In one of my previous articles, I discussed the competition between the Airbus (OTCPK:EADSF) A350 and the Boeing (NYSE:BA) 777X. Boeing and Airbus are battling on three markets: Large wide bodies (jumbos), wide bodies (mini-jumbos) and the single aisle markets.
While the large wide body market is dominated by Airbus more and more, the battle of the mini-jumbos is a thrilling one, although Boeing's presence in this market is strong.
Due to the recovery of the global economy, the demand for new airplanes is increasing. Since this demand is driven by growth of air traffic volume and replacement of aging fleet members, the company that receives the most orders now will probably be dominating the market for the next 1-3 decades.
Both Boeing and Airbus have quite good order numbers for their new aircraft. While Airbus and Boeing were able to haul in big orders from Asian and Gulf state airlines, Airbus recently received a big cancellation.
On the 11th of June, Emirates canceled its order for 50 A350-900s and 20 A350-1000s, four years before the first scheduled delivery. Airbus ended 2013 with 812 orders for the Airbus A350. In 2014, Airbus received cancellations from Alitalia (Air Purchase Fleet) and Emirates for the A350. The current backlog is still strong, worth over $232 billion, but Airbus surely took a hit as it lost 8.5% of its order backlog for the A350.
Although order numbers for the A350 are still big, the cancellation from Emirates is a painful one for the following reasons:
- Emirates is the biggest customer for Airbus's biggest jet, the A380.
- Emirates was one of the biggest customers for the Airbus A350.
- Biggest cancellation so far for the A350 program.
- Order would give Airbus a share in a Boeing dominated fleet.
Figure 1: Distribution of Boeing and Airbus aircraft in the Emirates fleet (Source: Dhierin-Perkash Bechai)
Looking at the chart, it can be seen that Boeing is dominating the Emirates fleet. Emirates has a fleet of 121 Boeing 777s, while it has 13 A340s, 21 A330s and 48 A380s. The A340s will be phased out soon and will be replaced by the Boeing 777. An order for the Airbus A350 would give a boost to the Airbus airplanes in the Emirates fleet, since the only orders Airbus has received from Emirates are for the Airbus A380. Previous orders for the A340 have been canceled, showing that Emirates prefers the Boeing 777 and Boeing 777X over the Airbus wide bodies.
Looking at Emirates' orders, Boeing has about 70% of the orders and the remainder are orders for the Airbus A380. As Emirates is expected to double its fleet by 2020, it can be said that Airbus is missing out here.
The cancellation shows confidence in the 777 and 777X program. While Emirates already dropped the Boeing 787 as a possible fleet member in an early stage, now the Airbus A350 is being dropped, which means that Emirates is not even trying to make use of the duopoly that Boeing and Airbus have to achieve bigger discounts (a balanced fleet forces both Boeing and Airbus to come up with attractive deals, additionally Airbus probably is very willing to give big discounts to have the A350 in the Emirates fleet).
So although the cancellation for the Airbus A350 did not bring Boeing any orders Boeing, must feel confident about the 777X concept being good enough for Emirates to drop the entire A350 order.
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