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Tony Sepanski · 03-08-2002, 12:14 PM

This certainly is a curious decision.

http://seattletimes.nwsource.com/htm...boeing080.html

South African Air dropping entire Boeing fleet

By David Bowermaster
Seattle Times aerospace reporter

BOEING, 2001
South African Airways plans to replace its new 737-800s with Airbus jets.

The call from Johannesburg woke Boeing Senior Vice President Doug Groseclose at 1:30 a.m. yesterday. The news was not good. After a hard-fought sales campaign, South African Airways had decided to purchase 15 Airbus A340 widebody jets, rather than Boeing 777s, to replace 14 aging 747s and two 767s.

That was not all. To fulfill its desire to work with one aircraft manufacturer, SAA also had decided to purchase 11 Airbus A319s and 15 A320s and phase out its fleet of 43 single-aisle 737s by 2011 — including 21 737-800s ordered two years ago.

"Obviously Boeing is extremely disappointed today," Groseclose said. "We had worked really, really hard to win their confidence."

All told, SAA, which up to now has operated an all-Boeing fleet, will purchase 41 Airbus jets with a retail value of $3.5 billion. The deal promises to be one of the largest of 2002, as the world's airlines continue to struggle with the aftershocks of Sept. 11.

Airbus hailed the purchase as an endorsement of its product line and in particular its twin-aisle jets, which have struggled against their Boeing competition.

"This is a significant victory for the A330/A340 program over the 777," said Mary Anne Greczyn, an Airbus spokeswoman. "A complete fleet change is as strong a product endorsement as any manufacturer can look for."

Airbus and Boeing have gone toe to toe in sales campaigns around the globe in recent years as Airbus has used aggressive pricing and incentives to entice carriers away from Boeing. The competitiveness has escalated as the pool of airlines able to buy planes has shrunk since Sept. 11.

While any win is significant in the current environment, it is hard to tell if the SAA deal signals any long-term shift in the balance of power between Boeing and Airbus — particularly because SAA's motives are hard to read, analysts said.

"I believe there's a bunch of inconsistencies with respect to the outcome and (Airbus') statements about operating economics," said Howard Rubel, an aerospace analyst with Goldman Sachs.

SAA President and Chief Executive Officer Andre Viljoen said, "Airbus offers lower operating costs and good product offering."

Yet Rubel said the operating costs of the 777 are highly competitive with those of the A340.

Price undoubtedly was a factor. Airbus insisted SAA's decision was based on performance, but Viljoen said SAA "negotiated a highly competitive net price for this new fleet."

In a not-so-subtle jab, Groseclose suggested Airbus made big concessions to get the deal done.

"Due to the lack of sales for the A340, Airbus was desperate to place these products somewhere," he said.

SAA's decision to turn its back on the 21 737-800s it ordered in March 2000 raised the most eyebrows. The airline has received 16 of those planes so far from lessor GATX Capital.

When SAA last October reported a loss of more than $60 million for 2001, Viljoen said problems with the 737-800, including high operating costs, slow turnaround times and passenger dissatisfaction, contributed to the dismal results.

Groseclose acknowledged SAA had "teething problems" when the planes were introduced, but he believed the problems were remedied.

"Everything we had done had met their expectations," Groseclose said.

Rubel, the analyst, said it is noteworthy SAA will not replace the 737-800s with A320s until 2010, which is about the time the planes will come off lease.

The reported problems may "heighten concerns" on the part of airlines such as EasyJet and Go that are currently deciding between 737s and A320s for their fleets, but Rubel added: "If (SAA) was really that unhappy with (the 737s), why are they waiting until 2010 to get rid of the plane?"

Political considerations may have come into play as well. The South African government has been favoring European military hardware over American products in recent years to improve trade and political relations with Europe, according to Richard Aboulafia, senior aircraft analyst at the Teal Group, a consulting firm. The same rationale may have tipped the scales toward Airbus, he said.

Whatever SAA's motives, Airbus is clearly happy to have the business.

Boeing, meanwhile, must hope the high-speed Sonic Cruiser now under development will give it a chance to get back in SAA's good graces.

"We've had a wonderful history with SAA," said Groseclose. "From a geographic perspective, the Sonic Cruiser would fit very handsomely into their fleet plans."

03-08-2002, 12:14 PM	#1
Tony Sepanski Master Collector Join Date: May 2000 Location: Seattle, WA, USA Posts: 798	SAA converting fleet to Airbus This certainly is a curious decision. http://seattletimes.nwsource.com/htm...boeing080.html South African Air dropping entire Boeing fleet By David Bowermaster Seattle Times aerospace reporter BOEING, 2001 South African Airways plans to replace its new 737-800s with Airbus jets. The call from Johannesburg woke Boeing Senior Vice President Doug Groseclose at 1:30 a.m. yesterday. The news was not good. After a hard-fought sales campaign, South African Airways had decided to purchase 15 Airbus A340 widebody jets, rather than Boeing 777s, to replace 14 aging 747s and two 767s. That was not all. To fulfill its desire to work with one aircraft manufacturer, SAA also had decided to purchase 11 Airbus A319s and 15 A320s and phase out its fleet of 43 single-aisle 737s by 2011 — including 21 737-800s ordered two years ago. "Obviously Boeing is extremely disappointed today," Groseclose said. "We had worked really, really hard to win their confidence." All told, SAA, which up to now has operated an all-Boeing fleet, will purchase 41 Airbus jets with a retail value of $3.5 billion. The deal promises to be one of the largest of 2002, as the world's airlines continue to struggle with the aftershocks of Sept. 11. Airbus hailed the purchase as an endorsement of its product line and in particular its twin-aisle jets, which have struggled against their Boeing competition. "This is a significant victory for the A330/A340 program over the 777," said Mary Anne Greczyn, an Airbus spokeswoman. "A complete fleet change is as strong a product endorsement as any manufacturer can look for." Airbus and Boeing have gone toe to toe in sales campaigns around the globe in recent years as Airbus has used aggressive pricing and incentives to entice carriers away from Boeing. The competitiveness has escalated as the pool of airlines able to buy planes has shrunk since Sept. 11. While any win is significant in the current environment, it is hard to tell if the SAA deal signals any long-term shift in the balance of power between Boeing and Airbus — particularly because SAA's motives are hard to read, analysts said. "I believe there's a bunch of inconsistencies with respect to the outcome and (Airbus') statements about operating economics," said Howard Rubel, an aerospace analyst with Goldman Sachs. SAA President and Chief Executive Officer Andre Viljoen said, "Airbus offers lower operating costs and good product offering." Yet Rubel said the operating costs of the 777 are highly competitive with those of the A340. Price undoubtedly was a factor. Airbus insisted SAA's decision was based on performance, but Viljoen said SAA "negotiated a highly competitive net price for this new fleet." In a not-so-subtle jab, Groseclose suggested Airbus made big concessions to get the deal done. "Due to the lack of sales for the A340, Airbus was desperate to place these products somewhere," he said. SAA's decision to turn its back on the 21 737-800s it ordered in March 2000 raised the most eyebrows. The airline has received 16 of those planes so far from lessor GATX Capital. When SAA last October reported a loss of more than $60 million for 2001, Viljoen said problems with the 737-800, including high operating costs, slow turnaround times and passenger dissatisfaction, contributed to the dismal results. Groseclose acknowledged SAA had "teething problems" when the planes were introduced, but he believed the problems were remedied. "Everything we had done had met their expectations," Groseclose said. Rubel, the analyst, said it is noteworthy SAA will not replace the 737-800s with A320s until 2010, which is about the time the planes will come off lease. The reported problems may "heighten concerns" on the part of airlines such as EasyJet and Go that are currently deciding between 737s and A320s for their fleets, but Rubel added: "If (SAA) was really that unhappy with (the 737s), why are they waiting until 2010 to get rid of the plane?" Political considerations may have come into play as well. The South African government has been favoring European military hardware over American products in recent years to improve trade and political relations with Europe, according to Richard Aboulafia, senior aircraft analyst at the Teal Group, a consulting firm. The same rationale may have tipped the scales toward Airbus, he said. Whatever SAA's motives, Airbus is clearly happy to have the business. Boeing, meanwhile, must hope the high-speed Sonic Cruiser now under development will give it a chance to get back in SAA's good graces. "We've had a wonderful history with SAA," said Groseclose. "From a geographic perspective, the Sonic Cruiser would fit very handsomely into their fleet plans."