EasyJet's order for Airbus A319s is being heralded as a success for both sides. But did the manufacturer's concessions make it worth it?
Champagne corks were popping in Toulouse and Luton last week as Airbus celebrated its landmark order from a European low-cost carrier and EasyJet signed what looks to be the most lucrative airliner deal in history. Boeing decided that its European rival had moved the bar too low and refused to match its terms.
So Airbus can now put another tick in a box on its "must-do" list - the much sought-after European low-cost airline customer. The deal bears many similarities to the campaign for British Airways' business four years ago, when the terms and guarantees were good enough to persuade the hitherto staunch Boeing operator to finally order Airbuses at the umpteenth time of asking.
The UK flag carrier signed a deal valued at $9 billion for 188 A320 family aircraft, but secured a huge discount rumoured to be in the order of $1.6 billion. BA's then chief executive Bob Ayling was confident that no other airline would be able to achieve better terms.
Apart from the strategic importance of the BA deal, then, as now, it dealt a blow to the Boeing public relations machine that had made much of having a dominant position in the fleet of an Airbus member country's national airline. This time, the EasyJet deal dispels Boeing's much promoted myth that low-fare airlines - the European ones at least - are only successful if they fly Boeing 737s.
It is a fact that to date most low-fare airlines around the world have chosen the ubiquitous Boeing twinjet. But this was as much to do with timing and availability as aircraft economics. In the 1990s, the 737-200 and Classic models were readily accessible through leasing companies and finance houses, and had a huge and ready supply of trained pilots. This made it a "no-brainer" for Europe's start-up low-fare carriers like EasyJet, Go, Ryanair and Virgin Express to adopt the 737 as the cornerstone of their fleets, giving the US manufacturer a leg up in later campaigns for new aircraft.
In 1998, when EasyJet last went shopping, Airbus pitched in with an A319 offer. Tales from Toulouse tell how EasyJet chairman Stelios Haji-Ioannou was presented with a model of the A319 in the airline's colours but with the Airbus salesman's telephone number in bold type in place of the EasyJet booking number which usually adorns its aircraft.
The manufacturer admits privately that back then it was busy with bigger fish than the still-embryonic orange brigade in Luton. On that occasion, Boeing was victorious, securing a major 737-700 order, and went on to rub salt in to the wound with a series of major deals from Ryanair.
Times have changed in those four years. EasyJet's aircraft now carry an internet address rather than a phone number, and it has become Europe's largest and fastest growing low-fares airline following its takeover of rival Go earlier this year. Managing director Ray Webster also points out that in 1997 the A319 was still an unproven quantity, particularly from a long-term investment perspective, but these questions have been answered and this time the A319 has got the nod.
So, just like when it was the loser at BA a few years ago, Boeing is consoling itself with the fact that it is the moral winner by not stooping to a level of concessions that would not have made sense to its shareholders. "Our dominant position [in the low-cost market] caused our competitor to work aggressively," says Boeing chairman Phil Condit. The implication is that Airbus has again bitten off more than it can chew, but chief executive Noel Forgeard is adamant that the deal is "cash positive".
Condit also suggests that a low-cost airline cannot be successful with a mixed fleet and the most successful low-cost operators today are those that have stuck to just one type. So has EasyJet made a fatal mistake?
The single-supplier point was long argued by the engine manufacturers to retain exclusivity, but not any more. But the power-by-the-hour engine maintenance agreements and cost guarantees now available enable airlines to mix and match their engine suppliers without so much as a blink. They will claim that the competition it introduces between suppliers makes for better cost of operation, rather than worse. If it works for engines, why should this not work for the airframe?
On this occasion EasyJet and Airbus are claiming they are the triumphant winners and Boeing the loser, but time will tell whether the European manufacturer's final dash to thefinish line was really justified and the trophy worth it in the end.
Source: Flight International
