Boeing Prepared to Offer Cheaper 737s to Low Cost Airlines

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SINGAPORE : US aerospace giant Boeing said it would aim to offer cheaper planes to low-cost airlines after losing a lucrative 40-jet contract with Malaysia's AirAsia to European rival Airbus. AirAsia announced Thursday it would buy 40 A320 jets for 2.5 billion US dollars from Airbus even though its current fleet of 26 aircraft was made up of Boeing 737s. "We are very disappointed that Airbus was able to get the AirAsia deal," Boeing Commercial Airplanes' marketing vice president, Randy Baseler, told reporters in Asia via a conference call from the United States. Baseler said Boeing had not been able to clinch the deal mainly because Airbus had undercut them. "Airbus has been very aggressive on price ... they have reduced their price significantly," he said. "You have probably seen it reported that AirAsia was offered airplanes for under 30 million dollars and these are 60 million dollar airplanes on catalogue price so that's a big discount." However, Baseler said Boeing was prepared to meet the price challenge. "We will continue to bring the cost down so we can continue to be competitive and not let the market share slide," he said. Baseler said that, despite the AirAsia deal, 88 percent of the 1,100 airplanes being run by low-cost carriers globally were 737s. "The 737 is still dominant for big low-cost carriers," he said.
Suppose Boeing and Airbus are both having to sell very cheap aircraft to attract buyers so shouldn't really surprise us.
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It's probably about time...(I'm sure Boeing has more than made it's initial investment on the 737NG back by now and can afford more than 25%-30% discounts)...time to play by Airbus's rules and see if they have the stomach to take 60% off their catalog price. I can't believe Airbus will continue to make healthy profit margins by "giving away" their planes simply to beat Boeing to a deal. Then again, I wasn't an economics major. :o
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Totally agreed..its about time. Although Airbus has a very ambitious strategy that they are following i dont think Boeing should go blindly that way.
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Well to think Airbus have given unthinkable fab deals to EZY and Air Berlin, Boeing had to take note, and take action, to stop Airbus gaining even more ground on them!

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Has everybody forgotten the fabulous deal RyanAir got for there 737NG's? it has been reported in many respected aviation journals that RyanAir got between 40-50% knocked off the published price list.

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I think we are all making a very big assumption about the price of either aircraft; that it actually costs ~$60 million to produce an A320 - including a profit margain. I personally don't think it costs that to produce an aircraft, I would say it was closer to around half that figure - Airbus has made compromises (or perhaps not, depends on how you look at it) to keep costs down, e.g not matching aluminium panels (hence no polished Airbus liveries bar the A330's), etc. Why not cut down your profit margain to gain ground on a competitor? I assume that they still make a slight profit on their sales, with or without back-door EU funding.
I agree...well put.
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Well to think Airbus have given unthinkable fab deals to EZY and Air Berlin, Boeing had to take note, and take action, to stop Airbus gaining even more ground on them!
For Air Berlin the main reason they went with Airbus was the fact that Boeing refused to give Air Berlin the same discounts as they give to Ryanair. That understandably pissed ther management off, as they are also a big 737NG operator and were willing to make a new big order for the type. We should not forget that the negotiations with Boeing were made by Air Berlin, while Niki was doing those with Airbus. Niki and Airbus very quickly reachend an acceptable agreement, Boeing however was more diffcult to handle. The first offer was worse then the original 737 buy made by Air Berlin. The decision was even postponed to give Being time to rethink their proposal, which they refused to do. Their offer was still significantly more expensive then the ürice Ryanair piad fpr their 737NG. That led to the victory of Airbus.