Word: airbuses
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...Pacific Rim to cancel or delay billions of dollars' worth of aircraft orders. Boeing, which plans to build 550 jetliners in 1998, says the downturn may cost it some 90 deliveries--which could carry a value of $10 billion--over the next five years. In Europe, Boeing rival Airbus Industrie, pushing for a 50% share of the world's $65 billion-a-year jetliner market, is wooing long-standing Boeing customers and has been bargaining hard for a $3.8 billion order from British Airways. Just last week US Airways, which previously ordered 400 Airbus jets, said it would...
Impressive as all that is, some critics doubt that the transformation alone will have much impact on Boeing's bottom line. Wolfgang Demisch, a managing director of the investment firm BT Alex. Brown, calls Boeing "hugely overstaffed" and ridicules its price war with Airbus. "The commercial-aircraft industry should be enormously profitable because it is a fortress franchise," Demisch says. He argues that with just two manufacturers selling to about 450 airlines, "I see no reason at all why prices [of planes] are as bad as they are. Neither competitor has any real notion of price discipline...
...fact is that airlines have grown skillful at extracting deep discounts from Boeing and Airbus by holding out huge contracts and bargaining hard on terms. In its latest solicitation, British Airways took bids from Boeing and Airbus for 100 jets with a total value of some $3.8 billion. British Airways has never bought a plane from Airbus, and Boeing doesn't want the streak to end. So the jetmakers have been battling over everything from prices to innovative leasing deals that British Airways wants on highly favorable terms...
...manufacturing archrivals are also locked in a bet-your-company stare-down over the immediate future of air travel. Airbus foresees a market for a superjumbo successor to the 747 that can haul anywhere from 555 to nearly 1,000 passengers. (The largest 747 carries as many as 568 people.) Working with some 20 airlines, Airbus is spending $9 billion to develop a plane it calls the A3XX and promises to roll out the monster by 2004. Boeing says its own "medium-large" 767s and 777s can easily connect cities such as Cincinnati, Ohio, and Frankfurt, Germany, eliminating the need...
Business travelers may grumble about moving to the back of the Airbus, but in the air and on the ground, special deals abound for those who are willing to lower their sights. Even though the base rate at Singapore's Hotel Phoenix is about $160 a night, marketing director Low admits that she "is happy to let you stay for $87 a night." Many hotels are spicing up the discount deal with a slew of extras, from free clothes pressing to complimentary limousine transport and free breakfast. Hong Kong's Conrad Hotel, for instance, is offering a standard room, with...