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September 8, 2021
By Michael Graham, Valuations Manager at Ascend by Cirium
If COVID-19 has taught us anything, it is that nothing can be taken for granted, especially in airline fleet planning. Last week UK-based low-cost carrier Jet2 announced an order for 36 Airbus A321 neo aircraft, for delivery from 2023 through to 2028, with an option for up to 24 more, and specified with 232 seats. From its origins as Channel Express, Jet2 has been an almost all-Boeing airline, currently operating an in-service fleet of 74 Boeing 737 NG aircraft, as well as three 757s. The only European representation in the fleet thus far has been one Airbus A321ceo, leased in from Avolon.
In a stock exchange release, Jet2 CEO Philip Meeson advised investors that the airline had negotiated “significant discounts from the list price” on the order from Airbus. We know that steep discounts over list are par for the course with large orders, particularly from LCCs.
Nevertheless, what Jet2’s order indicates is that, as we look towards the recovery from COVID-19, pricing power apparently remains very much in the hands of customers rather than OEMs.
Jet2’s decision to choose the A321 is no doubt driven by multiple factors beyond price, including the capability of the aircraft itself. Specifically, the European aircraft offers a greater payload and range than Boeing’s 737 Max 10, which has had its introduction delayed to 2023. This likely was as important as price in the final reckoning.
|Seats (Typical)||Seats (Max)||Max range (nm)*|
|737 Max 10||188-204||230||3,330|
It is also a demonstration of how this capability gap in Boeing’s payload-range is hurting the OEM in terms of winning orders. Other historically loyal Boeing customers, including American and United, have also made headlines over the past couple of years by splitting their purchases of larger narrowbodies between OEMs; for example, United now has a total of 120 Airbus A321neos on order, including 50 A321XLRs.
United does still remain the largest Max 10 customer by far, with a total of 238 aircraft on order. Nevertheless, that fact that they, along with Jet2 and other carriers have chosen the A321neo, shows that until Boeing can deliver a more competitive offering in this growing segment of the narrowbody market, it risks ceding further market share to Airbus.
STOP THE PRESS – As I was concluding this article, Ryanair announced that its negotiations with Boeing for a purchase of 210 737 Max 10 aircraft has “ended without agreement”, citing “Boeing’s optimistic outlook on pricing”. Perhaps Ryanair’s public move is a negotiating tactic, for if Boeing are not willing to provide the price the airline requires, it seems highly unlikely that Airbus will go lower for their more capable A321neo. But therein lies the key question for now, which OEM needs Ryanair more – Airbus or Boeing? With an A321neo backlog of 3,007 today compared to 554 for Max 10, the answer seems pretty clear.