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anfromme
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Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 9:09 am

Just came across this article on Leeham:
https://leehamnews.com/2016/02/22/in-strategy-shift-boeing-backs-7-max-sources/

They report that according to their sources, Boeing has changed its strategy on the 737-7. They were previously trying to persuade customers to upgauge to the 737-8 but are now committed to buiding the smallest 737 MAX variant, which currently only has 55 orders against it.
Major factors in play for the change in strategy:
1) The CSeries. Boeing cut UA a very cheap deal (low to mid-$20m, i.e. ~70% off list price) for their recent 737-700 order in order to prevent Bombardier from getting UA's business. By the same logic, Boeing needs the 737-7 going forward if they don't want to leave the size category to Bombardier. The article also mentions that Boeing is hopeful of tying a 777-300ER follow-on order (at ~$120m apiece) to UA's 737-700 deal.
2) Southwest. They need the -7 for short runway airports and don't want to upgauge.
3) Taking the new competition seriously, in line with something Airbus said in 2010 - that they would compete aggressively with BBD in order not to make the same mistake Boeing made with Airbus.

To me, that poses a few interesting questions.
1) Is this the right strategy?
Fair enough, the MAX is selling very well - even if the 737-7 on its own is never going to cover its development costs (which seems likely), the programme overall will be able to recover the expenses quite easily.
If building the 737-7 and pricing it very aggressively is the only thing required to keep BBD from getting a foothold in the market it seems to come at a relatively small cost.
And yet - it does look like the CSeries is the better plane for this niche. It doesn't carry any of the additional structural weight the 737-7 and A319NEO carry. Generally, it's the newer platform and optimised around its size category, while the competition from Boeing and Airbus is just the latest
So - how successful is the strategy of pushing ahead with the 737-7 going to be?
We know of examples at both Airbus and Boeing where they were trying to chiefly compete with price against a superior product made by somebody else. Cases in point: Boeing's original stated intention to wait out the NEO and just compete on price. Or Airbus' stated intention of lowering A340 prices to take its additional fuel consumption vs the 777 into account. We know what happened there in both cases...
I'm not sure, actually, how many instances there are where this particular strategy ever really worked in the mid to long term.
Another case in point: BBD has had lots of problems selling the CSeries. Most of them not actually to do with the plane itself but with Airbus' and Boeing's aggressive package pricing, BBD management screw-ups, successful FUD campaigns, etc. Which means the CSeries today has has fewer orders than many had hoped. And yet, with that background, Airbus and Boeing between them only sold just over 100 A319NEO/737-7. About 1/6th of BBD's current orders/commitments for the CSeries.
Once the CSeries enters service and becomes a known entity in the market in terms of performance, reliability, etc. (i.e. in the next year or two), why would that general trend change?

2) What about the A319NEO?
The A319NEO has just as few orders as the 737-7. Publicly, Airbus has always said they're taking the CSeries seriously and competing very aggressively with it. To my knowledge, they didn't shift away from this strategy - and yet, sales of the A319NEO are what they are.
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Matt6461
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 9:12 am

IMO this isn't about the -7 being a smart decision on its own. It's about Boeing (and Airbus) using their balance sheets and market power to price a competitor out of their cozy duopoly. Too bad there's no international anti-trust enforcer.
 
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anfromme
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 9:20 am

Quoting Matt6461 (Reply 1):
IMO this isn't about the -7 being a smart decision on its own. It's about Boeing (and Airbus) using their balance sheets and market power to price a competitor out of their cozy duopoly.

Completely agree.
Question is - how likely is this to work in the mid to long term?
Arguably, both Airbus and Boeing were already following that approach when they launched the 737-7 and A319NEO, respectively. Success so far has been limited, though. And as much as the CS has been struggling, it has about six times as many orders/commitments as the A319NEO and 737-7 combined.

Quoting Matt6461 (Reply 1):
Too bad there's no international anti-trust enforcer.

Kind of agree as well - it'd be a pity (mildly put) if a superior product was killed by inferior but cheap products. That usually doesn't work out well for anybody, especially with products that have a lifecycle of more than a few months.
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Matt6461
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 9:26 am

Quoting anfromme (Thread starter):
So - how successful is the strategy of pushing ahead with the 737-7 going to be?

What Boeing/Airbus really need to avoid is for the CS100/300 to become successful, then for BBD to follow on with the CS500 (LH already wants it) that would really threaten their core revenue streams. The -7 may be sacrificial pawn in this long game, and it may work out quite well.

Quoting anfromme (Thread starter):
Cases in point: Boeing's original stated intention to wait out the NEO and just compete on price. Or Airbus' stated intention of lowering A340 prices to take its additional fuel consumption vs the 777 into account. We know what happened there in both cases...

Two possible distinctions of each case:

(1) competing on price against Airbus's massive output would have killed Boeing's revenue in the entire NB sector. Competing against BBD for a few CSeries beachheads is much cheaper and therefore more feasible.

(2) capital is a smaller portion of operating cost - and fuel much larger - in a longhaul wide body competition than for narrowbodies. Thus Airbus had to slash a lot of a340 price to create 777-equal value proposition, whereas slashing narrowbody price more easily compensates for a fuel burn disadvantage.

[Edited 2016-02-23 01:52:36]
 
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BlueSky1976
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 9:26 am

70% off list price? Now, if this isn't an illegal dumping price, I don't know what is...

I will not believe Boeing has such high margin over the cost to produce a single 737NG, until proven otherwise.

And yes, I do understand the development is now fully paid off. Something is fishy here.
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anfromme
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 9:39 am

Quoting BlueSky1976 (Reply 4):
70% off list price? Now, if this isn't an illegal dumping price, I don't know what is...
I will not believe Boeing has such high margin over the cost to produce a single 737NG, until proven otherwise.
And yes, I do understand the development is now fully paid off. Something is fishy here.

Ahh - sorry, but you're being overly dramatic.
Firstly, nobody actually pays list price to begin with. 25-50% discounts are well within the ordinary, depending on the deal size.
Now, add to that that Boeing were trying to beat out BBD, this was a big deal, the 737-700 is a product at the end of its sales life, and Boeing has an interest in bridging the production gap to MAX even if margins go way down in the process. Not exactly a fire sale, but something very close to it. So ~70% discount off list price don't seem impossible.
Whether or not they're breaking even on a per-frame basis or whether it's only maintenance contracts etc. that are getting this deal into the black for Boeing is anyone's guess, though.
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BlueSky1976
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 9:43 am

I am well aware of the "usual" 50%+ off-list discount figure. It is just that 70% off list price figure has never appeared as being semi-officially mentioned on these pages.

Hence, my remark about margins on this type of deal...
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atcsundevil
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 9:46 am

Quoting BlueSky1976 (Reply 4):
70% off list price? Now, if this isn't an illegal dumping price, I don't know what is...

What makes you think it's illegal? Aviation essentially thrives off of undercutting competitors. How is this any different from Upstart Airline A entering a new market, and having Gigantic Legacy Airline B flood the market with seats and fares the upstart carrier can't match to flush out the little guy? Airbus and Boeing are protecting their turf; they're writing off losses in the short-term to capitalize on long-term gains to keep BBD and others from encroaching on their duopoly. It's only illegal if they're actively communicating to price fix, which I can pretty much guarantee that they are not. It's business. Unethical and unfortunate? Yes. Illegal? Not really. I want to see BBD succeed just as many of you do, but it won't happen without Airbus and Boeing risking tens or even hundreds of millions in losses to prevent the CS from ever gaining significant traction in the market.
 
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Matt6461
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 9:48 am

Quoting anfromme (Reply 2):

Completely agree.
Question is - how likely is this to work in the mid to long term?

Realizing that I gave a too-short answer to your good post, I tried to answer a little more thoughtfully in my last reply.

Your mid/long term distinction is helpful as well. I'm thinking that Boeing benefits from every bit of delay before a big, premium carrier (outside Canada) places a massive CSeries order. The general value proposition (for airlines) of Boeings price competition can probably be judged well by UA's behavior, so I'd expect the strategy to keep working in the mid term.

Longer term I don't know - BBD may get more government funding to allow for better price flexibility. On the other hand, Boeing might succeed in actually killing BBD. If a conservative government took over in Canada perhaps that government funding ends and perhaps the CSeries disappears. Or perhaps Boeing is playing a really deep game here of trying to bankrupt BBD into selling it the CSeries on terms better than it offered Airbus.

As economics and antitrust law (former) scholar, I find this space really fascinating. There's so much space for economically rational but weird and socially toxic behavior by our hometown dupolists right now, hard to tell which strategy they'll judge to optimal over the long run and whether it will succeed. It's an international unregulated market offering a good test for theories in antitrust law about free market fundamentalism.
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 9:55 am

70% off list price is actually making me sick thinking about it. How are competitors going to be able to sell their products? Everyone knows the list price is just the list price, but 70% off is insane. 70% off is a guaranteed loss on Boeing's part, just to make sure a superior product doesn't get sold. I'm disliking Boeing as a company more and more.
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 10:04 am

Quoting Matt6461 (Reply 8):
Or perhaps Boeing is playing a really deep game here of trying to bankrupt BBD into selling it the CSeries on terms better than it offered Airbus.

Just a crazy thought...

Boeing is looking at doing a MoM/NMA whose optimal configuration - 7ab fuse, bigger wing and engines - *might* leave little in common for a ~2030 NSA.

*Maybe* Boeing thinks the CS500 would be its perfect 738 successor, and will go all in trying to force BBD to sell? Then the lower end of MoM/NMA could replace the 739; Cseries the rest of the 737 family.

Like I said just a thought...
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 10:08 am

Quoting BlueSky1976 (Reply 6):

I am well aware of the "usual" 50%+ off-list discount figure. It is just that 70% off list price figure has never appeared as being semi-officially mentioned on these pages.

Hence, my remark about margins on this type of deal...

I saw this on Twitter:

http://twitter.com/jonostrower/status/701853226308657152

Quote:
Boeing Commercial CEO told staff that it couldn't tolerate a Bombardier win at United. Shades of Airbus in 1993.

Doesn't look like Boeing cared much about margins to win this deal.

[Edited 2016-02-23 02:09:39]
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 10:20 am

Quoting KarelXWB (Reply 11):
I saw this on Twitter:

http://twitter.com/jonostrower/status/701853226308657152

Quote:
Boeing Commercial CEO told staff that it couldn't tolerate a Bombardier win at United. Shades of Airbus in 1993.

Doesn't look like Boeing cared much about margins to win this deal.

Will be hard to convince staff that pricing pressure is causing layoffs when you are literally giving away 737s. If Boeing isn't careful they will see future problems with the workforce if they keep sending mixed signals to the market and their employees.

"We have to cut costs guys, Airbus is pricing is out of our margins, but hey we just sold 737s for $20 million a piece so we can keep a part of the market that is shrinking."
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 10:28 am

Quoting Matt6461 (Reply 10):
*Maybe* Boeing thinks the CS500 would be its perfect 738 successor, and will go all in trying to force BBD to sell? Then the lower end of MoM/NMA could replace the 739; Cseries the rest of the 737 family.

Not an insane thought.
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 10:29 am

Quoting enzo011 (Reply 12):
so we can keep a part of the market that is shrinking

I understand your point. However, it's not about keeping a part of that shrinking market. It's about preventing Bombardier from entering your high value customer base.
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 10:30 am

Quoting atcsundevil (Reply 7):
What makes you think it's illegal?

EU competition law and abuse of market power by monopoly, duopoly vendors.
If Boeing starts selling their products below cost of production in Europe you can be sure that BBD will report them to the competition commissioner. US corporations have been caught doing this before (Microsoft, Google).
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KarelXWB
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 10:38 am

Quoting Matt6461 (Reply 10):
Boeing is looking at doing a MoM/NMA whose optimal configuration - 7ab fuse, bigger wing and engines - *might* leave little in common for a ~2030 NSA.

*Maybe* Boeing thinks the CS500 would be its perfect 738 successor, and will go all in trying to force BBD to sell? Then the lower end of MoM/NMA could replace the 739; Cseries the rest of the 737 family.

Bombardier is not really in a financial position to launch a CS500 variant, and CSeries production will remain cash negative until 2021 at the least.

I also don't understand why they would develop a CS500 jetliner and compete with.the 737-800 / A320 market. Embraer CEO once said it's better to stay away from Boeing and Airbus and do business within your own niche. One must be suicidal to go after Boeing or Airbus. Latest UA 737 deal just shows why.

Be prepared for the consequences when you tickle the bear.
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anfromme
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 10:45 am

Quoting Matt6461 (Reply 10):
Like I said just a thought...

  
Well, it does sound a bit crazy, to be honest - that said, I wouldn't necessarily bet all my savings against it.  

You're making good points and with the CS300 and a potential CS500 in mind, Boeing and Airbus possibly stand to lose a bit more this time than with the 737-600 and A318... Those were also non-optimal for their mission and despite package deals and low prices weren't able to compete against the E-Jets in particular.
The alternative strategies to competing with the CS aren't that attractive:
1) Scrap the A319neo/737-7 and leave the market to BBD. I.e. give them the market and the money to develop a CS500 on a silver plate.
2) Kill the number one money-maker programmes (MAX/NEO) and develop a new narrowbody to compete with the CS.

Quoting Matt6461 (Reply 3):
(2) capital is a smaller portion of operating cost - and fuel much larger - in a longhaul wide body competition than for narrowbodies. Thus Airbus had to slash a lot of a340 price to create 777-equal value proposition, whereas slashing narrowbody price more easily compensates for a fuel burn disadvantage.

Fair point - but margins also tend to be smaller on narrowbodies, and if the reported low-to-mid $20m figure is true, that margin is probably gone altogether and they're relying on maintenance contracts etc. to recover their production cost and/or make a profit on the deal.
While okay(-ish) for high priority deals it's not really a sustainable strategy. Not least because such low pricing can set a dangerous precedence for the rest of the MAX and NEO lineup.
As a customer, I'd start asking some difficult questions once the disjoint in price of A320neo/737-8 compared to the A319neo/737-7 becomes too large.
As is, based on list prices, you already pay ~20% less for a -7 than for a -8. By comparison, you only pay ~5% less for a -8 than for a -9.
(Similar story with the NG lineup, by the way.)
So at the small end, list prices are much lower to begin with and on top of that, Boeing seems to be willing to offer much bigger discounts, at least with the NG.
That's not an encouraging sign for the long-term competiveness against the CS.

Curiously, Airbus' pricing strategy is almost exactly the opposite (i.e. small-ish jump from A319neo to A320neo, much bigger jump then to A321neo). Which of course makes choosing the A320neo over the A319neo quite an easy decision. Which is fine if it's just an A319neo vs A320neo decision - but if an airline actually needs something smaller, that strategy won't really work, either.

Quoting KarelXWB (Reply 11):
I saw this on Twitter:

http://twitter.com/jonostrower/status/701853226308657152

Quote:
Boeing Commercial CEO told staff that it couldn't tolerate a Bombardier win at United. Shades of Airbus in 1993.

Doesn't look like Boeing cared much about margins to win this deal.

On the one hand, I can understand the reasonin.
On the other hand, I think focusing on UA that way is a bit of an oversimplistic example of trying to prevent history from repeating itself. Fair enough, UA's A320 deal was a big turning point that gave Airbus a lot of momentum.
But to be honest I don't think the A320's success hinged on that one deal.
Similar story with the AA deal for MAX and NEO. Leading up to it, Boeing had to realise that competing on price only gets you so far against a more efficient competitor.

[Edited 2016-02-23 02:54:15]
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 10:49 am

Quoting anfromme (Reply 17):
1) Scrap the A319neo/737-7 and leave the market to BBD. I.e. give them the market and the money to develop a CS500 on a silver plate.

As mentioned above, it's not about that small market. It's about preventing Bombardier to enter your customer base. If UA had ordered CS100 jets, the door was open for a future CS300 order. You need to prevent that from happening at any cost.
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anfromme
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 11:04 am

Quoting KarelXWB (Reply 18):
As mentioned above, it's not about that small market. It's about preventing Bombardier to enter your customer base. If UA had ordered CS100 jets, the door was open for a future CS300 order. You need to prevent that from happening at any cost.

I agree, but I also don't think it's that clearly cut a definite win in that regard.
As is, the door for a future CS order is still open regardless. Those 737-700s ordered at low prices aren't a long-term investment in the same way a MAX/NEO/CS order placed today would be. So while UA may not place a CSeries order today because those 737-700s serve their capacity needs just fine for now (they'll all be delivered by the end of 2019 if I'm not mistaken), it's perfectly conceivable that those very -700s will be replaced by CS100/300 that they were supposed to keep out of UA's fleet. Or that the CS still joins the fleet at the lower end.

I'm not saying that's going to happen for sure, but to me it illustrates that the cheap -700s are really just a stop-gap for now if Boeing wants to keep BBD out of the picture at UA. Sort of a "throwing the kitchen sink at it" approach. It might just work. It definitely enables UA to get what they want/need at ridiculously low prices.
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jayunited
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 11:18 am

Quoting enzo011 (Reply 12):
Will be hard to convince staff that pricing pressure is causing layoffs when you are literally giving away 737s. If Boeing isn't careful they will see future problems with the workforce if they keep sending mixed signals to the market and their employees.

"We have to cut costs guys, Airbus is pricing is out of our margins, but hey we just sold 737s for $20 million a piece so we can keep a part of the market that is shrinking."

Playing devils advocate here. Although Boeing is practically giving away the aircraft at $20 million dollars isn't something better than nothing? Lets say Boeing refused to deal and offered the standard discount that airlines received and UA decided against the 700 and instead went with the C-series that is almost $2 billion dollars Boeing would have lost out on. The 737NG program development cost have probably already been recovered so I it comes down to covering the cost associated with building the aircraft (materials, parts, labor and misc. expenses ). I know $20 million dollars does not even come close to covering cost associated with building a 737-700 but if Boeing had lost this order wouldn't that be just as bad if not worst? What if Bombardier had won this order wouldn't Boeing face an even greater threat down the road of having UA order the CS300 do to the fact that UA would already have all the peices and equipment in place to add the CS300 to its fleet if the CS100 was in the fleet?

Could it be that Boeing is rolling the dice today betting that if they can keep CS100 out of UA's fleet then down the road when UA's Airbus fleet and some of the older 737NG's need to be replaced there is a greater chance that it would remain a 50/50 race between Airbus and Boeing? If Bombardier had won and joined UA's mainline fleet it truly would become a three way race, but by making this deal today it will make it harder for Bombardier to place its larger C-series in UA's fleet in the future? Could that be Boeing's ultimate angle take the loss today and hope the gamble pays off tomorrow?
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 11:29 am

Quoting jayunited (Reply 20):
Could that be Boeing's ultimate angle take the loss today and hope the gamble pays off tomorrow?

It is illegal in the US to sell any product at loss, as far as I remember the law prohibits it. Lawyers from either competing party involved would be all over this case if Boeing simply "dumped" these 737s on United below cost of manufacturing.

Boeing made very little profit on this sale, if any - that's for sure.
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Faro
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 11:30 am

Quoting KarelXWB (Reply 18):
Quoting anfromme (Reply 17):
1) Scrap the A319neo/737-7 and leave the market to BBD. I.e. give them the market and the money to develop a CS500 on a silver plate.

As mentioned above, it's not about that small market. It's about preventing Bombardier to enter your customer base. If UA had ordered CS100 jets, the door was open for a future CS300 order. You need to prevent that from happening at any cost.

Yes but that is a short-term tactic. In the longer term -and to the extent that BBD succeeds with the CSeries- Boeing needs to find a secular solution...


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mjoelnir
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 11:53 am

Quoting atcsundevil (Reply 7):
What makes you think it's illegal?
Quoting kelvin933 (Reply 15):
Quoting atcsundevil (Reply 7):
What makes you think it's illegal?

EU competition law and abuse of market power by monopoly, duopoly vendors.
If Boeing starts selling their products below cost of production in Europe you can be sure that BBD will report them to the competition commissioner. US corporations have been caught doing this before (Microsoft, Google).

It is banned in the USA too, called dumping.
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 12:13 pm

Quoting BlueSky1976 (Reply 21):

That is not true at all, you are allowed to sell goods at a loss. There is even a term for it: loss leaders.

What actually constitutes price dumping is very hazy, and often difficult to conclusively proove. AFAIK Google and Microsoft were never charged in Europe for price dumping, they were charged for anti trust reasons, basically using their position to dominate consumer web browsers, OSs, and search engines which is a completely different issue.

[Edited 2016-02-23 04:17:15]
 
Amiga500
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 12:17 pm

Quoting polot (Reply 24):
That is not true at all, you are allowed to sell goods at a loss. There is even a term for it: loss leaders.

Not when you are abusing your market position to enable the loss though. (AFAIK)
 
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Polot
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 12:25 pm

Quoting Amiga500 (Reply 25):

Is Boeing abusing its market position though? Just because you are larger doesn't mean you are not allowed to compete. Again this is why price dumping gets very hazy. BBD especially would also have to tred carefully since, you know, they just got a huge check from the Canadian government and might get more...

[Edited 2016-02-23 04:26:09]
 
Amiga500
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 12:38 pm

Quoting polot (Reply 26):
Is Boeing abusing its market position though? Just because you are larger doesn't mean you are not allowed to compete.

If you are accepting losses you would otherwise be unable to afford due to your market position (i.e. sales of 737-8 subsidising 737-7), then you are abusing your market position.

If you are selling end of line frames (737-700) you cannot be "loss-leading" - loss-leading implies taking an initial hit for future profitable sales of the same product.
 
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Polot
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 12:46 pm

Quoting Amiga500 (Reply 27):

Loss leading doesn't have to be the same product. Most food sold at bars, for example, are loss leading because people who sit and eat stay longer and are likely to order and drink profitable alcohol more. Discounting product A so the company is more likely to stay in the family so to speak and order product B could be considered loss leading.
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 1:05 pm

Every RR engine is sold at a loss, and it is perfectly legal in the EU. RR can do this because it plans to recover its investment/cost by providing maintenance over the life of the engine.
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 1:23 pm

Quoting Matt6461 (Reply 1):
IMO this isn't about the -7 being a smart decision on its own. It's about Boeing (and Airbus) using their balance sheets and market power to price a competitor out of their cozy duopoly.

Yes, but as long as Boeing has done nothing illegal, then it's just business.

Quoting anfromme (Reply 2):
Question is - how likely is this to work in the mid to long term?

Probably not an issue for Boeing. It will destroy any chance of getting a decent price on any further NG sales to any customer - "Oh yes, we'll take 30 as long as we get UA's pricing!" But given where they are in NG to MAX transition, I don't suppose they're that worried.

Quoting anfromme (Reply 5):
Not exactly a fire sale, but something very close to it. So ~70% discount off list price don't seem impossible. Whether or not they're breaking even on a per-frame basis or whether it's only maintenance contracts etc. that are getting this deal into the black for Boeing is anyone's guess, though.

It seems there's already a quid pro quo lined up with the sale of additional 77Ws to UA. So Boeing would argue (if they had to) that these cheapo 737s were part of a larger deal with UA and that overall, the deal made them money (not a lot, but some).

As to Airbus and Boeing's efforts to "kill off the CSeries", I'm not sure they need to do much as BBD seems to be making an excellent fist of it all on their own.

Quoting KarelXWB (Reply 16):
Bombardier is not really in a financial position to launch a CS500 variant, and CSeries production will remain cash negative until 2021 at the least.

BBD is a massive mess. I really can't see the CS500 ever being done.
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roseflyer
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 1:23 pm

Even if the CSeries has lower fuel burn per seat, there are many reasons why airlines might prefer the 737-7 or A319.

Quoting anfromme (Thread starter):
Another case in point: BBD has had lots of problems selling the CSeries. Most of them not actually to do with the plane itself but with Airbus' and Boeing's aggressive package pricing, BBD management screw-ups, successful FUD campaigns, etc.

All this talk of losses it surprising to me. The 737-8/800 has a higher profit margin. Stretches usually do so there is some encouragement from the sales teams to sell bigger.

One thing that most people in this thread are ignoring is that Boeing can probably build a 737-700 for less than Bombardier can build a CS300. I think the same is true for Airbus with an A319. Both the 737NG and A320 production lines are high volume efficient production systems. They have large well established supply chains where Boeing and Airbus have tightly negotiated supplier contracts. A part supplier knows that they will have business for 30+ years if they can get their part on a 737 or A320. They are going to fight and negotiate hard and accept slim margins in order to get on those airplanes because they'll be making parts for decades for both new production and more importantly after market spares. Bombardier does not have the negotiating power to get such prices out of its supply chain. While Boeing or Airbus can negotiate for 3000+ units, Bombardier's suppliers have to spread development costs and profit over a potentially much smaller production run. It is also important to note that there are going to be few if any PMA parts for the CSeries. With so few planes, there won't be many aftermarket alternatives for the airlines. Not only is Bombardier paying high prices for parts which is reflected in the airplane price, but airlines will be paying a lot for spare parts as well.

Don't forget reliability when having this discussion. The CSeries is new and going to have problems like every new airplane does. Bombardier doesn't have a lot of money to support its fleet once it enters service. It also has lost a significant amount of its engineering capability with layoffs and restructuring. There are many questions on whether Bombardier is prepared to handle all the entry into service problems. We have already seen how much trouble the PW1000 is causing Airbus. If you add that to all the airframe and systems problems with a new airplane, I don't know many airlines willing to take that risk when you have both the 737 and A320 having exceptional dispatch reliability. I can call either Airbus or Boeing's operation/customer support centers 24/7 with a question about anything and get an expert on the phone within minutes who can help me get my airplane back in the air. With Bombardier, there is a significant chance that the only people who know how a system was designed or functions were laid off.

In general the CSeries has a unproven production process, potentially higher manufacturing costs, weak engineering and customer support capability compared to Boeing and Airbus, and will have poor reliability at entry into service. It's not surprising that Boeing and Airbus can offer better prices and win orders with the less than optimal A319 and 737-7.

Quoting Amiga500 (Reply 27):

If you are accepting losses you would otherwise be unable to afford due to your market position (i.e. sales of 737-8 subsidising 737-7), then you are abusing your market position.

If you are selling end of line frames (737-700) you cannot be "loss-leading" - loss-leading implies taking an initial hit for future profitable sales of the same product.

Is there any evidence that they are losing money on these 737-700s for United or any future 737-7 sales or is that just A.net rumor? I don't get the idea that just because a 737-700 is being sold that we must be talking about losses.

Quoting mjoelnir (Reply 23):

It is banned in the USA too, called dumping.

I seriously doubt that Boeing is dumping. With its highly refined and optimized lean production, Boeing can probably make a 737-700 for less than Bombardier can make a CSeries. Airbus can probably do the same with the A319.

Quoting BlueSky1976 (Reply 21):
It is illegal in the US to sell any product at loss, as far as I remember the law prohibits it. Lawyers from either competing party involved would be all over this case if Boeing simply "dumped" these 737s on United below cost of manufacturing.

Boeing made very little profit on this sale, if any - that's for sure.

You can earn very little on a sale, but still have it be profitable. The aftermarket services side of Boeing earns quite a bit of money. There will be spare part sales and repairs on these airplanes for decades and those can be quite profitable.

[Edited 2016-02-23 05:24:44]

[Edited 2016-02-23 05:27:41]
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 1:34 pm

Quoting anfromme (Thread starter):
1) Is this the right strategy?

Yes! For the reasons you have stated in your opening post. The small price of certifying one more derivative is negligible versus the overall business-strategic implications (=protectinv the duopoly).

By offering -7 and A319NEO, A&B are effectively setting the maximum price that BBD can ask for the CS300.

Quoting anfromme (Thread starter):
2) What about the A319NEO?

Same thing. And it will still be a fine niche product as a CJ or for a handful of long thin routes.
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 1:41 pm

Quoting Matt6461 (Reply 10):
*Maybe* Boeing thinks the CS500 would be its perfect 738 successor, and will go all in trying to force BBD to sell? Then the lower end of MoM/NMA could replace the 739; Cseries the rest of the 737 family.

Like I said just a thought...

Had that same thought in another thread as well. I can see Boeing selling these planes with no intention of building half of them but replacing them with a then Boeing owned Cseries. I consider it Boeing's answer to the Delta love given to used 717s.

Force Bombardier to break up, buy cheap, haggle with the gov't to keep the line open, developed a 500 and also developed a 70ish seater on the low end to compete with Embraer in the RJ, Maybe even tinker with the Q400 for the turboprop market.

So.....

Boeing back doors what is seemingly a solid new plane and builds off of it.

CRJs go the way of the Dodo.

Q400 and a hypothetical CS75 to beat Embraer over the head with and have an answer for the MRJ if that comes to pass. Cough, cough, Comac planes as well.


CS100, CS300, CS500 , CS700 to placate the likes of Southwest and offer a line with wide commonality from 75seaters to 180 seaters. It also gives them a market answer to the SSJ in parts of the world that's not Russiaphobic.

Clean Sheet a new MOM/NSA/NMA with a 40,000 to 45,000 nm range to replace the high end 737s and fill that market void left by the 757 with.

[Edited 2016-02-23 05:45:12]
 
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Polot
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 1:51 pm

Quoting WaywardMemphian (Reply 33):
CS100, CS300, CS500 , CS700 to placate the likes of Southwest and offer a line with wide commonality from 75seaters to 180 seaters. It also gives them a market answer to the SSJ in parts of the world that's not Russiaphobic.

If Boeing ever acquired the C Series (which is nil) you can say goodbye to any chance of there being a CS500 or CS700. They have the established 737 for that market, it would be the 717 all over again. Why would WN be interested in a C series- you know what the 737 MAX offers? Wide commonality with their existing ~700 strong 737 fleet.

Quoting WaywardMemphian (Reply 33):
Clean Sheet a new MOM/NSA/NMA with a 40,000 to 45,000 nm range to replace the high end 737s and fill that market void left by the 757 with.

I assume you mean 4,000-4,500 nm; 40,000 nm would be enough to circle the Earth almost 2 times.

[Edited 2016-02-23 05:53:54]
 
roseflyer
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 2:01 pm

Quoting WaywardMemphian (Reply 33):

I don't think Boeing would have much interest purchasing Bombardier. The company is depending on the Canadian government to help it with its major cash flow problems. Many suspect that the Canadian government brokered the deal with Air Canada to give Bombardier a lifeline. Otherwise the company might not survive. Neither the rail nor the aviation sector is bringing in the necessary funds. Bombardier is facing tough competition. New entrants like COMAC and Mitsubishi have solid finances behind them. Bombardier is depending on the Canadian government, which can only go so far.
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LSZH34
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 2:08 pm

Quoting anfromme (Thread starter):
1) The CSeries. Boeing cut UA a very cheap deal (low to mid-$20m, i.e. ~70% off list price) for their recent 737-700 order in order to prevent Bombardier from getting UA's business

As others have mentioned: This, ladies and gentlemen, is why BBD is struggling so much to get orders.

I expect Airbus to keep offering the A319neo.
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 2:33 pm

This is all quite old news. BBD has been complaining about being undercut by Boeing and Airbus for several years. Exhibit A is when Airbus knocked off the 40 CS300 that were ordered for Frontier by Republic (North American launch customer). Anyone that that thought that Airbus or Boeing was going to give BBD and easy ride were seriously mistaken.
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 2:41 pm

Quoting BlueSky1976 (Reply 21):
It is illegal in the US to sell any product at loss, as far as I remember the law prohibits it.

Not true.

Quoting mjoelnir (Reply 23):
It is banned in the USA too, called dumping.

Price dumping laws protect U.S. manufacturers from foreign manufactures selling at a loss to U.S. customers. Bombardier - a Canadian company - would have no grounds to sue Boeing on the basis of a transaction between two U.S. companies.
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 2:45 pm

Quoting jayunited (Reply 20):
Could it be that Boeing is rolling the dice today betting that if they can keep CS100 out of UA's fleet then down the road when UA's Airbus fleet and some of the older 737NG's need to be replaced there is a greater chance that it would remain a 50/50 race between Airbus and Boeing? If Bombardier had won and joined UA's mainline fleet it truly would become a three way race, but by making this deal today it will make it harder for Bombardier to place its larger C-series in UA's fleet in the future? Could that be Boeing's ultimate angle take the loss today and hope the gamble pays off tomorrow?

Give me a nearly paid for 737-700 anyday compared to a more expensive C series with a bigger note.
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 2:51 pm

Roseflyer
I don't think Boeing would have much interest purchasing Bombardier.

I think they well might be interested (as reasoned above).
Not only is Bombardier a busted flush financially - Boeing is (most people think) going to abandon the bottom end of the single aisle market when the NSA comes along. One plane cannot do everything and clearly the market is moving towards 200-250 seaters.
Buying Bombardier covers the 130-150 (and possibly up to 180) market very well
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 2:58 pm

Quoting scbriml (Reply 30):
Probably not an issue for Boeing. It will destroy any chance of getting a decent price on any further NG sales to any customer - "Oh yes, we'll take 30 as long as we get UA's pricing!" But given where they are in NG to MAX transition, I don't suppose they're that worried.

Problem with that is that the 737-700 they used here to keep BBD at the door isn't the plane that's going to be competing with the CSeries two years from now. It hardly does today.
And using the same discount basement approach on the 737-7, which contrary to the -700 is still very much at the start of its product life, mightn't be the best strategy. Because customers might go down exactly the route you suggested, except on the MAX: "Oh yes, we'll take 30 as long as we get UA's pricing!"
Taking the UA deal as an example, Boeing was able to undercut the rumoured $30m apiece price BBD offered by offering a plane that's at the end of its sales lifecycle and has a good bunch of slots left to be filled while the transition to its successor is made.
Boeing won't be able to do the same thing with MAX. MAX will be more expensive to produce, there aren't any open MAX slots for a good while. Margins on the 737-8 and -9 sold are going to make it very hard to justify selling a bunch of 737-7 at cost to be able to simply match a $30m CSeries price tag. To not even mention that they'd have to free a bunch of higher-margin production slots at the same time if an airline asks for any delivery date before 2022.
And then there'd be the "Oh yes, we'll take 30 MAX as long as we get [enter airline name]'s pricing!" problem if they really do frequently offer the -7 at cost or below to keep the CS at bay.

Quoting scbriml (Reply 30):
It seems there's already a quid pro quo lined up with the sale of additional 77Ws to UA. So Boeing would argue (if they had to) that these cheapo 737s were part of a larger deal with UA and that overall, the deal made them money (not a lot, but some).

Well, the rumoured prices that UA is offered on the 777 (Leeham mentions ~$120m) show almost the same deep discount the rumoured 737-700 prices show. So Boeing won't make much, if any, money on those 777 and 737-700 deals directly even if you consider them together.
As I mentioned above - that's fine as both products are pretty much at the end of their sales life and beyond immediate profits on a sale Boeing has an interest in keeping both lines sort of filled during the transitional period to MAX/777X.
It's not a strategy that will work very well going forward, though.

Quoting scbriml (Reply 30):
As to Airbus and Boeing's efforts to "kill off the CSeries", I'm not sure they need to do much as BBD seems to be making an excellent fist of it all on their own.

See above - despite all the trouble BBD and the CSeries programme have been going through, and in spite of the much-bemoaned lack of flexibility on cutting deals in the early days, BBD currently has more than six times the number of commitments and orders that the A319neo/737-7 have combined. Even counting firm orders only (which still exclude the recent AC order, among others), the CSeries outsold the A319neo/737-7 combined by a factor of just under 2.5.
And that's despite the fact that the A319NEO and 737-7 are members of the two most successful airliner programmes of all time, so they should be very easy sells.
But as we've seen with the A318 and 737-600, pricing and being a member of an extremely popular family doesn't always help.

Quoting scbriml (Reply 30):
BBD is a massive mess. I really can't see the CS500 ever being done.

They are in a mess, but they also look like they're finally starting to sort through it. Won't be finished tomorrow, of course - but probably won't take as long as it did Airbus, who were also in a deep mess 10 years ago when the A380 troubles hit and the drastic "Power 8" programme was announced.
Once they're back on steadier ground a CS500 is a definite possibility - not for another 5-10 years, though. If at the right hand side end of that period it could be part of the first major CS refresh.

Quoting roseflyer (Reply 31):
Even if the CSeries has lower fuel burn per seat, there are many reasons why airlines might prefer the 737-7 or A319.

Yes, because of price and Boeing's and Airbus' ability to cut package deals when airlines are also considering widebodies and/or other members of the NEO/MAX family. But see above - problem with that is that so far, this is not something that has had a positive effect on A319NEO/737-7 sales.

Quoting roseflyer (Reply 31):
One thing that most people in this thread are ignoring is that Boeing can probably build a 737-700 for less than Bombardier can build a CS300. I think the same is true for Airbus with an A319.

Definitely. Also, Boeing wants to fill slots as well before MAX comes fully online, so margin for those slots isn't a primary concern.
The same low production cost and low margin expectatiosn won't be true for the 737-7 (or A319NEO), though. Nor will it be easy for Boeing and Airbus to find free slots in the near term.

Quoting r2rho (Reply 32):
Yes! For the reasons you have stated in your opening post. The small price of certifying one more derivative is negligible versus the overall business-strategic implications (=protectinv the duopoly).

By offering -7 and A319NEO, A&B are effectively setting the maximum price that BBD can ask for the CS300.

I have no doubt that it does have an impact, as does the FUD spread about the CSeries and the major screw-ups on BBD's part. Assuming BBD sorts itself out - which they finally seem to be doing - I do have my doubts whether this will keep the CSeries in check in the long run.

Quoting roseflyer (Reply 31):
Don't forget reliability when having this discussion. The CSeries is new and going to have problems like every new airplane does. Bombardier doesn't have a lot of money to support its fleet once it enters service. It also has lost a significant amount of its engineering capability with layoffs and restructuring.

Firstly, they haven't started the main part of the layoffs yet. Those will be spread over the next two years roughly. Secondly, most of the redundancies are going to hit the railway division. Lastly, even though the aerostructures and product development departments are going to take a big hit as well, I wonder whether you have any basis for what you imply, namely that support will be affected negatively by this at all.
This isn't Sukhoi or MRJ or Irkut, either where for most airlines the quality of support is a completely unknown quantity.

Quoting roseflyer (Reply 31):
We have already seen how much trouble the PW1000 is causing Airbus.

Well - it's a headache for sure, but as things stand, the issues will be sorted before the year is out.
BBD have stated that the PW1500G the CS uses does not exhibit the same issue that Airbus is seeing on the larger variant used on NEO. BBD has of course had its own issue on the PW of one of their test aircraft, but that was a few years ago and has been sorted since.
42
 
parapente
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 3:14 pm

Thread starter
1) Is this the right strategy?

For Boeing - yes I think so.For all the reasons posted and also that the -7 is a better small aircraft than the 319 (IMHO).

For Airbus. Not so sure. They never got a big private jet market,Their plane is structurally bigger and they are selling A320/321's (profitably) as fast as they can make them. I guess we will find out v soon (they prob will make it though- to work with Boeing and shut out Bombardier)
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 3:16 pm

Quoting anfromme (Reply 41):
Problem with that is that the 737-700 they used here to keep BBD at the door isn't the plane that's going to be competing with the CSeries two years from now. It hardly does today.

If fuel prices remain low airlines won't care. The low fuel prices really hurt BBD's position, that was the C-series prime selling point.

Quoting anfromme (Reply 41):

See above - despite all the trouble BBD and the CSeries programme have been going through, and in spite of the much-bemoaned lack of flexibility on cutting deals in the early days, BBD currently has more than six times the number of commitments and orders that the A319neo/737-7 have combined. Even counting firm orders only (which still exclude the recent AC order, among others), the CSeries outsold the A319neo/737-7 combined by a factor of just under 2.5.

The problem is Boeing and Airbus have been so aggressive with pricing that many airlines are finding that the numbers add up better by going with the A320neo or 737-8, even if the initial purchase price is slightly higher (made up for the fact that they can bring in more revenue). Never mind the differences in risk.

Quoting anfromme (Reply 41):
They are in a mess, but they also look like they're finally starting to sort through it. Won't be finished tomorrow, of course - but probably won't take as long as it did Airbus, who were also in a deep mess 10 years ago when the A380 troubles hit and the drastic "Power 8" programme was announced.

I'd argue that it would take BBD longer to get out of their mess than it did Airbus. Airbus had the popular A320 and A330, and even the A340 wasn't doing terrible at the time, to help prop them up. BBD has...umm...hmmm...well lets hope everything goes smoothly with the C series EIS or the ATR factory burns down, and that airlines start actually putting money where their mouth is...
 
PPVRA
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 3:21 pm

Quoting william (Reply 39):
Give me a nearly paid for 737-700 anyday compared to a more expensive C series with a bigger note.

Give me a nearly paid for -7 over a full price -8 any day. I'm sure Boeing will be careful about this.
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Flighty
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 3:27 pm

Quoting Matt6461 (Reply 8):
There's so much space for economically rational but weird and socially toxic behavior by our hometown dupolists right now,

Not legally. If BBD were an American company, they could sue Boeing for price dumping, which it likely is.

At least, the point is, Boeing would be willing to _spend_ some money and literally dump on the market to kill Bombardier. Normally there is some recognition that that's toxic, because it is an innovation-delaying duopoly as it is.

If BBD is killed, Boeing may be sorry when the IP licensed, C Series Mark II comes out in 2017, made in China, priced at $7 million. Boeing is big, but its pockets are shallow compared to the Chinese government.
 
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 4:04 pm

Quoting BlueSky1976 (Reply 21):
It is illegal in the US to sell any product at loss, as far as I remember the law prohibits it. Lawyers from either competing party involved would be all over this case if Boeing simply "dumped" these 737s on United below cost of manufacturing.

In that case, Airbus should sue the ASS out of Boeing for the 787 program, as Boeing's Accounting already proves that up until today, Boeing sold every single 787 less than it cost to produce them, and that excludes development cost.

Quoting roseflyer (Reply 31):
It also has lost a significant amount of its engineering capability with layoffs and restructuring. There are many questions on whether Bombardier is prepared to handle all the entry into service problems. We have already seen how much trouble the PW1000 is causing Airbus. If you add that to all the airframe and systems problems with a new airplane, I don't know many airlines willing to take that risk when you have both the 737 and A320 having exceptional dispatch reliability. I can call either Airbus or Boeing's operation/customer support centers 24/7 with a question about anything and get an expert on the phone within minutes who can help me get my airplane back in the air. With Bombardier, there is a significant chance that the only people who know how a system was designed or functions were laid off.

Please have your facts straight. There is no reason to think Bombardier did not laid off a single employee from the the CSeries team. Exactly opposite is true.
Bombardier doubled down on their the Cseries commitment, and laidoff people from the all other department to save every single CSeries Job. Not a single employee was laid of from the Commercial aircraft Division. Largest amount of layoff came from the Rail division, followed by AeroSuperstructure and Services Division.

Quoting roseflyer (Reply 31):
In general the CSeries has a unproven production process, potentially higher manufacturing costs, weak engineering and customer support capability compared to Boeing and Airbus, and will have poor reliability at entry into service.

Soulds like a true Airbus/Boeing Salesman

Currently Cseries production is going much more smoothly compared to the green A320NEOs that are pilling up at Toulouse. I would argue that risk for Bombardier not being able to produce 10AC/Month is lot less compared to NEO/MAX platforms that are aiming to produce unprecedented 50+A/C per month, putting huge stress on their supply chain. Bombardier engineering and customer support capability might be smaller in term of pure number compared to Airbus/Boeing, but it is sufficient to support the projected Csereis fleet.

As for the comment "Will have poor reliability at Entry into Service" is that a known fact, or just pure speculation on your part?
 
AM744
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 4:15 pm

Quoting anfromme (Thread starter):
Boeing cut UA a very cheap deal (low to mid-$20m, i.e. ~70% off list price) for their recent 737-700 order in order to prevent Bombardier from getting UA's business.

If this were true, wouldn't Bombardier be fighting in every court possible?

Quoting Matt6461 (Reply 1):
Too bad there's no international anti-trust enforcer.

Didn't Bombardier compained to the World Trade Organization about Embraer because of 'illegal subsidies'? What about NAFTA?
 
Amiga500
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 4:18 pm

Ah, I see the light on the sell at loss. The B787/A380 debacles are enough to prove that in the real world OEMs can and do sell at a loss.


Although, I suppose it could be argued in both those cases neither Airbus or Boeing are abusing dominant duopoly positions.
 
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Polot
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RE: Leeham: Boeing Changes 737-7 Strategy

Tue Feb 23, 2016 4:32 pm

Quoting AirbusCanada (Reply 46):
Bombardier doubled down on their the Cseries commitment, and laidoff people from the all other department to save every single CSeries Job. Not a single employee was laid of from the Commercial aircraft Division. Largest amount of layoff came from the Rail division, followed by AeroSuperstructure and [Engineering] Services Division.

*cough* They are also laying off 800 from aerospace product and development engineering...

Quoting AirbusCanada (Reply 46):
Currently Cseries production is going much more smoothly compared to the green A320NEOs that are pilling up at Toulouse. I would argue that risk for Bombardier not being able to produce 10AC/Month is lot less compared to NEO/MAX platforms that are aiming to produce unprecedented 50+A/C per month, putting huge stress on their supply chain. Bombardier engineering and customer support capability might be smaller in term of pure number compared to Airbus/Boeing, but it is sufficient to support the projected Csereis fleet.

Yes but the reason they are piling up is because of issues at PW...who is also supplying the engines for the C-series.

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