Boeing Explains Why The Japanese Airplane Market Is So Important
Boeing
Japan Airlines President Yoshiharu Ueki, left, and then Boeing Commercial Airplanes President and CEO Jim Albaugh cutting the ribbon at a ceremony for the delivery of the first two 787s, in March 2012.
Japan Airlines (JAL), a longtime loyal Boeing customer, will spend some $9.5 billion to buy between 31 and 56 A350 XWB jets from Airbus, it and the plane maker announced today.
The deal is a huge blow to Boeing for three key reasons:
It lost out on an order worth nearly $10 billion.
It's a sign that seemingly endless problems with Boeing's 787 Dreamliner are pushing customers to buy the competing A350.
Boeing is losing its grip on the lucrative Japanese market.
Japan's airline industry is well-established and still growing. In its most recent Current Market Outlook report, Boeing predicted that Northeast Asia (covering Japan, Taiwan, and South Korea) will need 1,360 planes in the next 20 years. The market is worth $280 billion.
Boeing has benefitted from that business for decades, supplying 80% of Japan's planes. Until today, JAL had never bought a single plane from Airbus. No Japanese customer had purchased the A350.
But the most lucid explanation of what Japan means to Boeing comes from the planemaker itself, in a backgrounder document posted on its website (last updated in January 2013). Here's a key excerpt (emphasis ours):
Japan has long been one of the largest single-country international markets in dollar value for Boeing Commercial Airplanes. Over the past 50 years, Japanese carriers ordered approximately 900 Boeing jetliners. In the past decade, more than 80 percent of the airplanes ordered by Japanese customers have been Boeing products.
Japan is the largest market for Boeing twin-aisle airplanes. Japan as a country is also the single biggest customer for the 787. JAL has purchased more 747s than any other airline customer, and ANA is the largest international customer for the 767 family of airplanes. Together, Japan’s major carriers make Japan one of the largest international customers for the 777, with more than 100 ordered.
The country is especially important when it comes to the Dreamliner, according to the document. All Nippon Airways and JAL were the first two airlines to put the 787 into service.
The airlines aren't canceling their orders, but its clear JAL isn't thrilled with the 787.
In a statement, Boeing said, "Although we are disappointed with the selection, we will continue to provide the most fuel efficient and innovative products and services that meet longer-term fleet requirements for Japan Airlines. We have built a strong relationship with Japan Airlines over the last 50 years and we look to continue our partnership going forward."
Kostya Zolotusky, managing director of Boeing Capital Corp, was more blunt, telling Reuters, "it's a heartbreak."
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