Wednesday, 27 November 2013

Boeing fights Airbus with mud and an attempt at oriental psychology. Was there a flaw?

Boeing's verbal assault on Airbus' offer to China of reduced weight A330s as a low(er) capital cost solution to some of the country's capacity and air traffic congestion problems was a mix of pure mud and an attempted use of oriental psychology to offside its rival.

Mud is a standard feature of  fights for aircraft  orders. It isn't new. It's been around for a long time , sometimes expressed loudly and sometimes quietly behind the curtains in a sort of "Pssst.... did you know the wings fall off " sort of  way. Psychology and above all " Face" is important in China. Sometimes it's almost everything.

First then to the mud. To first say that the proposed slimmed down version of the A330-200 for shorter range domestic use is old technology so nobody in their right mind would go for it and, to cover the options a bit if you really wanted that sort of thing Boeing just happen to do a nice line in the latest versions of the 1950s/60s designed 737 was a pretty good dollop of the brown stuff.

Next to the psychology/face issue. At first sight/hearing that was much cleverer. Saying that not only was the weightloss A330 a heap of old tech rubbish but that even to offer it to the Chinese was itself a demeaning affront to wise and honourable customers when there were higher tech, newer (Boeing) things available hit both the mud and the face bottletops neatly, were it not for the added unspoken insinuation that the Chinese would be mugs to buy it anyway.

It's this last bit which might be Boeing's undoing. Nobody likes to be told they are less than 100% astute. The risk is the Chinese might decide that the immediate lower purchase price of the older A330 wins over a glitzy new more expensive and more fuel efficient alternative, -let's call it as a random example a 787-8.  For one thing the A330's capital cost is cheaper right now and continues to be over the time it is financed or leased ,whereas the fuel economy benefits of the more expensive to buy new alternative are only harvested over the next 15-20 years and even then are reduced by its higher financing costs. That could well persuade the accountants that the cheaper A330 is the one to go for. If you are Chinese you might then be less than happy with the people who said it would be almost beneath their dignity to even be offered such an aircraft.

 The Boeing line was therefore risky as well as probably totally ineffective anyway. Their spokesperson should have looked a jump or two further down the line. Although it is counter culture particularly Boeing/Airbus spats " What they are offereing is good but ours is much better" could have been a better option. Unthinkable though, unthinkable. You just can't say things like that when you are selling aeroplanes.

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