On the Record with RANDY BASELER, VP MARKETING, BOEING COMMERCIAL AIRPLANES
If Emirates indeed announces the widely anticipated order for
20 A380s at Paris, Airbus should enjoy its triumph while it can,
because it will have sold one-third of the airplanes that it will
sell over the next 20 years.
That forecast is still at the core of Boeing's plans, according
to VP marketing Randy Baseler. "Airbus forecasts the sale
of 1,100 A380-sized aircraft, but our forecast is around 360.
It's a huge difference, not a rounding error."
Baseler is still preaching two controversial messages: Airbus'
A380 sales estimates are far too high, and the European group
is over-producing airplanes and flooding the market.
On the A380, Boeing maintains a strong belief in fragmentation-airlines
will add more airplanes and open up more direct city-to-city connections.
"Airlines have a choice of ways to serve passengers. They
can keep the network the same, and add bigger aircraft-but it's
been the pattern, and will continue to be the pattern, that they
provide more frequencies," asserts Baseler.
He cites experience on the North Atlantic, where the average seating
capacity of airplanes has been close to flat since 1980, despite
traffic that had expanded almost threefold before the post-9/11
slump. Boeing charts show a single daily Chicago-to-Europe flight
in 1984-TWA to London -and 22 cities served in 2001.
However, Boeing charts include only U.S. carriers, and according
to Airbus there were no fewer than 13 European flag carriers linking
their home cities nonstop to Chicago in 1987. "If you show
the whole thing it's less dramatic," Baseler acknowledges.
"We do it that way because it was the new entrants, the U.S.
carriers, who were driving the market."
The Boeing 777 is fragmenting the Pacific market in the same way,
Baseler says. In 1997, 747s flew 80% of trans-Pacific sectors;
by 2001 the proportion had fallen to 40%.
Between fragmentation and a large fleet of aging 'mid-market'
airplanes -TriStars, DC-10s, 767s and A300s, for example-Boeing
projects a massive market for the new 7E7. Baseler does not expect
that Boeing will sell many more 767s -"our challenge will
be to build them efficiently at two aircraft per month"-but
the 7E7 will not only replace the 767 but be good enough to depress
Airbus A330 and A340 sales in the short term, Baseler believes.
"Airbus is just starting to develop a customer base,"
he argues. "Why should an airline add a new type to bridge
the gap between the 767s and 747s they're operating today and
the 7E7 tomorrow?"
Baseler also charges that Airbus is over-producing. After 9/11
"we quickly cut production in half. We know that we have
to bring down the supply or we have to discount prices, and that
affects asset values." To support his thesis that Airbus
is overloading the market with heavy discounting, Baseler cites
data showing that 66 A320s are parked today versus only ten New-Generation
737s, and that 56 A320s are available for sale. Airbus's A320
sale to easyJet last year was the result of discounting: "You
can discount prices, but you'd better be ready for everyone else
to hold their hands out," he warns.
Baseler expects growth to return, but with some painful readjustments.
Major hub-and-spoke airlines, he predicts, "will evolve to
get their costs down and drive the efficiency of their aircraft
up." But this means increasing aircraft throughput at the
hub, which means less concentrated 'banks' of flights and-for
the passenger-longer connection times. Making air travel even
less convenient might seem crazy, says Baseler, "But I don't
think the airlines purposely do these things-they have a lot of
fixed obligations.
"If you had to look at the industry today, without knowing
what it is, from an MBA's point of view, you'd never invest in it,"
he says. "It's horrible."
