I went back and listened to the Boeing Investor Day recordings last night and an item that I missed on the first path jumped out at me at second glance. Today's mixed Delta Air Lines A320/737NG narrowbody fleet is a creation of the Delta/Northwest merger, but Boeing Commercial Airplanes CEO Albaugh hints that the carrier may be a point of traction for the A320neo.
A lot of people ask the question, well, is the re-engined A320 getting traction with your customers? And if you look at the airplane or the airline market out there, most people either have Boeing products or Airbus products. The people that have mixed fleets are the ones who have come together through acquisitions and mergers or the Chinese, where they bought both types of airplanes. And there's a very high cost of switching. And there's also a cost for complexity and I really don't think that we're going to see too many customers really think about switching to a different type of airplane any time soon.
A May 9 note from Leeham Co, suggests that not only is this is prime Airbus territory, but that Boeing may not even get into competition:
Airbus' John Leahy has publicly stated that he believes if Boeing "loses" a solid 737 customer, specifically naming Delta Air Lines, Boeing would be "forced" to re-engine. Buckingham reports in the May 3 BCC research note that Boeing may no-bid Delta, largely due to the inability to offer production slots (Boeing's 737 line is sold out to 2016/17); there is, therefore, nothing for Boeing to "lose."Yet, Albaugh's comment underscores a possible emerging strategic advantage with the A320neo even if Boeing chooses not to compete for the Delta order. Airbus may be able to gain traction in mixed fleets, but can Boeing? The A320neo's 95% part commonality does not unlock the current Airbus customer base allowing it to look elsewhere, though Airbus has positioned itself for modest marketshare growth to re-fleet one of the world's largest carriers and the Chinese market.
The Next Generation 737 has been an extraordinary sales success for Boeing, though the company's incremental update to the narrowbody created an aircraft that has a 75% non-commonality with the 737 Classics. This level of change opened the door for British Airways, easyJet and US Airways to look to Airbus for its narrowbody fleets.
In a war of attrition, victories may be measured in inches.
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