The news, which came out of Seattle yesterday, was a clear disappointment for all those who had expected the launch of a 737 successor. It’s not the big step towards technology leadership in this market segment many want to make. But together with all the 737 performance tweaks already under way, it keeps the race open. And more important - it is enough to prevent Airbus from turning the NEO into a real cash machine. A re-engined 737 might be just an interim solution, from a strategic point of view it is money well spent.
When announcing Q1 earnings in April Hans-Peter Ring, CFO of EADS, said, that he sees the thin profit margin of Airbus gradually improving over the next years. One reason he mentioned was, that he expects fewer low margin aircraft rolling of the A320 production line in the future. Never before I have heard EADS or Airbus publicly admitting, that outselling Boeing's 737 over the last years required the willingness to give the higher discount.
If the A320 family were the indisputable superior aircraft John Leahy always claims, it would be the other way round. Boeing would have to trade profit for market share. But no indications for that! Earnings reports from Seattle have been showing a constantly high operational performance during the last years – besides self-inflicted damage like strike and one-time charges due to the troubled 787 program.
Another sign that the real life might contradict the polished marketing story is Air Berlin. Airbus scored a big win, when this once die-hard Boeing 737 customer ordered 60 A320 in 2004. However, it went largely unnoticed, that CEO Achim Hunold has ordered 68 737-800s since - but no further A320s.
No doubt, the LEAP-X engines, the various performance improvements and its outstanding new Sky Interior cabin make the 737 a tough competitor to the A320NEO – if not the superior aircraft. Therefor it is not unfounded speculation that Airbus got the higher portion of the American Airlines deal because John Leahy was willing to throw in more deal sweeteners than his Boeing counterpart. Leahy never would accept getting the smaler piece of such a deal regardless what the price is.
But “historic orders” always come with a great deal of pain for the finance guys. Airbus had already several mega deal this year. So the stunning sales success of the A320neo could mean that Hans-Peter Ring has to abandon any hope that Airbus on day could reach Boeing-like profitability.
