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Why Is Boeing Losing So Many Orders?  
User currently offlineBlsbls99 From United States of America, joined Sep 2004, 345 posts, RR: 0
Posted (10 years 2 weeks 4 days 12 hours ago) and read 8105 times:

I'm sure there are many many many opinions on this, but I just don't' get why Boeing seems to be losing some fairly large aircraft orders, especially in these times when there are few orders anticipated.
Some have said it is reluctance on Boeing's part to bid on non-financially/future stable airlines/business plans. Others have claimed it is a high risk for financing on Boeing financial arm's part. I've heard the Airbus is less expensive part too. And I've also heard the premise of an airline not wanting to depend on just one manufacturer for their aircraft.
I am also of the belief that both the 737NG and A32X are all very capable and competitive aircraft.
So, what's up with Boeing? I know they need to make a profit on their efforts, but one would think that the fewer of their aircraft any airline has in their fleet, the more unlikely they are to look at Boeing in the future, either for add on orders for the same type of aircraft, or for future replacements or expansion (commonality, familiarity, etc.).



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38 replies: All unread, showing first 25:
 
User currently offlineGigneil From United States of America, joined Nov 2002, 16347 posts, RR: 85
Reply 1, posted (10 years 2 weeks 4 days 12 hours ago) and read 8029 times:

Boeing has more stringent margin requirements than Airbus is really what it boils down to.

Airbus is willing to get by with a 10 or 15% profit on a deal, while many Boeing orders can be as high as 30%.

Of course, the things you mentioned are true as well.

N


User currently offlineMatt D From United States of America, joined Nov 1999, 9502 posts, RR: 47
Reply 2, posted (10 years 2 weeks 4 days 12 hours ago) and read 7992 times:

It's probably a combination of the following factors:

1. As stated, pricing. It all comes down to $$$$.
2. Perhaps the Airbus better fits the needs of the airlines.
3. Political backlash against the US.
4. Actual and/or perceived superior quality.


User currently offlineBCAInfoSys From , joined Dec 1969, posts, RR:
Reply 3, posted (10 years 2 weeks 4 days 12 hours ago) and read 7964 times:

Gigneil -

I'm sorry... but your margin % numbers are GROSSLY inflated. As a Boeing employee who has SEEN the financial documents on our margins for commerical aircraft, I can tell you that we make a lot less then 30% on commercial a/c sales! I really wish we could get away with that, that would be nice.

I obviously can't tell you the real percentages, but it is in the single-digits or pretty close (it shifts, depending on market conditions). So I don't know your source, but it's way off on this one.

Steve


User currently offlineKim777fan From United States of America, joined Aug 2004, 510 posts, RR: 1
Reply 4, posted (10 years 2 weeks 4 days 11 hours ago) and read 7950 times:

What "lost" orders are you referring to?? I know much was made of VS going for more A340's instead of B777's but did that actually SURPRISE anyone???

User currently offlinePilottim747 From United States of America, joined Jul 2001, 1607 posts, RR: 5
Reply 5, posted (10 years 2 weeks 4 days 11 hours ago) and read 7908 times:

I think its that Airbus has lower costs and hence can offer planes at lower prices. Boeing used to outbid Airbus just to get the order, possibly even taking a loss just to keep customers away from Airbus. Boeing, however, couldn't keep using this practice because it was loosing money.

pilottim747



Aviation Photographers & Enthusiasts--Coordinate your life.
User currently offlineAither From South Korea, joined Oct 2004, 859 posts, RR: 0
Reply 6, posted (10 years 2 weeks 4 days 11 hours ago) and read 7884 times:

Boeing had some big orders too this year.

Keep in mind both manufacturers have similar products so it makes sense they have fairly 50% of the new orders.

Also Boeing exposure to the American and Japan market is higher. Airbus has a broader range of customers.



Never trust the obvious
User currently offlineBlsbls99 From United States of America, joined Sep 2004, 345 posts, RR: 0
Reply 7, posted (10 years 2 weeks 4 days 11 hours ago) and read 7884 times:

Well, a few "lost" orders come to mind which led me to bring up this topic. Spirit Airlines A32X order, Air Berlin A32X order, Virgin A340-600 order. And now there are rumors floating about Air Asia going to Airbus for their big narrow body order.


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User currently offlineFrugalqxnwa From United States of America, joined Apr 2004, 565 posts, RR: 1
Reply 8, posted (10 years 2 weeks 4 days 11 hours ago) and read 7871 times:

Boeing has 197 orders YTD, 113 of which are 737 orders, so the orders are comming in, if a bit slower these days. Boeing also has a new hot seller (7E7, 52 firm orders, at least 10 more pending), and is trying to rejuvinate its product line with the latest 777 derivatives and the 7E7. Once the US airline market improves, the orders will start comming in in greater numbers. Give it time. Boeing will probably surpass Airbus as the #1 commercial aircraft manufacturer soon, and A and B will probably trade this rank several times within the next 20-30 years.

User currently offlineBeaucaire From Syria, joined Sep 2003, 5252 posts, RR: 25
Reply 9, posted (10 years 2 weeks 4 days 11 hours ago) and read 7860 times:

..but then other roumors talk about a big 7E7 order from China...


Please respect animals - don't eat them...
User currently offlineLGB Photos From , joined Dec 1969, posts, RR:
Reply 10, posted (10 years 2 weeks 4 days 6 hours ago) and read 7647 times:

Well with Boring's sales attitude of "We are Boeing, airlines come to us" and Airbus's strategy of "Go out and get them", what do you expect. Just ask the Spirit management team of who had better sales pitches. Airbus wins hands down......

User currently offlineBCAInfoSys From , joined Dec 1969, posts, RR:
Reply 11, posted (10 years 2 weeks 4 days 6 hours ago) and read 7609 times:

Wow.. it's amazing the kind of EARTH-SHATTERING insight you arm-chair CEOs can come up with! I mean.. Boeing's never heard any of this bullshit before! Maybe or maybe you guys can come in and change things around for us! Oh pretty please.. please do!

/sarcasam

Boeing is full of bright, intelligent people. We will find a way to turn things around in the face of a difficult market. In the mean time.. all of you brilliant CEOs out there, keep up the great work!  Insane


User currently offlineGreaser From Bahamas, joined Jan 2004, 1101 posts, RR: 4
Reply 12, posted (10 years 2 weeks 4 days 6 hours ago) and read 7590 times:

I think Boeing also has a pretty good risk-management team. In order to prevent a rapid de-valuation of their aircraft, Boeing acceses the risk of selling 737s to startups, and this has been proven in their favour.

"Airbus has been very aggressive with their pricing in the low-cost segment ever since easyJet," said Randy Baseler, Boeing vice president of marketing.
Easyjet was reported to have a 50% discount on the deal.
On the Air Berlin issue:

"We're obviously disappointed," Baseler continued. "But [Airbus] seems to be wanting to buy market share at any cost."
It looks like Air Berlin drove the price very low and thus Airbus was the only one willing to negotiate.

But he [Baseler] questioned how many of Airbus' sales will actually happen because a number of Airbus' most recent customers, particularly in the U.S., have a very short track record.

The Air Berlin decision in my mind was foolish for obvious reasons. Perhaps now other LCCs can go in for the kill....






Now you're really flying
User currently offlineAither From South Korea, joined Oct 2004, 859 posts, RR: 0
Reply 13, posted (10 years 2 weeks 4 days 5 hours ago) and read 7560 times:

If BCAInfosys represents the average Boeing employee we may just had the answer to the question :L


Never trust the obvious
User currently offlineFlyabunch From United States of America, joined Nov 2004, 517 posts, RR: 4
Reply 14, posted (10 years 2 weeks 4 days 5 hours ago) and read 7541 times:

I think that BCAInfosys hit it right on the head. In his defense, he did mean the comment as sarcasm. The one thing this site has is a whole bunch of people who would like to be more involved in an industry that they love...or they wouldn't even be here.

I do not see any harm in a topic like this, after all, it has helped us go a whole week without a major NWA DC-9 thread!

Now for my two cents: Engineering driven companies like Boeing always seem slow to react to market changes. They are less prone to jump from one strategy to another when market conditions fluctuate quickly. By quickly I mean, look at all the changes that have happened in the civil aviation world since 9/11. Heck, it takes longer than that just to design a new aircraft type.

I think that Boeing will be fine. When you have a business that has two main players, it is healthy for business to fluctuate back and forth. It is healthy and always more obvious than in a business that has lots of players.

Mike


User currently offlineAither From South Korea, joined Oct 2004, 859 posts, RR: 0
Reply 15, posted (10 years 2 weeks 4 days 5 hours ago) and read 7517 times:

"I think that Boeing will be fine. "

I think they're not going that bad at the moment. They just don't trust the market as in the past.



Never trust the obvious
User currently offlineFd728 From Germany, joined Jan 2004, 136 posts, RR: 0
Reply 16, posted (10 years 2 weeks 4 days 4 hours ago) and read 7453 times:

I believe it is all very balanced in terms of orders coming in for the two major manufacturers. And airlines will always make sure that none of the two a/c makers will be too weak or too strong. Airlines need the competition to receive better products, better pricing, so they will always buy planes from both manufactures. And whenever they see that one of them is having difficulties, the airlines offer their advise.

FD728


User currently offline767-332ER From United States of America, joined Mar 2001, 2030 posts, RR: 10
Reply 17, posted (10 years 2 weeks 4 days 3 hours ago) and read 7396 times:


I think BCAinfosys is correct. You guys are pathetic and of course, you have all the answers to everything and yes...the guy is passionate about his company and of course he has every right to defend it, specially when it is being criticized by people who basically come up with numbers just to try to show some credibility in "facts." Get the numbers straight and if you guys don't have anything constructive to say...then don't say it!



Twinjets...if one fails, work the other one twice as hard!!!
User currently offlineGigneil From United States of America, joined Nov 2002, 16347 posts, RR: 85
Reply 18, posted (10 years 2 weeks 4 days 2 hours ago) and read 7337 times:

My numbers are probably skewed by figures from IDS. IDS obviously has a huge profit margin, and its sometimes hard to break out financial data between Boeing's individual operating entities.

My numbers are also a few years old, so obviously they're probably not as accurate as they could be.

N


User currently offlineAeronuts From United States of America, joined Sep 2004, 114 posts, RR: 0
Reply 19, posted (10 years 2 weeks 4 days 2 hours ago) and read 7297 times:

What a joke! BCAInfoSys is right, too many arm-chair CEO.

Airbus built the best planes on this planet
Airbus buy's into the market to build market share
Airbus drives Boeing out of the commercial market

See if those great deals still exist for start-up LCC's

Let be real, competition is good.


User currently offlineCloudy From , joined Dec 1969, posts, RR:
Reply 20, posted (10 years 2 weeks 4 days 1 hour ago) and read 7279 times:

Gigneil -

I'm sorry... but your margin % numbers are GROSSLY inflated. As a Boeing employee who has SEEN the financial documents on our margins for commerical aircraft, I can tell you that we make a lot less then 30% on commercial a/c sales! I really wish we could get away with that, that would be nice.

I obviously can't tell you the real percentages, but it is in the single-digits or pretty close (it shifts, depending on market conditions). So I don't know your source, but it's way off on this one.

Steve
-------

My guess is that Steve's numbers include an ammortization of R&D costs, as well as fixed costs. These are costs you pay regardless of how many sales you make - for example, the factory building. Gigneil's estimate would only include unit costs, that is, the extra costs of building each additional airframe. But I could be wrong.

In accouting, I believe, the profit derived when all costs are counted is called Net Income - this is what people usually mean when they refer to a company's earnings. Gross Margin only counts the variable costs of producing your product - costs that rise or fall depending on how much product is produced. The difference between these two figures can be crucial to understanding the health and behavior of companies in all industries. Airlines and aerospace companies in particular often show a huge difference between these two figures, due to high fixed costs.


User currently offlineBehramjee From Canada, joined Aug 2003, 4825 posts, RR: 44
Reply 21, posted (10 years 2 weeks 3 days 22 hours ago) and read 6843 times:

Steve....LGB Photos has a very valid point when he states that BOEING has an attitude with certain airlines ""We are Boeing, airlines come to us".

In October 2001, I had a very interesting conversation with a Kuwait Airways employee of high repute and standing within the airline who informed me why KU ordered 3-4 A 343s in the mid 90s and not B 777s as expected. His reason was that BOEING expected KU to order the B 777s from them automatically without even approaching AIRBUS or looking into their A 340 line and were not offering any attractive deals/discounts etc.

Hence with the uncorporative and snobbish attitude shown to KU by BOEING, the airline went ahead and bought A 343s as well. After a few months of this happening, BOEING went after their tails vigorously and managed to obtain a consolation order for 2 B 772IGWs. This story I got reconfirmed in the same way from another KU employee so I guess its true !!!

Politics / foriegn policies play a very big part when it comes to an order of high scale and repute for either manufacture as well.

Examples : PIAs B 777 order + A 310 order + TKs A 320-321 order + ACs massive Airbus order + Saudias all Boeing/MD order etc etc

Airbus has also been accused by many aviation analysis and insiders for under cutting their prices more further than BOEING can especially on the A 320 family line to win orders from the Low cost airlines.

Though it was very logical for IB to order A 346s instead of B 773ERs, Boeing did release a statement saying how cheap the A 346s were priced as this order was very keenly fought.

As for VSs A 346 order for 13 firm and 13 options, the official reason was that their pax survey revealed that 25% of their pax would go out of their way and fly a 4 engined plane than a two engined one.


User currently offlineAither From South Korea, joined Oct 2004, 859 posts, RR: 0
Reply 22, posted (10 years 2 weeks 3 days 20 hours ago) and read 6545 times:

Sorry for being pathetic, someone asked for our opinion i just gave it.

I'm wondering if i should buy some meat for lunch, i should ask a my butcher, he's the specialist, not me.



Never trust the obvious
User currently offlineGreaser From Bahamas, joined Jan 2004, 1101 posts, RR: 4
Reply 23, posted (10 years 2 weeks 3 days 19 hours ago) and read 6396 times:

Behramjee, your explaination applies to Phil Condit's Boeing, not Harry Stonecipher. Stonecipher is keen to garner orders and maintain good relationships between Airlines and Boeing. But, Boeing will not go under a 'reserve price' (as they call it in Auctions) and thus they will not always win the orders, not because Boeing is 'proud'.

Politics / foriegn policies do play a very big part, and i guess we will all have to live with it forever. But regarding the LCCs, Airbus takes alot of risk and shoots where it cans, sometimes resulting in big gains (B6), sometimes losses:

Independence Air ordered 15 A320-family jets. But a dire earnings announcement last week caused several airline analysts to say the carrier may have to seek bankruptcy protection.

Virgin America has ordered 18 jets this year but does not even have an operating licence yet.

it is a well-known fact that the more risk you are willing to take, the bigger your revenue will be but could also be the bigger your losses would be.

The argument that the A32X is superior or the 737NG is superior is no longer applicable as these 2 aircraft have neck and neck performances, at this point what matters is:
1. Fleet Commonality (Minor)
2.Pricing (Major)
3.Maintaince schemes
4.Training
5.Other Packages/ Financing
6.Political Influence (Not applicable to Private Airlines)


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Now you're really flying
User currently offlineCoewr From United States of America, joined Oct 2003, 273 posts, RR: 2
Reply 24, posted (10 years 2 weeks 3 days 16 hours ago) and read 5922 times:

As I am moving to Everett in a month and a half to work on the 7E7 program, I should get involved right?

Greaser mentioned Airbus taking a lot of risks with startups, and the fact that the 737 is quite similar to the A320.

Boeing insures stability within its business by not accepting every offer. It is important to build planes for customers who will be able to come up with the cash for them (no business can afford to give its product away for free!). Think about this...

If anyone here owned a shoe store, would you give away the shoes at a price that did not cover your bills just to make the sale or would you be sure to get at least enough profits to ensure you can pay the bills? If you sell too many shoes at a high discount you may go out of business because you can't pay rent, electricity, or even afford to order new product!

Also, since the aircraft are quite similar in size and performance most new airlines go with the best offer. B6 went with Airbus because Neeleman got a deal he could not pass up (and that was stated in his book "Flying High"). Airbus was willing to take a risk on a startup based on Neeleman's track record of successful airlines (Morris Air and West Jet come to mind), where Boeing was not. That is not to say Boeing didn't want to sell B6 their jets (of course they wanted to...more profit if they did!) I am sure the higher-ups at BCA just wanted reasonable assurances they were not going to be building aircraft for a company which was not going to be able to pay them off.

In business its all about Dollars and Cents. Boeing, much like any other business, is out to make a profit. Boeing can not give away the farm so to speak just to make another sale.

Here's a few pictures for everyone! (no significance just like posting them! And yes you get 737s cause they are my favorite airplane!)

--C


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25 Motorhussy : Rather than looking at it from the manufacturers perspective, try the airlines' POV. The right product at the right price - and it would appear that A
26 Checo77 : I think Boeing and Airbus are very similar in terms of quality offered but the main factor that affect airliners final decision is the price. For exam
27 Icarus75 : Easyjet was reported to have a 50% discount on the deal. Greaser : What's your source? Do you really think Airbus Industrie sells his planes at such a
28 JoFMO : I believe the EasyJet deal was something special. At that time the locost boom had just begun, but so far all loco-airlines had already an fleet of 73
29 Hoya : People here have said that Boeing is less willing to take risks and gambles, and rightfully so. During this downturn they have been hit the hardest. B
30 Ckfred : You have to remember one thing. European governments own significant portions of Airbus. Whereas, the only government ownership of Boeing might be thr
31 Hoya : Airbus is a private company, just like Boeing. EADS and BAE are the owners of Airbus. You can make the argument that Airbus and Boeing both get favora
32 Leskova : Ckfred, may I welcome you to the 21st century? Because that list that you just posted states "facts" about Airbus that are from "times gone by". Airbu
33 A380900 : Because they stopped designing airplanes 20 years ago.
34 Post contains images Jasepl : And, yes, however much some people try to claim the opposite, Airbus is actually in business to make money, and not only for us ruthless Europeans to
35 N1120a : >Because they stopped designing airplanes 20 years ago.
36 Warren747sp : Because it is against US law to give kickbacks and or other so-called commissions! W
37 Post contains images Maersk737 : It is against Danish law to drink and drive, but it still happens from time to time Cheers Peter
38 Leskova : It's good to know that Warren747SP is reliable: we can always count on him for a good laugh... N1120a, I agree with you that the "Airbus can do no wro
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