Airbus, Boeing fight it out over middle ground

For fierce rivals Airbus and Boeing, the medium-haul aircraft market is crucial and their A320 and B737 workhorses will be in the spotlight at the Paris International Airshow this week. For Boeing, a key and costly decision looms what to do with the B737, the world's largest selling aircraft should it be upgraded again or replaced by a completely new model to take on the A320neo, which promises operators lower costs at a time of soaring fuel bills. Airbus launched the A320 'New Engine Option' in December, with the plane due in service from 2015 on the back of a flood of orders which it has added to in the run up to the show at Le Bourget in the northern Paris suburbs. "Up to now, we have more than 300 orders or statements of intent to order and we think we can get that up to more than 500 after the airshow," Airbus chief operating officer Fabrice Bregier said recently. The single-aisle, twin-engine A320neo offers 15 percent lower fuel costs, a major attraction for clients as oil prices rise, and Bregier happily noted that Boeing was being forced to respond. "You just have to look at the commercial cost involved to realise that Boeing has to make up the lost ground," he said. Analysts agree that Airbus appears to have stolen a march on Boeing, rubbing the point home in the last few days with orders for more than 100 A320neos worth $10 billion from low-cost carriers GoAir of India and the Philippines' Cebu Airlines. "With persistent high fuel prices, the A320neo series will continue to gain traction. It’s also likely that one or more key (B737) clients will defect," said Richard Aboulafia of the Teal Group, an industry consultancy. The stakes are enormous. Boeing now expects 33,500 planes worth $4.0 trillion (2.8 trillion euros) to be needed over the next 20 years, with single-aisle aircraft like the B737 or A320 accounting for fully 70 percent by number and 48 percent by value. It is hardly surprising then that Boeing is cagey over what it will do with the B737, a massive success with some 8,900 sold since its launch in 1967. "We're going to take our time, especially in evaluating a new aircraft," Randy Tinseth, Boeing marketing director, said on Thursday, conceding that he expected "a lot of announcement(s) by Airbus" at the airshow. "Our preference would be a new airplane but we have a lot of work to do," Tinseth said. In the 1990s, the B737 was modernised on the back of new technology and this time around Boeing could follow Airbus and equip it with new engines, a cheaper and more certain route than developing a completely new aircraft. Both Airbus and Boeing have suffered enough major technical and cost problems in their recent flagship projects the A380 superjumbo and the B787 Dreamliner to be wary of taking on another which requires massive investment and years to come to fruition. Aboulafia of the Teal Group said Boeing also cannot afford to opt for a new jet now as existing customers will not wait around for it to come into service, around 2020, while the current B737 series is too expensive to operate, even if discounted. "Boeing will likely need to launch some kind of new or re-engined single-aisle product in the next 24 months," he said. "When it does, it will likely find that the additional cost premium of an all-new jet ... is not justified by the technology available ... A re-engined 737, despite its drawbacks, is therefore the most likely solution."