Can Boeing Grasp This Huge Opportunity?

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Competition between the two airplane makers, Boeing (NYSE: BA) and Airbus, owned by European Aeronautic Defence and Space Company (NASDAQOTH: EADSY.PK), has intensified over time. Airbus won the order battle at The Paris Air show, leaving Boeing behind. The upcoming Dubai Air show is expected to be held in November this year, and is being touted as one of the biggest opportunities of all time for these companies. Let’s see whether Airbus will be able to beat Boeing once again.

Fierce competition

Due to electrical problems identified in the 787 Dreamliner stemming from its lithium-ion batteries that overheated, Boeing gave Airbus the international advantage. Airbus, with its A350, is well positioned to compete with Boeing’s 787. The Boeing 787 Dreamliner and Airbus A350 are popular planes due to fuel efficiency, yet Airbus A350 is more fuel efficient than the 787 Dreamliner.

According to Boeing, the new 787 Dreamliner has 210-250 passenger seats and has a flying range from 7,650 miles-8,200 miles; as compared to the Airbus A350 which can fly up to 10,300 miles. Boeing launched a longer version of 787-10 with 323 seats to carry more passengers. Boeing also beat Airbus on a cost basis. The 787 Dreamliner costs about $206 million - $243 million each compared with $254 million - $332 million for the A350.

Airbus beats Boeing in order battle

The battle between the world’s biggest airplane makers heated up at the Paris Air show. Airbus won the order battle from Boeing and booked orders for 466 aircraft worth $69 billion. These orders included 59 orders from Singapore Airlines and Air France for A350. Boeing booked a total 442 aircraft orders, including 102 orders for the 787. The list price of Boeing’s total order was $66 billion.

At the Paris Air show United Continental Holdings (NYSE: UAL) was an active customer of Airbus and Boeing. United ordered 10 Airbus 350-1000 and upgraded 25 previous orders for the smaller A350-900 to the new 350-1000 model. It also purchased 20 787s from Boeing. Twenty Boeing orders consisted of 10 new Dreamliners and the remaining 10 were for converting the older orders to the new and larger version.

At the Farnborough Air Show held last year, Boeing booked total orders worth $72.2 billion as compared to $16.9 billion for Airbus.This order battle will also heat up at the Dubai Air Show, expected to be conducted in November 2013. Emirates Airline wants to replace its 175 planes of 777s generation and will be a prime customer for Boeing or Airbus. The Dubai Air show organizers are expecting that this will be the biggest air show in their 26 year history and expect a crowd of more than 60,000 visitors and over 1,000 exhibitors from 50 countries which include 80 defense companies.

Boeing’s Strong orders

Despite a battery problem in the 787, Boeing still received strong orders. Its Dreamliner was grounded worldwide by the FAA (Federal Aviation Administration) for four months due to lithium-ion battery problems and was recently returned to service. A few days back, technical problems arose in the 787 Dreamliner of United due to which the plane made an emergency landing.

In the last week of June came the second emergency landing by United Airlines' Dreamliner. Recently, Poland Airline LOT postponed two Boeing Dreamliner flights due to technical problems arising in aircrafts, but it is still not confirmed whether the problem was due to overheating of batteries or any other technical fault. LOT was the first European company last year which added Dreamliner to its fleet.

Similarly, at the beginning of this month, All Nippon Airways cancelled a number of flights and Japan Airlines bound-back its flight due to engine problems in 787. In January, the Japanese airline grounded 50 Boeing 787s due to battery problems identified in two planes. Such troubles in the 787 are the reasons behind reduced Boeing orders at The Paris Air show, but these orders are still high despite a number of technical problems.

Conclusion

The Paris Air show proved that competition in the aircraft industry is increasing; which is a market worth trillions of dollars. Boeing and Airbus are working hard to produce top quality and fuel efficient jets to win more orders. However, it seems that Boeing has not been able to fix problems with its its Boeing 787, which might further reduce its orders. Both Airbus and Boeing are a good investment, but in case of single choice, I would pick Airbus over Boeing because Airbus has an opportunity to increase its orders at the coming Dubai Air show.

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