Airbus, Boeing wide-body jet battle triggers warnings of oversupply

Fri Aug 1, 2014 3:17pm EDT
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By Tim Hepher

PARIS (Reuters) - Airbus's (AIR.PA: Quote) summer sales campaign with the new A330neo airliner has triggered warnings of potential oversupply in the wide-body market and of a bruising price battle as the older-generation model undercuts rival Boeing's (BA.N: Quote) 787 Dreamliner.

Two weeks after Airbus announced a revamp of its A330 at the Farnborough Airshow, the battle for wide-body sales is heating up as Delta Air Lines (DAL.N: Quote) seeks to renew part of its fleet.

The head of the U.S. carrier is so confident of getting a bargain he began negotiating in public, saying he would take the A330neo for barely a third of its $275 million official price.

His "high 70s, low 80s" bid was below the market value of such jets - but not by a massive margin, analysts said.

The aerospace industry is focusing on squeezing the maximum life out of existing products following some expensive upsets, including delays and technical problems on the 787 and Airbus's A380 superjumbo.

Airbus has upgraded the A330, and Boeing has updated its larger 777, even as both companies pour billions into developing next-generation models such as the 787 and the forthcoming A350.

But big jets bring proportionally bigger risks.

Now a debate is growing over whether the airline market can absorb the industry's older models at the same time as state-of-the-art new ones. That, analysts say, could have a bearing on pricing and margins right across the industry.   Continued...

Visitors walk past the logo of Airbus Group during the e-Aircraft Day at the Bordeaux Merignac airport, southwestern France, April 25, 2014.   REUTERS/Regis Duvignau