Is Boeing Corporation (NYSE:BA) Losing Customers to Airbus?

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By Hanson So on December 4, 2014 Company

Airbus received its first order from Delta Air Lines last week. The order is for 25 of its A330neo aircrafts. It is important to mention here that A330neo was designed in order to compete against Boeing Corporation’s (NYSE:BA) 798 Dreamliner. Airbus, the European company that manufactures airplanes, launched its much awaited A330neo back in July. The company committed to deliver 121 aircrafts to 3 leading airline companies.

This new airplane of Airbus has the Rolls-Royce engines and curved extensions. The company promises that this new plane will consume 14 percent less fuel than its A330. Airbus is planning to introduce A330neo into service by the end of the year 2017. Although this entry is 6 years late than Boeing’s first ever 787, market experts expect Airbus to win over Boeing both in terms of market share as well as pricing.

Coming to the features of A330neo, the company plans on introducing the aircraft in 2 different models, A330-900neo and A330-800neo. If you are wondering as to what the letters neo stand for, let us reveal it. Neo is the abbreviation for New Engine Option, which indicates to the fact that the main feature in the new A330neo is the engine of Rolls-Royce. Perhaps this is the reason why the plane is much more efficient than the other aircrafts.

The plane will accommodate around 250 to 310 passengers with a 3 class seating arrangement. These features resemble that of Boeing Corporation’s (NYSE:BA) 787 Dreamliner, which has a seating capacity of around 240 to 320 passengers. Boeing’s Dreamliner has a higher range than Airbus’ A330neo. Dreamliner can fly at a range of 7,000 nautical miles whereas A330-900neo will have a range of 6,200 nautical miles.

It is important to mention here that many companies are placing orders for A330neo, despite the fact that its range is lower than that of Boeings. For instance, the airlines in Asia are fine with the range of Airbus’ airplane. It is true that Boeing’s higher range allows the airlines some flexibility in terms of the expansion of network, however, this flexibility comes at a price, which the airlines do not want to pay upfront. Chances are that the airlines, which deal with smaller trips, will prefer A330 over 787. If this happens, some of the market share from wide-body aircraft segment will be taken away by Airbus. Not to mention that the segment is currently dominated by the 787 Dreamliners of Boeing.

Boeing Corporation (NYSE:BA) has already lost some of its narrow-body aircraft segment’s market share to Airbus; losing some more in the wide-body segment can prove to be quite detrimental to the future of Boeing.

Boeing Corporation (NYSE:BA) can give a discount on the purchase of its Dreamliners in order to keep the customers intact to the company.

Coming to the stock prices of Boeing Corporation (NYSE:BA), the company, on the last trading day of December 3, 2014, started its stocks at a price of $132.65 and closed at a price of $131.97, after hitting the highest price of $133.28.