menu

Monocolumn: Airbus and Boeing Battle For American Airline’s Next Generation Of Fuel-Efficient Airplanes

Monocolumn: Airbus and Boeing Battle For American Airline’s Next Generation Of Fuel-Efficient Airplanes
Advertising

In today's column from luxury magazine, Monocle, American Airlines scores a superior deal on 460 fuel-efficient airplanes, by offering both Boeing and Airbus the job.

Caroline Ku
  • 27 july 2011

Monocolumn is Monocle’s daily bulletin of news and opinion. Catch up with previous editions here.

Last week, American Airlines placed the largest single aircraft order in history. To replace its ageing fleet, the airline signed up for 460 narrow-body aircraft to be delivered over the next 11 years. What made the order even more significant was that American ordered 260 of these aeroplanes from European manufacturer Airbus, ending American’s two-decade long loyalty to Boeing.

American appears to have handled the negotiations craftily, pitting the two manufacturers against each other — Airbus desperate to break in, Boeing desperate to keep them — then sealing a great deal with both. The manufacturers combined to commit $13bn (€9bn) to financing the first 230 aircraft in the order, at no doubt much better rates than a bank would have given the airline.

Although Boeing did receive a proportion of the order, this deal represents a huge coup for Airbus. A major factor in its win was the fact that it could offer its upcoming A320neo, a re-engined version of the A320 plane, that promises up to 12 per cent improvements in fuel burn. Until now, Boeing hadn’t decided whether to re-engine its own offering, the 737, or to build an entirely new aeroplane. But Airbus has seen over 1,000 orders for the A320neo since its launch earlier this year and American’s insistence on needing more fuel-efficient planes was the final straw. Boeing was effectively forced into committing to a re-engined 737 that could enter service around 2016. Essentially, Boeing is now playing catch-up.

American lost $286m (€197m) in the second quarter of this year. It raises the question: why would an airline that is losing money place such a large order for aircraft? From a long-term planning perspective, this move might actually be a sensible one. American has hundreds of older, inefficient planes in its fleet constantly dragging on its bottom line, and this order will give them the youngest and most fuel-efficient fleet in the US within five years.

Since the US airline market is characterised by older fleets, weak demand and razor thin profit margins, any customer that suddenly enjoys a 10 to 12 per cent discount on a very expensive fuel price has a large advantage,” says Richard Aboulafia, vice president of analysis at Teal Group. “Other US carriers will likely follow American, setting off a wave of new orders.

That means both manufacturers may now need to look at ramping up production rates just to keep up. If even a couple of the other US network carriers decide to follow suit in order to stay competitive, the pressure gets even stronger on assembly lines and means the Boeing versus Airbus battle will only get more interesting.

Gabriel Leigh is a Monocle staff writer based in London.

To continue reading, click here.

Trending

Modular System Lets Musicians Create Their Own MIDI Controllers

Arts & Culture
Travel Today

Mercedes Reveals Dazzle-Free LED Headlights

Digital Light offers great precision with a resolution of over two million pixels

Product Launch Today

Nissan Is Testing A Digital Car Sharing Program In Europe

Nissan plans to launch their new service in Paris sometime this year to trial the profile-matching service

Trending

Get PSFK's Related Report: Future of Automotive

See All
Social Media Today

Your Favorite Tweets Are Now Wearable

This temporary tattoo allows fans to wear their most favorite moments from the social platform

Health Today

This Mirror Tracks Your Dark Circles And Fine Lines

HiMirror is a device snaps a photo of your face every day to provide feedback on how to care for your skin

Sustainability Today

Biodegradable Furniture Made From Pine Needles Could Be The Next Phase Of Sustainable Living

Premiering at Dutch Design Week 2016, the collection fully utilizes an often wasted material

Retail Today

Creative Director: Navigating The New World Of Founder-Brands

Richard Smith, Creative Director at Sullivan, explains how visionaries like Elon Musk and Mark Zuckerberg approach their branding and why it’s important to apply brand thinking to founders’ products

Syndicated Today

Madrid's 'Robin Hood' Cafe Charge The Rich To Feed The Poor

The charity restaurant makes money from customers by day to offer homeless people meals at night

PSFK LABS REPORT

Future Of Retail 2017
Transformation Strategies For Customer-First Business
NEW

PSFK Op-Ed Yesterday

VP: Why Messaging Apps Are Issuing In A New Era Of Commerce

Matt Johnson discusses how mobile messaging commerce is creating a different modality for interaction between retailers and consumers

PSFK Labs december 1, 2016

Retail Spotlight: Home Depot Reimagines How Employees Conduct Tasks

The home improvement retailer puts the customer first by initiating local fulfillment centers and simplifying freight-to-shelf inventory management

USA Today

Amazon Launches Cashier-Free Store For Ultimate Efficiency

The retailer is looking to make shopping even faster by letting customers instantly pay as they walk out the door

Augmented & Virtual Reality Today

Marble-Like Mini-Worlds Invade Miami Art Week And Your Mobile Screen

The gallery world's sphere of influence seems to be expanding into the realm of Pokémon Go—why that's a good thing

Technology Today

A 'USB Stick' That Can Detect HIV Levels

The simple device developed at Imperial College London measures viral load in less than 30 minutes

Customer Retention Today

Crafting The Personalized Retail Experience

Marriott International's Christopher Baer shares insights into how the hospitality company is strategizing customer service

Retail Today

Zagat's Cafe Offers Tiny Replicas Of Classic NYC Dishes

The restaurant rating service created buzz for its new guide and app by opening a tiny food cafe

PSFK EVENT

FUTURE OF RETAIL 2017:
Conference Built Around Report Launch
BUY TICKETS

Children Today

Experience The White House In Augmented Reality Using A $1 Bill

1600 Pennsylvania Ave. is an AR app designed to help people learn about the history and significance of the United State's capital building

Travel Today

Portable Computer Monitor Opens Up Like An Umbrella For Travelers

This mobile screen and projector means work can go anywhere and still feel like working from home

Food Today

Starbucks Is Selling An Automated Temperature-Setting Mug

For those looking to keep their coffee hot on their winter commutes, the coffee chain has created a device that keeps beverages exactly at their desire temperature

No search results found.