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 affected.

While European aircraft manufacturer Airbus’s assembly plants are running at full capacity to meet orders for 7,197 narrow-body Airbus A320s, 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 line 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 an Ethiopian Airlines plane crash in 2019. It was the second crash involving a Boeing 737 Max, after the previous year, which 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 company. 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. 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 is not just affecting 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 flies 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 technology 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. The five-decade transatlantic rivalry between the two airlines has been the foundation for an explosion in passenger numbers and has led to innovations that have reduced the cost of flying and made travel more accessible to the masses.

Aviation experts say the world needs both Boeing and Airbus to be strong. This is vital for the health of the global aviation industry. "Having a strong Boeing and a strong Airbus is absolutely necessary. Having both of them 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 those expectations now depend 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% share of 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 aircraft maker has added new variants to the family, including the A320neo and A321neo , which feature more efficient engines. This is 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 sooner, 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 to a near standstill, Boeing suffered a lot of damage, leading to Airbus dominating the narrow-body aircraft market.

“The market share has shifted strongly to Airbus with the launch of the A320neo ,” said Aengus Kelly, CEO of AerCap, the world’s largest aircraft lessor. “That’s not going to change.” So Boeing should focus on the next generation of aircraft and build a “serious competitor” to compete with anything 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 American and European manufacturers.

One potential competitor that has long been mentioned is Comac, a Chinese aircraft manufacturer. Backed by heavyweight 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 that Comac will become a competitor in the near future.

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

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

But many believe Embraer will be cautious about taking on two giants of the aviation industry. Bombardier, Canada's former industrial giant, 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 London consultancy. “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