In truth, Willie Walsh just having a go at Airbus with regard to their prices. Airbus won’t sell A320s to Ryan Air at the price Mike O’Leary wants, which is why Ryan Air remains all Boeing. Willie Walsh wants Ryan Air pricing to compete with Ryan Air though Veuling and Level.

    Will it work, will it happen? Tim Clarke is reneogiating all of Emirates major deals because he signed deals whilst having a strop at Airbus. Will we see Willie Walsh doing the same? Probably.

    Ruthless stuff. I expected Mike O’Leary to do this, but even he had the sense that the timing was wrong. I wonder what IAG’s board will say and what the shareholders will say. Brand is very important. Associating a big name brand with Boeing’s 737 MAX skullduggery could have consequences!

  7. It seems like Boeing undercutting Airbus offers are a common occurrence. The same happened in the past and similar ones happened recently with Air Canada and Vietjet. Of the 4000+ orders that the B737max accumulated, almost 20% of it came as a surprise undercut.

      • Yep . Except in the US when they undercut Boeing , they call it dumping

      • And, given that Airbus seems to have no difficulty selling A32x’s at (implied) higher prices, one has to conclude that it’s a competition Boeing have been losing for decades.

        The lack of transparency (both at Airbus and Boeing) on actual prices means that Boeing’s shareholders don’t have visibility of how well their company board is doing. Company profits are all very well and good, and with Boeing it seems that that’s pretty much the only measure the shareholders have to judge the performance of their board. However if the company is repeatedly missing out on greater profits due to having to sell at a big discount, then the company has the wrong products and the board is underperforming in their jobs, but Boeing isn’t giving the shareholders the means to judge that.

        Isn’t that something the SEC should be interested in?

        Given the enormous risks to Boeing at the moment – 737MAX may not fly again, 777X certification may now be much harder due to the increased attention being paid to certification in general, law suits, congressional, governmental and criminal investigations, doubts even about the NG all of a sudden – I’m faintly amazed that Boeing’s shareholders haven’t been more vocal and interventional than they have been. They could be about to lose absolutely everything, but it seems that they too are believing their company’s management’s assertions that this is a “normal” situation easily recovered from.

        If it turns out that the company has been vastly understating the risks to the company, that really will be something that the SEC will take an interest in. Honesty over risk is a legal obligation, isn’t it?

  8. It’s very hard for airlines to get good deals when they are faced with a duopoly.Particularly when But products have sold so well.AIG ‘ordered’ 200 NB’s because clearly they need these aircraft going forwards.
    The A320 production lines are full.Indeed they are now so full they are concentrating on new high margin sales -The A321xlr.
    Can’t see what alternative AIG had really.These aircraft are for LCC operations they had to have a keen price.

    • Perhaps IAG shouldn’t wait until the last moment with it’s fleet renewal plans?
      Then they might get earlier slots in the production line 😉

      • IAG A320 neos were ordered back in 2013. ( 220 all up)

        Thats why Im thinking most of the 737 ‘order’ is a placeholder for something else,( we arent privy to the details about any up-gauging) unless IAG is seeing the next 4 years as having huge passenger growth in its single aisle markets that no one else is seeing.

  9. If Boeing is selling the 737 MAX to IAG below production cost, Airbus can file a petition charging Boeing with dumping the 737 in the EU market.

    Boeing can sell the 737 below cost in the US, as this is its home market, but not in the EU, as this damages local industry.

    If this goes to court, it will be handled by Spanish courts, as IAG, the parent company for the affected airlines’, is incorporated in Spain.

    This is similar to the Boeing complaint against Bombardier. The conclusion was that the CS-100 (A220-100) do not compete with the 737. The same can’t be said about the A320 family.

    I think IAG will never firm up this letter of intent. It is just a way to put pricing pressure on Airbus.

  10. From IAG poin of view (those 737 MAX’s were cheap, really cheap, imho) – or Boeing is dumping prices in EU or just bribing airlines’ CEOs.

    From Boeing perspective is a desperation – sell below the cost just to sell anything of MAX and to show the world that they are still selling MAXs.

    No one else, apart AIG, placed any LoI and no firm order for a single MAX has been placed by anyone.

    AIG is exploiting the difficult Boeing situation, and Boeing is exploiting AIG for current needs – I wonder for who it will backfire more? and sooner? I’ll bet that for AIG in both cases.

  11. Willie and IAG will know exactly what Airbus can do (or at least have an idea of what they can) in terms of pricing and availability (which is also a key point here), remember Boeing had 216 cancelled slots from Jet airways to deal with, and Airbus have nothing til 3 years after the first max delivery.

    It’s likely either Ba approached IAG cap in hand to get IAG to rescue their reputation with a deal so stupendous they could not turn it down, or IAG made a speculative punt to BA hoping they were desperate enough to deal (am I reading too much they didn’t a single image or model ready of Max aircraft in IAG colours?)

    If the former, wonder who else they approached with that deal, in which case one wonders what that will do for their selling price going forward?

    If the price is that low, maybe Airbus could lead a complaint about Boeing Price dumping their aircraft…. lol

  12. Hearing what Walsh says & what is released this is a strategic decision. IAG longer term needs at least 2 suppliers. Not 1 dominant supplier asking a price they aren’t willing to pay, like on the A380. So congratulations to Boeing and Airbus (IAG ordered NEO’s too last week, probably for a solid price, because no alternative).

    • Cheap price = cheap quality – for short term a low price sounds excellent, but for long term signify lower quality & reliability & brand. Boeing is famous for bargain prices and where are they now? US cars in EU or Asia almost nobody buys, but European and Asian cars sells well in USA.

  13. Pablo my Mercedes SUV sells for higher price in EU than in the US. A320 do not last as long as B737 In cycles and hours. Airbus has improved the cycles but it is still less than Boeing.

    • @Daveo

      Do you have any hard evidence of the assertion that A320 do not last as long as 737 in cycles, and hours please. That’s an interesting fact, I’d like to know more.

      I’ve also seen claims that the A320 airframe isn’t as strong as a 737, and more prone to corrosion, has anyone got any real data on this ?

    • Boeing is pushing envelope in wrong direction :/

      Mercedes sells maybe cheaper in US, because in US car are made cheaper =poorer, less sophisticated, less economic etc.

      Mercedes sells maybe cheaper in US but sells. US cars doesn’t sell in EU almost at all.

      • Because it cost less to build a car in the US than the EU.

        And when was Mercedes economical? the 180D?

        • It cost less to build a poorer car, simple.

          Are mamy EU or Japan auto makers, not only Mercedes, and all generally are more technologically advanced or more economic then US cars.

          • We put our money into trucks. Mfgs makes lots more money with them.

            The tech is as advanced or more so than anyone.

            Should we? Whole different discussion.

            All that tech, more stuff to go wrong and cost more.

          • Airbus did state a couple of weeks ago that they weren’t going drop prices in order to protect residual values for existing customers. How kind ofthem.Unfortunately I can’t remember where I read this.

        • TransWorld – isn’t it likely that sales price is geared to market characteristics and expectations, rather than production cost? Daveo’s SUV price will reflect supply and demand in both markets.

    • @Daveo

      What a poor analogy!

      Your Mercedes SUV costs more in the EU for the simple reason that automobiles are significantly higher taxed in the EU than in the U.S.

      Registration duties, such as VAT (Value Added Tax), Registration Tax and Registration Fee, are payable in all EU countries.

      Compared with the European car taxation system where several taxes are due annually and at the moment of purchase, the American system seems more favorable to company cars and passenger cars overall. A large number of cars on American roads would definitely be heavily taxed in view of their CO2 emission if they were driving on roads in the EU.

      Interestingly, “the Gas Guzzler Tax”, introduced in 1978, is applicable to passenger cars that fall short of federal fuel economy standards at the moment of purchase and is based on fuel consumption. However, your gas guzzling SUV is exempted from the “Gas Guzzler Tax” as the tax is only applied to cars, and does not cover crossovers, SUVs, minivans, or pickup trucks.

      Only in America would a gas-guzzling SUV be exempt from taxation when a gas-guzzling sports car is not. In fact, the gas-guzzler tax exemption is one key reason why excessively inefficient SUVs and other light trucks seems to be running amok on U.S. roads.

      One of the underlying reasons of this is probably cultural; while the U.S. remain the home of supercharged V8 manufacturers, the European car industry is more and more focused on green, yet highly performing developments.

      https://blog.consumerguide.com/gas-guzzler-tax/

      Vehicle, road and fuel taxes generate billions of euros in revenue for governments across Europe, helping to fund both infrastructure as well as paving the way for the development of non-auto related projects.

      Taxation on motor vehicles in the EU-15 countries alone (including VAT, sales, registration taxes and excise duty on fuel) is worth €428 annually, or more than two and a half times the total budget of the European Union.

      https://www.acea.be/industry-topics/tag/category/taxation

  14. Since 2015 The Max is overselling the A320Neo. The success of the Airbus is based on the A321Neo . The 7378 can carry more pax for a longer range. Before the crashes Boeing used to boast that Max customers have added 250 new city pairs already using the aircraft. Boeing also boasted that it’s customers are making a lot of money . I did not hear such claims from Airbus. Now everything is muted. If the Max fails to safely return to the skies in the very near future this will be the end of Boeing as a private company. But I believe chances for that are very small.

    • Boeing is not a private company, its a public company

      And while it would be a huge blow (not going to happen) it would come back.

      • TransWorld
        You are of course correct . Boeing is owned by many private shareholders , much like GM was a public company in 2008 just before being saved by the government . I.E nationalised . By an analysis published by a respected analyst in Israel, Boeing will not be able to continue producing so many 737 without delivering them or getting government help for much longer.

    • I’m not sure if it’s a language barrier issue, maybe English isn’t your first language, but nothing you’ve said here makes any sense.

      • Hi Bee,
        Sorry about my English. Just watch the numbers at wikipedia . And consider of course the recent decision of AirAsia to convert 253 a320Neo to A321Neo.

  15. Boeing was pushing and is still pushing envelope in wrong direction :/

    This times aircrafts are replaced before they run out of cycles, for lots of other economic reasons.

    Mercedes sells maybe cheaper in US, because in US car are made cheaper =poorer, less sophisticated, less economic etc.

    Mercedes sells maybe cheaper in US but sells. US cars doesn’t sell in EU almost at all.

  16. Wah!

    Didn’t tell us that the A330NEO was cheaper than a 787?

    And didn’t they cry and cry when Boeing undersold them?

    • A330neo costs ~10 mln $ more that B787 (numbers differs from year to year but A costs more then B) @TransWorld you are not checking data?

      And Boeing is granting huge discounts, so let nobody be surprised that they leaving debris in and tools in 787’s airframes, firing quality managers etc. etc. Or putting deadly MCAS on MAX’s and hiding it from anyone, and cheating during certification.

      Cheap =poor =bad (for long term).

    • TransWorld, you have to make sure you understand the difference between production cost and sales price. There is no “cheaper” per se.

      From all I know about industrial production, material cost etc. I would think that the A330 is at least 10% cheaper to produce than the 787, but it could easily be 20% or more.

      At which price you sell your product to which customer – well, that’s a totally different game then.

      • that is the point.

        Airbus is whining because Boeing is not playing fair (as determined by Airbus)

        mommmy, mommmy, Boeing isn’t playing nice.

        Well Billy go kick them in the shins then.

        • Whining is what you will hear from every European successful enterpreneur or manager. That again is part of our culture. We don’t brag. That’s considered bad style over here.

          Kick in the shins? Well, isn’t that what Airbus just did with the XLR?

          Though what I find more interesting is that the development of the XLR is a perfect win-win situation for Airbus and the airlines. That’s a plane that was obviously missing and a perfect replacement for the 757.

          So, kicking the competition in the soft parts and whining convincingly at the same time – that looks to me like Airbus had a perfect time in Paris.

        • Who is the one that keeps running to the American Govt and WTO?!
          That was their greatest move in years, going to the USTR and pushing Bombardier into Airbus’ arms!!

  17. @TransWorld

    So you are telling us that Boeing is owed by US government? Not by shareholders?

    Well, you can see that way – it’s not a news that US government is helping and pumping money to Boeing however they can, e.g. by overpriced contracts.

    • Pablo: You clearly do not understand the difference between US Private and Public companies

      Public companies like Boeing has their stock listed, they have a board of directors and there are a great many legal obligations in being so.

      Private is owned by an individual or group but does not have the independent (so called) board and can operate to suit themselves.

      And please stop the Government feeding Boeing nonsense, all countries do that for their own defense industrious (Germany has its -MBT as does UK as does France – tell me that is not catering to a and feeding a non economical defense industry!)

      A400 anyone?

      France sold tank targeting systems to the Russians. They tried to sell them Helicopter assault ships.

      Hate Boeing (or even the US) all you want but keep the discussion to facts and context

      Me? Spain has a perfect Frigate ship in the F100 class we could use and I am all for buying it.

      The Marines are buying an Iveco combat vehicle because it was the best out there.

      • You just need to look at US defence spending and compare it with any other nation.Even more importantly you need to look at value for money, US defence contractors have been totally unable to provide a decent,acceptably priced fighter(or any warplane?)for over 40years despite the overwhelming advantage of volume of orders.US defence products should be much cheaper than anyone else’s for this reason.
        Ofcouse any nation would bail out an important company like Boeing by any means possible if they really get into trouble.There is no excuse for getting themselves into real trouble considering the advantages they enjoy.

        • No one else has built a stealthy fighter /fighter bomber or a bomber.

          Advanced stuff costs.

          F-35 is getting close to the price of an F-15 or F-18, costs a lot more per hour to operate.

          Difference is the US designs equipment to beat an enemy and not just be part of the employment agency.

          Germany is a case in point where all 6 of their subs are out of service. Keep the shipyard going but no spare parts to keep the ships going . Lucky to have 100 tanks working. Most of their air Fore is in bad shape despite 4th gen Typhoon.

          UK is now down to 250 MBT. they can’t even supply an Armored Division, more like an Armored Brigade (spares, training takes a good 40%)

          The US is not immune but we have large enough forces to cover and when it gets public then Congress allocated the money to brings spares up to needed levels to keep equipment up to combat standard.

          • Check some facts.. in the plane business US military projects are a litany of bad design, cost overruns and delayed entry into service. We aren’t just talking derivatives of existing planes either , such as KC46 or C130J. The C17 was so bad it was almost cancelled, the F22 was too big to fail, it just used up the budget for full F15C replacement with only 180 or so planes.
            The Pentagon buys European helicopters when they want both off the shelf and the best. Sikorsky seems to have stuffed on new version of an old helicopter the CH53K.
            I could go on other projects…. But actual facts seem to not matter to some.

      • @TransWorld

        That what you discribed is a private company listed on the public stock exchange. Not a public company.

        Pumping billions of dollars to Boeing by US government so it can sell civil aircraft at huge discount/dumping prices you call nonsense? And how do you call Boeing vs Bombardier antidumping case? Also nonsense? I’m not against US, but against interventionistm mixed with hypocrisy.

        In spite of this incessant US govt aid Boeing is making worse and worse planes, cheap planes.

        • Pablo:

          You have bought the standard EU cool aid.

          You conflate defense needs with pumping billions when all countries do it for their own purposes (some actually get products that work out of it)

          What you are contending logically means that the US would have to stop all defense spending to satisfy your bent.

          You ignore the billions all countries pour into their defense industry and the fact that Arius is also a military manufacturer . And those companies don’t benefit and are allowed to survive because they get those billions and can’t compete in the world market.

          So Europe can make and sell helicopters, tanks, fighter etc and the US can’t?

          Really?

          You make some truly phenomenally illogical connections.

          Western Europe would be far better off buying good US equipment with the money instead of making their defense comapies employment agencies .

          They would actually get equipment that worked at a price that was affordable and could even defend themselves (gasp what a concept)

          Why do you think Poland has and encourages supports US forces n its soil? Because they know they can’t count on the rest of the NATO countries.

          The best munitions? nope, we have to pretend to be green while we try to kill them so we give up the edge in depleted uranium armor and ammo.

          Fighters, well they can’t be too loud, that would hurt our ears.

          • @TransWorld

            Ufff, man, no comment. US is the best, isn’t it? Including 737 MCASliner and 787 SHODDYliner, period.

          • Pablo:

            No you don’t get it. No nation is perfect let alone the US.

            Many have good and bad – to make blanket statements like you have simply says you have no perspective and are anti US.

            You then change to the classic attack the responder mode.

            Boeing clearly hosed up the MCAS, that does not mean the 737 is a lethal piece of junk if it is corrected.

            Its clear Boeing messed up the 787 program trying to get something for nothing. They did salvage it and its a successful cash generating program now.

            And is your country and all its decisions and where it puts its money in defense all pure and wonderful?

            Western Europe has a huge defense issue because the defense Industry is an employment agency not goal oriented.

            I can make the same claim and worse that billions are dumped into waste and duplications and its accurate.

            France spent 100s of million converting the Rafeal for aircraft carrier use (for a single carrier) when they could have bought F-18s that are designed for that from the ground up (and in the past they did operate US carrier aircraft for just that reason)

            So that to is a government handout to Dessault that fails miserably to get an economical solution to a need.

            With money saved France could buy another aircraft carrier of add in the always badly needed Frigates .

            But on the quiet they buy C-130J because the A400 can’t do the job needed.

            There will always be problems with defense areas, but the US does not hand out billions for no reason. Its not as efficient as it should be, it can be and is painful, but usually we get good equipment out of it that can do what its been paid to do.

            In the meantime, Germany can’t field even 100 combat capable Leopard II though they have hundreds of them.

            I will also point out that Rheinmetal came out with the world premiers 120 mm Smooth bore that the US adapted because it was better than what we had and better than the rifled 120 mm the Brits have insisted on sticking with despite all tech reasons to the contrary.

  18. I see so much A vs B here that just makes me lose faith in the whole comments section. Anyone here knows the market imperative for both OEMs and that is to create/ maintain market share. The product is what it is and will not change in the short or even medium term. Both OEMs effectively hold firesales or at least shall we call it aggressive sales campaigns where profit is a distant second to market share. Examples

    A300 during the whitetails and Eastern
    A320 and the Leahy glory years of growth
    A340 and the B77w glory years
    B767 and the slow squeeze of the A330
    B77w selling the transition/ bridging slots of recent years
    B787 early sales and more recently in a desperate attempt to kill the A330neo at birth

    There are many more , the simple fact is that you have to support a current product come what may. The thing that told me that time was up on the A380 (how very sad) was that even with massive discounting it wasn’t working or to see it another way manufacturing costs were always too high.

    So simply Boeing need an order of significance and they have bought it. Well done IAG, they got a deal that they may exercise. That last bit is not really an issue as Boeing just needed a fillip and would pay (in wider benefits) generously for the positive press.
    A

  19. Let me know which EU car company that is ahead of Tesla in technology. My S500 and GL are borderline lemon. My Honda SUV and Chevy rock are bullet proof . 300,000 miles plus.

      • Sales ?
        BMW has 77% of the EV market in Norway while Tesla is much less ( half of all new cars in Norway are EV)
        Globally ?
        Tesla is tied with BYD Auto for first place in sales with Beijing Auto 2nd and BMW 3rd.
        People living in US tend to have a US centric view of the world

        The tech is moving all the time , so anything Tesla had 5 years ago is old hat now

        • Well when Tesla has only been selling Model 3 since March in numbers
          I3 3024
          tesla M3 9674
          this month Tesla 50%
          Bmw 5%

          cannot let the FUD go by

  20. 737 design cycles 90000 and a320 series 48000 but recently raise to 60000. John Leahy use to joke why will you want to keep a plane more than 15 years because engine tech make them obsolete. Those who castigate the US tell me an equivalent of Apple, intel, Microsoft, Facebook, google, Qualcomm, Cisco,Netflix and amazon in civilized EU. Boeing canbuilt aplane with 100 percent US content. Airbus is fifty percent US content. By the way I own stocks in EADSY.

    • The 737 is nowhere near 90,000 cycles. Southwest had to withdraw its 737-300 fleet early because of fatigue issues in fuselage ( 2 planes in air had loss of pressurization/breaks in 2009, 2011)
      N387SW – 42,000 cycles [On examination, a hole measuring approximately 17 inches by 8 inches (43 x 20 cm) was discovered in the top of the fuselage.]

      N632SW- 39,000 cycles [5-foot x 1-foot hole in the crown area was observed on the left side of the airplane,]

      The major parts of the 737 are only made in US because it dates back to the 1960s. As you know all recent Boeing airliners since the 777 have large sections made overseas.
      Although smaller parts are made in China and yes , some 737 parts made by Airbus Defence and Space ( flight control surfaces)
      http://www.airframer.com/aircraft_detail.html?model=B737#Airframe%20Assemblies

  21. I bet that your Chevy rock bullet proof 300.000 miles plus burnt and is still burning so much petrol that if it were an airplane nobody would bought it in first place because of poor economic, like 737-100. Petrol in US is just cheap, very cheap.
    I got my old Fiat with 400k mileage and it still burns 6,7 l/100 km.

    Tesla imho is not a gamechanger, battery technology for now is inefficient, and Tesla is not changing it. Many EU or Japan carmakers are producing hybrid or electric cars, which are more practical then Tesla. Tesla is just a peacock in electric car industry.

    Airbus started time ago a maintenance fatigue investigation program to enhance the fuselage A320 cycles far beyond 60.000, maybe even to 180.000, it’s all about proper monitor & maintenance procedures.

    • The original A320 life cycles was designed around expected usage over 25 years. Since then LCC have appeared who fly their planes harder , quicker turnarounds. Even major airlines now schedule their single aisle fleet to the max to give lots of frequency and don’t worry so much about unexpected delays that once could be covered by gaps in the schedule.

  22. GL 450 is 14-17 miles a gallon. My Chevy truck is 17-22 miles. Look at Boeing widebody. Every equivalent one weights less than Airbus and yet the freighters are part of the design from the get go.

    • There are no truly equality aircraft between Boeing and Airbus (A320 and 737-800/8 maybe the closest.

      767 is both smaller and lighter than an A330.

      I don’t think any of it is relevant, Boeing got the market and kept it.

      Like and MD-11, I don’t get while it is so popular a freighter (and Boeing had nothing to do with it) but it is and assume it hits a spot of need really close.

  23. Southwest Airlines N694 over 82000 cycles at retirement. Check the public records.

  24. @Daveo

    Don’t compare one data as weight or anything else without comparing a whole picture eg.

    “The 787-9 burns approximately 1.5% to 2% less fuel than the A350-900 with the same payload weight.

    This is because the 787-9 is a lighter frame with slightly less cabin area, less wetted area and less drag.

    However with the same payload weight in both aircraft the A350-900 would be less dense and more comfortable. So the A350 has an advantage here. Fuel burn per cabin area the difference is now very close.

    The big advantage to the A350-900 is it can also fly much further and with a larger payload than the 787-9. Once the 787-9 is at maximum fuel load for it to fly further you must start to reduce payload. 1000nm past this point the A350-900 can carry TWICE the payload weight of the 787-9.”

  25. Both Airbus and Boeing are constantly trying to spot the next Ryanair and lock them into their respective narrowbodies. Once committed it’s really difficult to change,but Boeing customers are going to have to completely change their systems when the NSA arrives anyway.,it wont much more difficult to change manufacturers.This seems to be why MCAS happened, there’s no way that this can be dragged into the FBW era.

  26. Maybe events like this could make AB speeding up a decision on the A220-500. A simple stretch, +20/5pax., 2500Nm range, same MTOW as the A223.

    This could be done relatively quickly, be ideal for European conditions and possibly have the best seat mile cost of the single aisles.

  27. @Leeham News

    I really would like to see your analysis of this surprising IAG “commitment” for 200 MAXs from other perspective.

    Longer I’m thinking, longer I’m asking myself: what’s really behind IAG 200 MAX sudden LoI ??? Why it’s probably NOT about buying 737 MAX? Why it is probably a Boeing-IAG simple big BLUFF?

    Pros:
    1) IAG has a320 quite new fleet – so they don’t need to replace them in a few years time, and not so many like 200 planes,

    2) in next few years market will not grow so suddenly for IAG to assume so many narrow bodies in their fleet,

    3) IAG has still quite lot of a320neo family planes in order – so they don’t have long term plan to switch so suddenly to Boeing narrow bodies,

    4) 737 is obsolete airframe, there will be no new version of 737 – so it’s a “dead end” from perspective of pilots training & MRO, so it’s uneconomical for AIG to switch narrow body fleet to 737s,

    5) IAG didn’t ask Airbus for counteroffer – there were nothing to ask about (if they didn’t going to buy narrow bodies).

    What is going on, so?

    So my suppositions are:
    1) Boeing is really needy for good MAX publicity – so they bought it from IAG in the form of Letter of Intent, something it’s not biding anyone but sell well to press – “200 grounded MAX just sold !!!! ”

    2) IAG will receive huge discounts from Boeing in their wide body fleet which they need to renew/expand

    3) IAG for selling his brand to Boeing in MAX case is booking slots for Boeing NMA & gaining huge discounts.

      • I don’t think so, but it’s a nice suposicion: new arline – is there’s really a growt/niche that justifies such move? ; acquisition of an airline – I would rather first acquire then buy new planes.

    • IAG existing narrow bodys arent that new

      British Airways A319s are average 17 yrs , the A320s are 11 years
      Iberia A319s are 13 yrs , A320s 10 yrs , A321 16 yrs
      Vueling A320 are average 7 years
      Aer Lingus A320 are 13 years

      Remember they have a large number of A320 neos coming into service now that were ordered back in 2013.

      Thats why I think this order is a smokescreen. Sure its some years away from deliveries, but Europe traffic growth isnt that great.

  28. Airbus needs a NSA, too. Their A320 is close to 40 years old. The B787, the A350 and the A220 show that a lot of new technology and advancements can make a much better plane today.

    • Someday A320 will be replaced, but I think there is a one or two generation of A320 ahead of us. And with every generation – new improvements, more improvements, step by step, who knows maybe next A320 will be of carbon fibre parcialy. But 737 in at the end of the road. Even Boeing admitted that they didn’t want to make MAX generation – Airbus competition “forced” them to rush.

      • This is Boeing’s nightmare. Airbus figures out how to incrementally improve the 32x and never needs to build and ramp a NSA. XLR today, new wing next, etc etc.

        If they can do this and keep output at current rates across the family that will be a hard thing for a Boeing NSA to compete with.

  29. Seattle time did another write up on MCAS

    Its like some monstrosity that took on a life of its own.

    The added authority was for slow speed flight.

    What seems to have occured is it kept chainging and the assesment behind it did not.

    As it started with two inputs, that set a standard but was no looked at for a single input and as was noted, no one logs the accidneal issues with AOA and puts into the assesment datas base, its all in the AOA faiures by itself.

    They point out that the suddent change of the AOA indicates a bird strike in the Ethiroion case.

    Clealry pressure on due to the finanail aspect (someting about South West would get a million dollar disocut per hull if sim training was needed).

    The same system is used on the 767, but uses two AOA.

    When I was younger we did the talking circle thing where you whispered the information into the ear of the person next to you, they in they passed it on.

    When it got back to you it had no connection with your initial statement.

    That seems to be MCAS in a nutshell. It never got cross checked back to the original form even as it kept getting changed and no one was in charge of heading it through and lost all accountability of what was going on and being done to and with it.

    Past processes that would have done things like check it in the air in failure modes have been shut down.

    While its redundant, its clear Boeing needs to revise its processes as much as the FAA does and go back to the designated engineer reporting to the FAA and not Boeing.

    You can sum it up they could not have done it worse if they set out to make it that way.

  30. Walsh clearly said he wants competition, there’s no tender but a undefined surprize LOI. Ignore this & you can see a great recovery.

    • Wants competition ?
      Yet he does a deal with Boeing that was without a competing deal from Airbus on the table. Thats now how competition works. IAG deal sounds more like a ‘rescue deal’ – save that sort of thing for the stray dogs,not a $100 bill company

  31. In the perfect Airline world Airbus or Boeing would make a great airplane just for IAG, Detla, South West and no one could compete against them them.

    Airbus and Boeing wants to sell ass many as they can as the profits go up. Ideals if the original owner goes bust the airplane simply disintegrates so they have no used competition.

    It all merges into a wheeling dealing cluster and right or wrong everyone is maneuvering in what they think is their best interest.

    Boeing clearly killed 346 people trying to force the commonality aspect which is a case of letting the wrong thing be the domination part of the decisions.

    Walsh thinks what he did works best of IAG. Certainly gives him leverage in future pricing.

  32. It looks like MAX airframe has significant problem during flight as with high speed as with low speed.

    From today’s Seattle Times:

    “Engineers observed a tendency for the plane’s nose to pitch upward during a specific extreme maneuver. After other efforts to fix the problem failed, the solution they arrived at was a piece of software — the Maneuvering Characteristics Augmentation System (MCAS)”

    “While passengers would likely never experience the maneuver on a normal commercial flight, it could occur if pilots for some reason needed to execute a steep banking turn.”

    “The lack of smooth feel was caused by the jet’s tendency to pitch up, influenced by shock waves that form over the wing at high speeds and the extra lift surface provided by the pods around the MAX’s engines, which are bigger and farther forward on the wing than on previous 737s.”

    “The flight-test pilots had found another problem: The same lack of smooth stick forces was also occurring in certain low-speed flight conditions.”

  33. Is there a possibility the Max is not fixable? With high risk of stall without MCAS, and inabilty to manual trim at high speed, how that this thing really be fixed?

    • Yes, small, but it is.

      Seems that without MCAS is hard to control in some conditions. In case of manual trim maybe some gear could be added to make easier manual trim, other question if Boeing would like to change it.

      The real problem is what else Boeing could hide. About MCAS reporters investigates and bringing new facts to the light, against Boeing who is not transparent. But other possible hidden flaws? One thing is sure for me – Boeing is not trustworthy. Biggest danger for Boeing as company is Boeing itself.

  34. Population of Dallas/Fort-wort area is more than Norway. BMW, Mercedes and Toyota invested in Tesla a while back for a reason.

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