When Boeing concluded its recent trade-in deal with Singapore Airlines (SIA) for 10 more 777s in exchange for a guarantee to buy and remarket its entire A340 fleet, the move seemed as capricious as it was masterful.
But, with arch rival Airbus Industrie putting the finishing touches to a master plan to ensure that Boeing's remarketing plans fail, the whole deal is looking increasingly questionable as a business tactic in the cut throat world of airliner sales.
While on the one hand, Boeing's agreement to acquire SIA's 17 A340-300s in return for 10 777s could set a new trend in airliner selling, Airbus is determined to ensure that the risks of such a strategy outstrip the benefits.
The Boeing/SIA deal has angered Airbus in much the same way as its rival's 20- year exclusive contracting deals with various US airlines did two years ago. Then, as now, Airbus was faced with the option of following Boeing's lead and undertaking similar tactics, or trying to smother the deals at birth.
Last time, Airbus used official channels to object to Boeing's strategy, forcing the US manufacturer to take a step back after much sabre-rattling from Europe. This time, the European consortium is trying a more subtle approach to ensure that it can trip up its rival, threatening to withdraw all support for the A340s if they are remarketed by Boeing.
That in itself would not prevent Boeing from finding a home for the aircraft, but it could end up costing the company a great deal of money by forcing it to buy in that support from elsewhere.
But the redrawing of the battle lines by Boeing has rankled with Airbus because the SIA deal will inevitably make it harder for Airbus to sell new A340-300s, and will drive down prices because the European consortium will have to sell A340s in competition with Boeing/SIA.
The prospect of what is effectively a year's production of cheap, nearly new A340s coming on the market in the near future will not have been well received in Toulouse. The consortium aims to respond to Boeing's pricing level by offering competitive deals of its own, but this could see it dragged into a downward spiralling price war.
By threatening not to support any customer that acquires the aircraft from Boeing, Airbus will effectively orphan the A340 fleet to ensure that its rival has a tough time concluding a solid commercial deal for the aircraft.
Here, Airbus needs to tread carefully. Failing to provide a proper support package means risking alienating those airlines that would be interested in buying the ex-SIA A340s at Boeing's knock-down price. So Airbus' very own marketing force de frappe that has helped it gain market share risks backfiring with potentially disastrous consequences - and Boeing knows it.
No-one is questioning the nature of the Boeing deal, especially if the US manufacturer believes it can make money and justify its actions to shareholders. Ultimately, the arrangement serves to preserve the dominance of the 777 at SIA, a strategically important customer. It also ensures some important orders on the board for Boeing for 1999. The other bonus is the headache it provides for Airbus A340 sales.
If Boeing does end up with the SIA aircraft on its books, it remains to be seen how it will fare trying to market a large fleet of aircraft it did not design or build. It will also have to limit itself to offering the A340s to existing operators, or risk taking market share away from itself by placing them with potential 777 operators.
Some would say that bending, even breaking, the rules is what successful commercial business practice is all about. Even so, this deal represents a watershed, pushing the fierce competition between Boeing and Airbus to a new level.
But, with the new-airliner market on course to degenerate into a secondhand car dealer style of racketeering if this type of deal prevails, it is difficult to see how either supplier can be on anything but the losing side.
In a market with just two competitors, horsetrading of one another's products will not only distort the market even more, but could ultimately ruin it and its players to no advantage to anybody, including the airlines buying their aircraft and the passengers flying in them.
Source: Flight International
