Boeing and Airbus vie for supremacy

21 November 2013

Rival aircraft manufacturers are battling to dominate the rapidly growing Middle East aviation market

Few corporate rivalries are as evident as the fierce competition between aircraft manufacturers Boeing of the US and Toulouse-based Airbus, and the Middle East market has become their latest battleground.

Talking to MEED on the sidelines of the Dubai Airshow held on 17-20 November, Fabrice Bregier, chief executive officer of Airbus, said: “[Boeing] are the followers and we are the leaders as far as product policy and innovation is concerned.” His bold comments are just further evidence of the intense competition between the two firms.

Both companies were vying for Middle East domination during the airshow, with the first day alone producing announcements of record-breaking multibillion-dollar aircraft deals with the leading Gulf airlines, Emirates, Qatar Airways and Etihad Airways.

More than $200bn of aircraft orders were placed in the first three days of the show, with both Airbus and Boeing battling to be the biggest supplier of planes to the region.

Regional growth

The level of growth expected in the Middle East’s aviation market should ensure there is enough room for both manufacturers to keep securing lucrative deals for many years to come. Yet, the huge market potential offered by the region is still unlikely to dampen this historic rivalry.

“More than $200bn of aircraft orders were placed in the first three days of the Dubai Airshow”

Aviation traffic in the Middle East is growing faster than anywhere else in the world, at a rate of 10.4 per cent year-on-year, according to passenger data for September from the International Air Transport Association. The growth is predominantly driven by the large Gulf airlines. These government-backed, cash-rich airlines are rapidly expanding their fleets and networks to fulfil their ambitions of positioning the GCC as a major transit and tourism hub.

In line with the growth of the airlines, the region’s airports are also being expanded. The Dubai Airshow was held for the first time at the emirate’s new Al-Maktoum International airport, which opened for passenger traffic at the end of October. Against this backdrop, confidence in the sustained growth of the region is strong.

“I think there are fewer question marks around the potential success [of the region] than there were six to eight years ago,” says Bregier. “The airlines are very well managed. They have a young fleet and huge infrastructure.”

According to Airbus forecasts, new deliveries for passenger aircraft in the Middle East will reach at least 2,000 planes by 2032, with a value of $472bn, representing 11 per cent of the global forecast.

The type of aircraft in demand in the Middle East also differs from other markets. Gulf airlines favour large twin-aisle plane orders rather than single-aisle aircraft.

Deliveries of single-aisle planes to the region are projected to reach 779 by 2032, while there will be a total of 906 for twin-aisle aircraft and 390 orders for very large aircraft, such as the A380.

Boeing’s forecast is even more bullish. Jeff Johnson, the company’s president for the Middle East, says deliveries of aircraft to the region will reach 2,610 over the next 20 years, valued at $550bn. “If you were to ask me three years ago, I would have thought current growth might cap out within three to five years, but now we really see continued strong growth in aviation,” he says.

Boeing orders

Boeing signed more than $100bn-worth of firm orders and commitments (excluding options and purchase rights) at the Dubai Airshow.

The manufacturer’s success suggests its reputation is recovering from the controversy surrounding its 787 Dreamliners. Earlier in the year, many global airlines, including Qatar Airways, were forced to ground their Dreamliner fleets due to safety concerns.

“We are getting the 787 problems behind us,” Johnson said ahead of the airshow. “We did not have any orders cancelled.”

Boeing’s airshow announcements revolved around the launch of its 777X aircraft, the newest member of its twin-aisle family, which is being marketed as the largest and most fuel-efficient twin-engine commercial jet. The 777X family includes two models: the 777-8X, with 350 seats, and the 777-9X, with approximately 400 seats.

Both Etihad Airways and Emirates announced orders for this new model. In a deal potentially worth up to $25.2bn, the Abu Dhabi carrier ordered 56 new Boeing wide-bodied aircraft with options and purchase rights for a further 26. This order also includes 25 777Xs, one 777 Freighter, and 30 Boeing 787-10 Dreamliners. Emirates placed an order worth up to $55.6bn with Boeing for 150 777Xs, with an additional 50 purchase rights.

Qatar Airways is also set to expand its fleet of Boeing aircraft, having signed a letter of intent to order 50 of the Boeing 777-9X variants, in a deal that could be worth up to $19bn.

Boeing secured deals with other regional airlines as well, including a $11.4bn deal with low-cost carrier FlyDubai, signalling that aviation growth will also be generated outside the big three.

Airbus signed $44bn of contracts during the Dubai Airshow, with its $20bn deal with Emirates for 50 Airbus A380 aircraft taking centre stage.

The deal cements Emirates’ role in driving sales of the A380 model and Bregier says the projected orders and deliveries for the model continue to be strong.

“The A380 is fantastic when you want to get market share and increase revenues. This is why we are so successful with Emirates and we have built a big part of our business model around the deployment of the A380s,” he says.

Airbus also used the Dubai Airshow to highlight what it sees as superior levels of comfort within its planes compared with newer Boeing models. Its campaign centred around the size of its economy seats in all aircraft models, which span 18 inches, a more generous allowance than featured on some Boeing aircraft.

Bregier argues that Boeing has compromised on quality on its newer planes by reducing seat width to fit more passengers into a plane and maximise revenues per seat.

“You say does it make a big difference? It makes a big difference when you fly 10-14 hours. The message is we should all agree on a minimum standard of quality to transport passengers, including in economy class. So yes, competitivity matters, number of seats matters, but comfort to passengers also matters,” says Bregier.

“We cannot have two classes of passengers where business and first-class [travellers] have even better comfort every day and then economy class has even lower comfort.”

Other key Airbus deals announced at the airshow included a $26.9bn order by Etihad Airways for 87 Airbus aircraft, plus purchase rights for a further 30.

The firm order comprises a total of 50 Airbus A350 XWBs. The A350 XWB is a new Airbus mid-size model available in three versions and set to enter service in 2014.

Qatar Airways also placed a firm order for five new Airbus A330-200 Freighters and an option for an additional eight aircraft, in a deal worth up to $2.8bn.

Skills shortage

As the aviation market in the Middle East grows from strength to strength, the lack of trained pilots and engineers could throw the industry off course.

“One of the key issues here is not the building of the planes, but who will fly these airplanes,” Philippe Forestier, executive vice-president, global affairs and communities at France’s Dassault Aviation, said on the sidelines of the airshow.

The French technology firm works closely with the large aircraft manufacturers providing 3D simulation software that helps with the design of new aircraft.

“Will the young generations of the world be willing to embrace technology?,” he asks, saying his company works closely with universities to promote careers in science and technology.

According to Boeing’s 20-year market forecast, there is a need for 40,000 additional trained pilots and 53,100 additional trained technicians within the Middle East alone.

“We have been very active in training and education,” says Johnson at Boeing, explaining how the company is looking at ways to provide more innovative training methods to attract people to the industry.

Similarly, Airbus is looking at ways to enthuse students about the aerospace industry, running competitions such as the Fly Your Ideas challenge, which asks students to come up with ideas to develop more sustainable growth in the aviation industry. 

The battle for the largest market share of the Middle East aviation market will not necessarily be won by the company with the biggest order book. Rather, the manufacturer that helps equip future generations with the necessary expertise to sustain the growth of the industry will be the ultimate winner.

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