What Dubai deals say about the Airbus-Boeing duopoly

In the Middle East, Airbus and Boeing are trying to wow aviation chiefs and ink billion-dollar deals. Airbus has profited from its rival Boeing’s turbulent year, but things aren’t all one-sided.

While consumers have plenty of choice when it comes to choosing an airline, airlines have a much more limited choice when it comes to buying planes. For the last 25 years, Airbus and Boeing have effectively ruled the global aerospace industry as a duopoly.

The biennial Dubai air show provides the planebuilding behemoths with an extravagant Middle Eastern venue to display their many and costly wares. But this year’s event is the first to take place since Boeing’s world changed dramatically following two horrendous crashes involving its 737 MAX model which caused 346 deaths and led to the global grounding of the plane.

The shadow of the crashes of Lion Air Flight 610 (in October 2018) and Ethiopian Airlines Flight 302 (March 2019) continues to stalk Boeing, and its presence can be felt in Dubai as well.

On Monday, it was Boeing’s European rival that was grabbing the headlines for its in-tray of lucrative orders. It announced deals worth $30 billion (€27 billion), with Emirates and local low-cost airline Air Arabia ordering dozens of A350s and A320s.

The Seattle-based Boeing had a much slower start by contrast. It sold about $1.2 billion worth of its troubled 737 MAX to Turkish carrier SunExpress on Monday, although things did pick up on Tuesday as Kazakhstan flag carrier Air Astana said it had signed a letter of intent to order 30 Boeing 737 MAX 8 jets for its Fly Arystana subsidiary.

On top of that, Reuters reports that an unnamed airline has also signed a firm order for 20 Boeing jets, taking the value of orders for the US company past the $6 billion mark.

Turbulence

Nonetheless, Boeing’s problems are clear. Although it’s in some respects a symbolic title, the news that the Airbus A320 is now the world’s most popular aircraft, moving ahead of the Boeing 737, adds further to the woes of Boeing CEO Dennis Muilenburg.

In October, the total amount of orders for the A320 (15,157) overtook that of the 737 (15,136) for the first time. The disparity between the amount of orders has been closing all year as the controversy and uncertainty over the 737 MAX took its toll on Boeing’s order book.

According to Boeing’s own third-quarter earnings report for 2019, the continued grounding of the MAX 737 cost the company nearly $1 billion in that period alone, bringing the total loss since the second crash in March to $9.2 billion.

Boeing has already committed to paying out $5 billion after tax in compensation to airlines for the problems caused by the grounding of the MAX while it is also facing legal actions. Last month, the Southwest Airlines Pilots Association announced it would sue Boeing for $100 million in lost income, while Boeing has already begun settling legal cases taken by victims’ families.

Not Boeing to the pressure

Added to the already tangible financial losses is the ongoing uncertainty over exactly when the 737 MAX will be allowed to fly again. Grounded since March as Boeing rushed to make software fixes on an automated flight control system implicated in the two crashes, the return of the aircraft is now contingent on it passing the tests of the Federal Aviation Administration (FAA), the US regulator.

With the ever-lengthening wait adding to the losses incurred by Boeing and airlines with large fleets of 737 MAXs, Boeing has tried to put pressure on the FAA to speed up the process and allow Boeing to deliver upgraded models to airlines.

However, just last week, FAA boss Stephen Dickson told staff to resist such pressure. “I know there’s a lot of pressure to return this aircraft to service quickly,” Dickson told staff in a video briefing. “But I want you to know that I want you to take the time you need and focus solely on safety. I’ve got your back.”

Boeing has long expected the plane to be returned to service at some stage during the final three months of 2019. Several US airlines are penciling in January 2020 as the return month.

The decision ultimately lies with the FAA though, and they have not issued any specific details or timetable for when the model may be allowed to fly again.

“It will return to service only when we deem it safe to do so,” were Dickson’s clear words last week.

Counting the cost?

Although the idea has been floated that the 737 MAX may never return to service, that seems highly unlikely and a 2020 return seems a safe bet at this stage. The orders for the 737 MAX placed in Dubai, albeit small compared with those Airbus has been receiving, seem to confirm this.

It’s worth pointing out as well that while Boeing has been buffeted both in a financial and reputational way as a result of the crashes, it is not going to go out of business any time soon. It still made a not-too-shabby profit of $1.2 billion in Q3. While that was a slide of 50% compared with 2018, its revenue fall was just 20% in that time.

A successful return of the MAX is likely to push those numbers up further. Boeing used the Paris Air Show in June as an opportunity to try and rebuild confidence in the MAX, displaying a “letter of intent” between Boeing and the major airline conglomerate IAG for 200 jets. Similar shows of faith would be likely to follow a return to the air.

It hasn’t all been blue skies for Airbus either. In its Q3 earnings report, the Toulouse-based outfit was forced to cut its delivery goal for commercial jets due to production delays at its plant in Hamburg.

The Airbus-Boeing dynamic will be a source of intrigue to aviation watchers over the coming months. But all this talk of profits and market fluctuations must seem obscene to those still mourning the 346 people whose lives were cut short in horrific circumstances by crashes caused by a plane with design flaws.

Πηγή: kathimerini.gr