It is a proven fact that Airbus can simply produce planes cheaper than Boeing . (And before somebody asks me to prove this statement... look at the various topics on B7E7, A380 and A. vs. B. lately; they show several links to and quotes from reputated articles pointing this out!)
However, if you look at the list price of Airbus, and you compare it to the list price of a similar Boeing plane, you do not see much of a difference.
In short: Airbus planes look equally expensive than Boeing planes.
Hasn't anybody ever come up with the idea that Airbus is deliberately OVERpricing its product line?
Why do so?
As the margin between the list price and the cost price of an Airbus is bigger then for a Boeing, Airbus can always undercut Boeing's final offer and still pull a profit from it... and if on some occasions Airbus doesn't have to go to the full extend, Airbus have concluded a very juicy deal, notwithstanding the huge price reduction...
Look at it for a second:
Suppose an airline is looking for new planes and asks both Airbus and Boeing for their best offer. Both take their list price (very similar) and give let's say 20% reduction. Then the airline goes to Airbus and asks for a better deal, because the offers are really such a close call and the cheapest will win. Airbus changes its offer to 25% reduction! The airline then calls Boeing and says Airbus has changed their offer and is giving 25% now! Boeing thinks Airbus went bottom price to get this 'to close to call for the moment' deal and matches it by creative methods.... and gives even a bit more.... 26% reduction! Then the airline goes back to Airbus with this last offer from Boeing and hears from Airbus they can offer them not 27, but even 28% off the list price if they decide now! The airline quickly calls Seattle, but when Boeing hears about this, they quit saying Airbus can not possibly get any profit out of this! Sounds familiar?
But what if Airbus started off with a too high list price (which still only matches the real list price of Boeing and thus goes relatively unnoted)? Then they can go further then Boeing in their offers for reduction... Airbus might very well go to 40% before selling its planes at production cost! And every percentage above this is pure profit!
Why would Airbrus play this trick?
Why doesn't Airbus start off with the real and thus lower list price? It would most possibly have the same sales results for them as now, and would make negociations less long and exhausting....
Yes, but in the end there is much more to win from it!
As long as Boeing is giving Airbus a run for their money in negociations with airlines, Airbus has (and will) cut its list prices automatically by 25 to 30% sometimes even 35 or more percent (remember there is plenty of margin) to obtain normal free market profits, yet the day Boeing decides they can't possibly win a contract and thus won't bother to make a serious offer (remember Boeing announced this strategy after the Iberia deal), Airbus will only have to offer a symbolic reduction to the airline and can milk the cow completely!
In fact, once they have reached this stage, they can increase their revenues thanks to their monopoly, without having to visibly raise the price of their products.
yes, Airbus is truly setting the standards in every single segment...
[Edited 2003-06-19 17:16:13]