Paris Air Show
Aerospace |
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What's It
All About, Paris?
Paris (June 20, 1997) -- Airbus and Boeing circled in the ring, bathed
in bright light, gloves flashing to land pointed jabs on each other's chins.
The two heavyweights of the aerospace industry came to Paris to play out
the ritual of competition. As each blow lands, another point gets scored.
Now Needless to say, the judges' scores will not be revealed here. Let's look at the strategy. Boeing clearly came to minimize controversy. As the leading player in the commercial market, they had to make announcements at Paris. But most of their major orders were actually announced the week before, and not by Boeing. Continental's $3 billion order, the $1.7 billion Atlas order for 747s, EasyJet's order for 12 737s, American's seven 777s. Big deals made less conspicuous by their timing and by virtue of the fact that the carriers made the announcements. Boeing instead took their turn on the Paris stage to make measured, politically
astute pronouncements. For example, their repeated discussions about exclusivity.
Boeing began and ended the show by pointing to their exclusive relationship
with engine manufacturer CFMI on the 737 program, indicating that one of
the two partners in CFMI, Snecma of France, will create more jobs in France
than Airbus will with the A319. Airbus decried exclusivity, but then went
on to discuss a virtual exclusive relationship with Rolls-Royce on their
newly announced A340s, while making pains to call it a "non-exclusive"
deal. Pratt & Whitney said they had been in discussions with Airbus
on the new aircraft but didn't feel they could get a return on investment
without an exclusive relationship. So, they withdrew from consideration,
and by so While Boeing's orders mostly came the week before the show, Airbus for its part made "order" announcements at Paris almost every day. After proclaiming repeatedly that they never announced orders that were not firm, "unlike our competitors," the European consortium proceeded to spend the week announcing purchase decisions and memoranda of understanding, rather than firm orders. While the Northwest Airlines memorandum of understanding for 50 Airbus aircraft will be large, if Airbus followed their own rule, it would not be announced until the ink is dry on an actual "order." Instead, Toulouse executives issued two press releases about the deal yesterday. Airbus took an aggressive stance early. In the company's first of three show press conferences, Airbus managing director Jean Pierson leveled a series of charges against Boeing, stating that the consortium would basically see the U.S. manufacturer in court. Boeing's exclusive deals with American, Continental and Delta were cited as being in violation of the Treaty of Rome. Boeing's response was deliberate - talk about the product line, announce
a few small orders, let Airbus take its shots, and stick to the party line
about the benefit to both sides from Boeing's European partnerships with
But, while the 12 rounds at the Paris Air Show est finis, any knockout in this battle will have to wait until August, when the Boeing McMerger is destined to reach its inevitable conclusion. This judge rates the Paris fight as 9 rounds for Boeing, 3 for Airbus. In the last three weeks, Boeing's orderbook has gained significantly in comparison to Airbus. The Seattle company's quiet strategy was disarming, causing many to wonder if Boeing had lost its impact on the market. Exactly the effect Boeing hoped to gain. Airbus took several rounds with its contention about European legality and jurisdiction over the three Boeing-exclusive airlines. The aggressive style adopted by Airbus brought more pressure on the EU to take a strong stance in defense of the European consortium. Yet Boeing landed the last blow. As the trade portion of the Air Show ended yesterday, Boeing's media machine issued one last release about the French employment created by their 737. As France's newly appointed Socialist Prime Minister Lionel Jospin prepares to make his position known, one thing is for sure - preserving jobs are very high on his party's agenda. Not a knock-out, but a well-landed left hook, certainly.
In the business jet arena Boeing and Airbus are now both in the market,
forcing pressure at the high end of the scale. Bombardier's Global Express
Military programs continue as before, except the programs in this new, kinder and gentler world environment are not played out at Air Shows, but rather in long, drawn out political battles. Will Eurofighter gain German backing? Will Rafale be supported by the new French government? These and other military stories will be in the news over the next several months. One military note at this year's Paris - Russia has now overtaken the French as the world's number three arms dealer, bringing attention to the country's powerful potential as a business competitor. And yet, there has never been a question about Russia's technology. The country still builds the most impressive fighters in the world. The issue, instead, has been about their ability to market. As with Farnborough, frustrations at Paris ran high among Westerners trying to deal with the myriad of Russian companies exhibiting at the show. Typical complaints among aerospace executives were that the Russian companies were surly, secretive and poor communicators. Visitors to Russian exhibits and chalets were often as not routinely ignored or treated brusquely. A country wanting to buy a MiG-29 fighter may not care. An airline interested in an IL-96 passenger aircraft certainly will. Great success for Russian manufacturers in the marketplace will largely depend on how quickly they learn the finer skills of marketing. So, as for the aerospace industry, the prize fight will continue in other cities and other air shows. C'est la vie, c'est la guerre. |
that the bell has
sounded on the final round of this year's bout, who will be declared the
winner?
doing made
an even larger statement about the economics of the new aerospace environment.
airlines and suppliers.
In a fascinating sort of way, the Boeing approach was a kind of aerospace
Rope-A-Dope. Let the other guy flail away until he gets tired. Then land
the knockout blow.
Looking at the rest of the show,
regional jets are
the rising stars of the commercial market. The large order from American
Eagle for 75 aircraft divided between the Canadair Regional Jet 700 and
the Embraer EMB-145 is more evidence that the world's air travel is continuing
to shift from simply a hub and spoke major airline system, to dependence
on feeders. The regional capillary system has proven effective in routing
passengers between major destinations while also getting them to and from
smaller locations. Passengers are increasingly expecting jet service, rather
than turboprops. While turboprops aren't dead, it's safe to say that they
have a much weaker pulse.
and Gulfstream's
V both see the top end being eroded by these two giants while, at the bottom
end, an endless array of new and old competitors continue to force pricing
pressures.