When the European plane maker, Airbus (EADSY, Financial), laid the wraps off the A330 neo at the Farnborough Air show, millions had flocked to get the first view of the prototype that was showcased during the show. Airbus’ management were of the opinion that this new plane could aid in winning more market share in the wide bodied aircraft segment and recently Airbus received the first firm order of 25 aircraft from Delta Airlines (DAL, Financial). The A330neo is undoubtedly the answer to the hugely successful Boeing (BA, Financial) Dreamliner 787 and could later serve as a medium to compete with Boeing in the wide-bodied aircraft category. Let’s dig deeper and find out how Airbus’ new offering could offer tough competition to the market leader in the wide bodied aircraft segment, Boeing.
A tremendous upgrade over the predecessor
This airplane that was launched in July with commitments for 121 aircraft from three airlines and three leasing companies features the Rolls-Royce (RR.L, Financial) Trent 7000 engine and has curved extensions at the wing tips as promised from the Airbus’ development team. It is 14% more fuel efficient than the earlier Airbus A330 version, and though its entering the market pretty late after the Dreamliner hype which has kept most of the market buyers engrossed, Airbus expects that this new engine option would weigh on the rival’s order book soon after the plane enters service in 2017.
In fact, the first delivery of A330neo is almost six years later to the first Dreamliner delivery of Boeing. But, as history will have it mentioned Boeing has been happy with the Dreamliner and did not do much re-engineering on the Dreamliner already in service. Meanwhile, Airbus seems to have geared up pace to catch up with the immediate rival and thus the A330neo came into existence.
Waging a price war
Airbus has shared that the new A330neo would be available in two options – A330-800neo and A330-900neo. With a seating capacity of 250-310 passengers, it would directly compete with the Boeing 787 which seats around 240-320 passengers. This directly confirms that Boeing enjoys a better range to Airbus even after the new plane enters service in late 2017.
However, despite 787’s higher range airlines could still flock in to buy the new A330neos. For example, airlines in Asia that are focused on serving the fast-growing intra-Asian market would be fine with the range of the airbus A330neo.
In today’s era where airlines are hankering for buying only fuel efficient planes, many of them might just want to exchange the Dreamliner for the Airbus A330neo to get some discount on the buying price. This could in turn take away market share from Boeing’s 787 in the small wide-body airplane segment.
So, Airbus’ ability to discount A330neo’s price is likely greater than that of Boeing. That’s majorly the reason why while the 787-9 and 787-10 cost around $257 million and $298 million, Airbus’ A330-800neo and 900neo are priced about $242 million and $276 million, respectively. Thus, as airlines are becoming price-conscious Boeing might have to offer discounts to match the price to Airbus’ new offering.
This would not bode well for the U.S. plane maker who has spent billions on the development of the Dreamliner.
And finally, the catch
Airbus is already a dominant player in the narrow bodied aircraft segment. Now, if it is able to reign supreme through the A330neo offering to the airlines industry, Boeing which is still a leader in the wide bodied segment might start facing some heat in the segment’s order count. Currently the order gap between Boeing and Airbus is noteworthy, but only time would suggest whether this new plane from the Airbus den is able to reduce this order gap with Boeing in the long run.
