Aug 30

For The First Time Since The Recession, Boeing Won’t Raise Airplane Prices Due To Plunge In Demand:

As part of the US economic slowdown, many have observed the sharp drop in demand for heavy trucking, coupled with the steep dropoff in train and intermodal traffic. Now, a third major red flag has emerged in the sky, where the slowdown in sales and new orders for airplanes is now so acute that US plane giatn, Boeing, announced on Monday it would refrain from increasing jetliner prices for the coming year, the first time it has held prices steady since 2009.

“Boeing will continue to quote July 2015 base prices in 2016,” company spokesman Doug Alder said in an email to Reuters. A tactic typically invoked during recessionary periods Boeing has held prices steady during sales slow-downs in the past. It did not increase prices in 2001 or 2009, Alder noted.‎ Boeing and Airbus sales fell precipitously those years following the Sept. 11, 2001, attacks and the financial crisis.

While airlines typically negotiate steep discounts from the list prices that Boeing and rival plane maker Airbus quote publicly, leaving the list prices as largely symbolic, the pricing strategy provides a glimpse into the overall market, and needless to say, this year it has been dour, dropping 20% YTD: in 2016 Boeing has booked new orders for 335 planes though Aug. 23, much fewer than the 418 jetliners in the first seven months of 2015, according to company data. Boeing list prices range from $80.6 million for the small 737-700 to $400 million for the large 777-9X.

The Boeing slowdown, however, pales in comparison to the plunge in global demand for Airbus poroducts: sales at the European conglomerate have slowed to a net 323 through July this year. That compares with 1,080 in all of 2015. Airbus prices range from about $88.6 million for an A319 up to $428 million for the double-decker A380.

Both major plane makers have struggled to sell their big twin-aisle planes this year as low fuel prices have kept older planes flying longer.

Even as Boeing has said it feels particular pricing pressure from Airbus, it has vowed that it will not cut prices simply to win market share. It almost certainly will.

Boeing said earlier this month that it may need to cut production of its twin-aisle 777 and skip a planned production rate increase on the 787 as a result unless sales improve. Boeing also is slowing production of its 747-8 jumbo jet. Airbus said in July that it would cut A380 production starting in 2018, citing weak demand for its largest plane.

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