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Airbus-Boeing duel intensifies; small jets make a haul

An Embraer SA E190-E2 passenger aircraft on show on Day 2 of the Farnborough International Airshow 2018.


THE rumble between Airbus SE and Boeing Co for dominance in the market for smaller jets is already heating up, if a sales flurry at the Farnborough Airshow, the aviation industry's biggest expo, is any indication.

Embraer SA, the Brazilian planemaker tying the knot with Boeing in a US$3.8 billion venture, had its best showing in five years with orders and commitments for 300 planes, including options. That amounted to a US$15.3 billion haul before the customary discounts for aircraft purchases.

Airbus broke a sales drought this month for the aircraft formerly known as the Bombardier Inc C Series. It won a 60-jet commitment from investors creating a new US airline.

That matched an order of the same size by JetBlue Airways Corp on July 10, the day Airbus rebranded the jet as the A220 family. Combined, the deals are valued at US$10.8 billion.

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Airbus chief executive officer Tom Enders said at a briefing on Wednesday: "Bombardier has sold 400-and-something in 10 years, we have now sold 120 and counting in about a week."

The duelling tallies herald the coming face-off between the world's two biggest plane-makers over jets with fewer than 150 seats. While the market had been overshadowed during the past two decades as airlines sought ever-larger single-aisle aircraft to shuttle travelers, Airbus and Boeing are now muscling in and vowing to drive down supplier costs.

If they are successful - and prices fall - sales will be positioned to accelerate.

Boeing and Embraer do not expect to finalise their complex agreement until late October, and the deal is not expected to close until as late as the end of next year.

While their sales teams will not be able to market the aircraft jointly until the tie-up is approved by regulators, Boeing already sees opportunity.

Greg Smith, Boeing's chief financial officer, said in an interview: "When you take their bill of material and ours and compare the pricing, we think there's opportunity there. Obviously, it'll help us in the marketplace sell those aircraft."

The Chicago-based planemaker is also studying ways to reap other benefits from the tie-up. Embraer has a wealth of engineering talent known for their savvy aircraft design.

And the Brazilian company's experience making components such as landing gear would potentially help expand a Boeing initiative to bring more supplier work in-house. Mr Smith sees the relationship bolstering Boeing's manufacturing by driving competition and providing redundancy in instances where the industrial giant relies on a single source.

Embraer's commercial aircraft chief, John Slattery, sees the deal with Boeing closing ahead of schedule, which would enable the plane-makers to start coordinating their sales efforts.

"I'd be very disappointed if it took a year and a half to execute this," he said. The Brazilian manufacturer's upgraded E2 models entered service this spring with Norwegian regional carrier Wideroe.

Embraer's sales team is trying to secure bigger transactions in the second half of the year, Mr Slattery said.

The momentum was apparent at Farnborough, where Embraer stunned industry observers with a sales haul that included a Republic Airways order of 100 Embraer E175 regional jets valued at US$4.7 billion, along with options for another 100 of the planes.

United took 25 of the 76-seat planes, a deal valued at about US$1.2 billion. "It certainly exceeded my expectations," said John Plueger, chief executive officer of Air Lease Corp, the largest publicly traded US aircraft financier.

"I don't think all of those orders would've been there without the Boeing momentum."

Whether the sales flurry continues depends, in part, on whether Airbus and Boeing sustain their focus on the small jets - and bring down prices. "Why have people like us not ordered the C Series?" Mr Plueger said of the company he co-founded.

The jet family is too expensive, its customer base too limited, and its future under Bombardier was uncertain, he said. To make the aircraft viable, Airbus has said it needs a "double-digit'' reduction in supply-chain costs and is in the process of negotiating with suppliers. BLOOMBERG

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