PARIS 2019 BLOG: “It’s a brand I trust”: Walsh’s very public endorsement of Boeing
Paris Air Show day two and, shock, some real news! In the best-kept industry secret of the year, British Airways parent International Airlines Group announced a deal for 200 Boeing 737 MAXs.
The deliberate significance of this LOI, for a mix of 737-8s and larger 737-10s, cannot be understated. Boeing has not secured (or at least, not publicly acknowledged) a single firm order for a MAX since the aircraft was grounded in March following the new narrowbody’s two crashes—both fatal for all those onboard.
Since then, Boeing executives have cut the 737 production rate and declared their total priority on getting the MAX recertified, back into service and trust restored with their customers and the flying public.
On that last point, Boeing just got a huge boost from IAG CEO Willie Walsh, a well-known and respected industry leader, businessman, and a 737 pilot.
Lest anyone at the Boeing show chalet didn’t get the message why Walsh was making this deal now, he spelled it out.
“We’re partnering with the Boeing brand. I’ve worked with Boeing for years and it’s a brand I trust,” he said. “We have every confidence in Boeing and expect that the aircraft will make a successful return to service in the coming months having received approval from the regulators.”
While IAG has Boeing widebodies in its fleet, its narrowbody fleet is almost entirely comprised of Airbus A320 family aircraft, making the deal even more pointed. Walsh—known for his extreme focus on cost discipline--was prepared to absorb the potentially higher operating costs of a narrrowbody mixed fleet to demonstrate his faith in the MAX, which will be flown by British Airways and Spanish LCC Vueling. Of course, offsetting any higher operational costs might be that Walsh has likely secured the deal of the century in terms of upfront price.
Whether one airline deal—however big—can turn the page on the MAX story is not clear. Three of the biggest airlines in the US—American Airlines, Southwest Airlines and United Airlines, have multiple MAXs in storage until the grounding is lifted. The majority of their passengers now know the MAX name for all the wrong reasons, but they won’t be familiar with IAG, Walsh, certainly not with Vueling and—it has to be said—some not even with BA.
Walsh’s backing of Boeing will resonate in the airline and leasing company C-suites, however. Like Walsh, the airlines and lessors have no desire to see the narrowbody supply market becoming a monopoly, especially since the Airbus takeover of the Bombardier CSeries--now A220--and the pending Boeing-Embraer joint venture.
Airbus, even with the A220 and now the new longest-range A321XLR in its portfolio, cannot physically meet the worldwide demand for highly efficient, low emissions narrowbodies that the A320neo and MAX were designed to satisfy. The neo has some 6,500 orders, while the MAX has more than 5,000. Neither manufacturer’s backlog would allow one to pick up the other.
And for most airlines, there’s little-to-no interest in letting the MAX situation create a gap in which Chinese manufacturer COMAC can extend its narrowbody market share beyond its predominantly Chinese customer base.
Boeing had other good show news today with a decent-sized order from Korean Air for 787 widebodies—a deal that, unlike the MAX LOI, was anticipated.
But air shows, even more so than the millions of dollars of deals and thousands of partnerships that are secured across chalets and exhibit halls, are also about the show. Usually, the theater is outside and up in the sky, where military jets loop and roar and airliners try to steal a bit of the limelight. Today, the drama was all inside and Walsh was show master.
Karen Walker email@example.com