Airbus Beats Boeing in Dubai
Middle East Oil Money Lifts Airbus Sales Above Boeing
Billions of Arab petrodollars were spent buying Airbus aircraft in the Persian Gulf. Ahead of Boeing in aircraft sales, Airbus' overall economic situation improved little
The Dubai Air show, now ranked third behind Farnborough in England and Paris in France, saw Middle East Airlines sign orders with European Aircraft Manufacturer Airbus totaling over $100 billion dollars. Amid internal corporate turmoil, European governmental intervention and unusual Arab harmony; Airbus was able to focus on selling airplanes in the Arabian Gulf. However, the monetary forecast still has a significant economic downside that must be examined.
Financial Forecast
The headlines focused on Emirates Airlines, who placed the largest single day order in aviation history, $34.9 billion; but numerous other MENA airlines placed large orders as well. As airlines in Europe and North America struggle to stay out of bankruptcy, deal with over capacity and consolidate via mergers and acquisition; Middle Eastern airlines continue to expand their ever prosperous routes.
The air show brought out the world’s best in aviation. Tensions had been rising all year in the highly competitive business of aircraft sales. Brazil’s Embraer, Britain’s BAE & Rolls Royce, Canada’s Bombardier, Italy’s Piaggio, Russia’s Sukhoi along with America’s GE and Boeing were all present. In the end, Airbus must be declared the clear victor. Depending on what statistics one views ($43.5 billion to $24.3 billion, 1.790 to 1, or $55.1 billion to $30.5 billion, 1.807 to 1.00) Airbus out sold Boeing nearly 2:1.
Economic Weakness
The numbers do not reveal the complete financial story for Airbus. The bulk of the orders came from one carrier, Emirates Airlines that accounted for nearly 58%-72% of the total orders for Airbus.
- The Government of Dubai (Dubai Holdings) owns 100% of Emirates Airlines but also owns 5% of EADS (the parent company of Airbus.) With the purchase of Airbus aircraft, Dubai has aided an ailing portion of its portfolio.
- The Wall Street Journal reported that the named value of the orders were only a “book value" and the actual price may have been "20-30% lower.” Discounting large orders is a common practice; however, such a large discount is not only unusual by also a significant negative financial impact for Airbus.
- Aircraft are sold in dollars; however, most of Airbus' production cost is Euro based. The falling dollar makes Airbus aircraft cheap for non dollar based societies and lowers the ROI for each aircraft sold by Airbus.
Boeing’s Paradigm
When considering Airbus’ success despite all the problems mentioned above, we must ask; did Airbus succeed or was Boeing ineffective? Boeing had such success in Asia that now a large backlog of orders exists: she simply can not deliver aircraft as rapidly as Airbus. Time is a significant factor for many airlines and in Dubai the airlines spoke.
All in all “a sale is still a sale.” These were orders that clearly place Airbus, from a sales point, first!($3.5 billion Airbus)
- Air Arabia ($3.5 billion Airbus)
- Bahrain Bank ($0.70 billion Airbus)
- Dubai Aerospace Aircraft Leasing ($13.5 billion Airbus, $13.5 billion Boeing)
- Emirates Airlines ($31.7 billion Airbus, $3.2 billion Boeing)
- Jabar Airlines ($0.14 billion Airbus)
- Jet Blue ($0.45 billion Airbus)
- Nile Air ($1 billion Airbus)
- Oman Airlines ($0.55 billion Airbus)
- Qatar Airlines ($13.5 billion Boeing)
- Royal Jordanian Airlines ($0.32 billion Boeing)
- Saudi Arabia Airlines ($1.6 billion Airbus)
- Yemeni Airlines ($2 billion Airbus)
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Political Turmoil Over Airbus Mess
