Boeing's crisis threatens global aviation growth

If US aircraft manufacturer Boeing continues to lose market share to rival Airbus, the entire supply chain and airlines will be negatively impacted.

While the European aircraft manufacturer Airbus’s assembly plants are running at full capacity to meet orders for 7,197 narrow-body Airbus A320 aircraft, its rival Boeing is in crisis. The Airbus A320 is Airbus’s best-selling aircraft.

The incident of an Alaska Airlines (USA) plane door being blown off while in the air on January 5, 2024 has raised concerns about the safety of the Boeing 737 Max aircraft. This aircraft is the main source of revenue for Boeing's commercial aircraft division and is a direct competitor to the Airbus A320 .

Rescue workers at the scene of the Ethiopian Airlines crash in 2019. This was the second crash involving a Boeing Max 737, after the previous year's crash that killed more than 100 people (left); an investigator examines the Alaska Airlines plane whose door burst open mid-flight. The incident led to the temporary grounding of Boeing's Max 9 aircraft. Photo: AP

This is the latest incident for the multi-billion dollar corporation. In 2018 and 2019, the 737 Max 8 was involved in two crashes that killed a total of 346 people. The longer version, the Max 9, was also grounded before being lifted by US authorities a few weeks ago.

Investigations are underway into manufacturing practices at Boeing and Spirit AeroSystems, which builds the fuselage for the Max series. Boeing investors are demanding answers from the company. Alaska Airlines and United Airlines, the largest Max 9 customers, have also criticized the planemaker.

Boeing’s crisis has not only affected its leading position. Some experts consider that the balance of power has tilted towards Airbus in the competition between the two giants that dominate the aviation industry.

A Boeing 747 carrying passengers between New York and London in 1970. Boeing's risky decision to produce the aircraft is credited with making air travel more accessible due to cost and technological competition between Airbus and Boeing. Photo: Getty Images

Boeing - Airbus: Two giants of the sky

Almost every commercial aircraft in the world today is built by either Airbus or Boeing. Their five-decade transatlantic rivalry has underpinned a boom in passenger numbers and led to innovations that have reduced the cost of flying and made travel more accessible to the masses.

Aviation experts say the world needs the strength of both Boeing and Airbus. This is vital for the "health" of the world's aviation industry. "Having a strong Boeing and a strong Airbus is absolutely necessary. Having both of these companies strong enough to compete with each other is not only important for reducing costs but also for technological development," said Michael O'Leary, CEO of Ryanair, one of Boeing's biggest customers.

But that expectation now depends on Boeing's ability to turn things around in the wake of the recent incident. If it fails, the industry's supply chain and airlines will suffer. "There has been a shift in power: Airbus is selling more than twice as much as Boeing in the narrowbody market," said Bank of America analyst Ron Epstein.

By 1999, Airbus had a 50% market share in the single-aisle market, largely thanks to the popular A320 family, which first flew in 1987, according to aviation analytics firm Cirium. Since then, the European planemaker has added new variants to the family, including the A320neo and A321neo , which feature more efficient engines, an important feature for airlines looking to save fuel and reduce carbon emissions.

The launch of the A320neo and the near loss of its sole customer, American Airlines, prompted Boeing to launch an improved version of its best-selling 737 , the 737 Max, in 2011. The Max not only became available earlier, but also featured the same fuel-efficient engines as the A320neo to meet the needs of its customers.

However, the crash of two Max 8 planes led to the entire fleet of this type being grounded for nearly two years from March 2019. Combined with the disruptions caused by the pandemic, which brought international aviation activities to a near standstill, Boeing suffered a lot of damage, leading to Airbus dominating the narrow-body aircraft market.

“The market has shifted strongly to Airbus with the launch of the A320neo ,” said Aengus Kelly, CEO of AerCap, the world’s largest aircraft lessor. “That will not change.” Boeing should therefore focus on the next generation of aircraft and build a “serious competitor” to compete with whatever Airbus might launch.

The future of the world aviation industry

Boeing's troubles have revived debate about whether new competitors are capable of challenging the long-standing duopoly between US and European manufacturers.

One potential rival that has long been mentioned is Comac, a Chinese aircraft maker. Backed by strong backing, Comac hopes to capture a slice of the global commercial aviation market with its C919 narrow-body passenger jet.

“The localization of aircraft production will happen faster than people think,” said Fu Shan, a professor of automation at Shanghai Jiaotong University, whose team is involved in testing standards for the C919 . However, many experts remain skeptical about Comac’s ability to become a competitor in the near future.

But there are other potential competitors. For example, Brazilian aerospace and defense giant Embraer, the leading maker of regional jets with up to 120 seats for short-haul flights, could be encouraged to enter the civilian market.

The second commercial flight of the C919 aircraft of Chinese aviation company Comac. Comac is expected to create the first challenge to the “dual monopoly” in decades. Photo: Getty Images

But many believe Embraer will be cautious in taking on two giants of the aviation industry. Bombardier, Canada's former industrial leader, nearly went bankrupt trying to compete with a small single-aisle plane - the C-series .

All of this suggests that there will be no real competition any time soon. “The duopoly is working well,” says Nick Cunningham of Agency Partners, a consultancy in London. “There is no real competition to speak of at the moment.”

Some longtime Boeing watchers believe the only way for the company to regain market share is to launch a new single-aisle aircraft. However, Boeing has said it has no plans to develop a new product until the mid-2030s because it believes the new models will not achieve the desired fuel efficiency levels.

Boeing can now count on airlines to serve their markets as demand for air travel continues to grow, while Airbus is fully booked through 2030. This gives Boeing a chance to weather the storm.

Source: Financial Times

Source: https://phunuvietnam.vn/khung-hoang-cua-boeing-de-doa-den-phat-trien-cua-hang-khong-toan-cau-20240224212714605.htm