Airbus-Boeing global price struggle extends into Turkey
FARNBOROUGH, United Kingdom - Reuters
Pegasus, the privately owned Turkish airliner, may buy dozens of new jets. Hürriyet photo
Airbus and Boeing head into the Farnborough Airshow between June 9 and 15 locked in their fiercest market share battle in a decade, slashing prices to win key orders for their latest narrow body jets and storing up potential trouble for future profit margins.
The latest firefight involves a back-and-forth battle for between 40 and 50 jets worth $4-5 billion sought by Istanbul-based carrier Pegasus Airlines, with Boeing resisting Airbus efforts to poach one of its customers in a duel known as a “flip fight,” according to several sources familiar with the matter.
The airline is one of many looking to jump on a 15 percent improvement in fuel burn and therefore a significant reduction in costs offered by the latest revamped models of jets offered by Europe’s Airbus and its U.S. rival Boeing.
The heated up competition between world number one Airbus and Boeing extends from Australia to Indonesia, the United States to Norway, along with Turkey.
While Airbus unveiled an assembly plant in Boeing’s backyard at the end of last month, the battle behind the scenes - described as “hand-to-hand fighting” by one participant - has implications for the business case of the A320 jets to be built on U.S. soil, as well as the profitability of Boeing’s rival 737.
Could shape leadership
Its outcome could shape the leadership of new bosses at both jet makers: Frenchman Fabrice Bregier of Airbus and Boeing’s Ray Conner, cautious and publicity-shy insiders who reach the pageant facing pressure to draw a line under a period of risk and give investors a sober ride with predictable margins.
As with a series of other duels in the last year, according to multiple sources who spoke on condition of anonymity, Boeing has been fighting back after seeing one of its clients targeted by its competitor.
Airbus maintains that this is normal competition.
Contacted by Reuters, Ali Sabancı, Pegasus chief executive, said: “we are negotiating, no decision has been taken.”
Airbus and Boeing compete for the lion’s share of a jet market estimated at $100 billion a year.
Although economies are stuttering, aircraft demand has remained relatively strong as airlines modernize fleets to survive high fuel costs and the balance of growth shifts towards Asia, prompting Boeing to raise forecasts last week. Best-selling single-aisle or narrow body models - the 150-seat medium-haul A320 and Boeing 737 which serve airlines worldwide - sell for some $80-90 million each at catalogue prices but like most models they are sold at undisclosed discounts.