Monday, December 11, 2017

The Trump effect could give Boeing an edge over Airbus in the fight for Delta's big jet deal

Boeing may have gained an edge over Airbus as the jet makers battle for a Delta Air Lines order of up to 100 single-aisle jets, thanks to the Trump effect, an aerospace analyst said Monday.

Veteran Bainbridge Island aerospace watcher Scott Hamilton said the Boeing's 737 Max and the Airbus A320neo are almost identical in terms of economics and performance.

"Those I’ve talked to in the market think that on the merits, the choice between Airbus and Boeing is a coin toss. But throw in Trump’s Buy America and the C Factor (Boeing filing a trade complaint against Delta after it bought Bombardier CSeries regional jets), those I’ve talked to think Boeing is more likely to get the nod than Airbus," Hamilton wrote in a commentary on his Leeham News website.

"When it comes to Boeing vs Airbus in Washington (D.C.), and especially the White House, Boeing has the advantage," Hamilton suggested.

Another political factor that could influence the decision in Boeing's favor is Delta’s potential concern were it to buy Airbus about a customer backlash in the Seattle area, home of Boeing Commercial Airplanes' biggest factories, Hamilton wrote.

Boeing makes the 737 jets in Renton, and winning the Delta order would be a huge victory for Boeing and its supply chain in the region while creating positive sentiment toward Delta as it expands in Seattle.

"Delta is building a hub here in competition with Alaska Airlines, a heretofore exclusive operator of Boeing aircraft," Hamilton wrote. "Alaska’s acquisition of Virgin America, an Airbus operator, muddies these waters for now. "

Hamilton said he's overlooked one important consideration in the American-or-European jet decision: "the Trump administration’s Buy America push."

"One can just imagine if Delta buys Airbus. Notwithstanding the fact that many (or maybe all) of the A320neos might be assembled at the Mobile plant in deep-red Alabama that loves Donald Trump, Boeing has remarkably and successfully kissed up to Trump and massaged his ego to no end," Hamilton wrote.

"Boeing CEO Dennis Muilenburg didn’t take a strong stand about Trump’s Charlottesville remarks basically endorsing white supremacists. Several CEOs on Trump’s Business Council quit in protest. Not Muilenburg," Hamilton wrote.

Another aerospace analyst said the industry consensus is Airbus still has the upper hand in the Delta order battle, except for the politics wild card.

"With the entire Bombardier-Boeing clash ... Delta does have the leverage to acquire Boeing jets at high discounts," Dhierin Bechai of Aero Analysis in Rotterdam said in an interview.

Richard Aboulafia, vice president of aerospace analysis at the Teal Group, said the competition is "very hard to handicap."

"Boeing is at a political disadvantage due to the trade complaint against Delta's Bombardier CSeries order," he said. "On the other hand, that would make a Max win that much more impressive."

With Delta as the only U.S. major airline that hasn't yet specified its next-generation single-aisle jet, there's lots of business at stake for Boeing and Airbus in the decision.

Delta CEO Ed Bastian told the Puget Sound Business Journal earlier this year that he hoped to settle the jet question before 2018. Delta's board of directors meets this week to consider the order. Hamilton said the purchase could be announced by Friday.

(Andrew McIntosh - Puget Sound Business Journal)

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