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Airbus is used to losing. For more than 30 years, the France-based manufacturer went into tenders to supply aircraft to Japan Airlines (JAL), the national flag carrier, and missed out every time.
Displacing Boeing, which opened its first Tokyo office in 1953 and has dominated the market ever since, was proving impossible.
“The Japanese are somewhat change-averse,” says Stéphane Ginoux, president of Airbus Japan. “If they are comfortable with the relationship, if they are happy with the product, if they don’t see too many issues, they are not going to look for change.”
But last year was different. JAL wanted to replace its ageing fleet of wide-body, long-distance 777s, and while Boeing’s new model – the 777x – was still in development, Airbus’s similar-specification A350 was fresh from test flights. Importantly, the tender was overseen by JAL’s chairman Kazuo Inamori, known for his insistence on using a range of suppliers at Kyocera and KDDI, two huge companies he founded.
And months before the decision was due, regulators had grounded all 50 of Boeing’s 787 Dreamliners after problems with lithium-ion batteries. The incidents prompted Mr Inamori to describe a complete reliance on one vendor as “abnormal” in a CNBC interview.
A JAL representative says that the Dreamliner groundings had no bearing on the decision that followed.
But other people familiar with the situation say it was probably a combination of those factors that gave Airbus a foot in the door. On October 8, JAL announced it had signed an agreement to buy 31 Airbus A350s worth $9.5bn at list prices, along with options for another 25. The single-supplier policy was over.
“It was obviously disappointing that we did not win this campaign,” says George Maffeo, president of Boeing Japan. “Going forward, we will work very hard to earn their business.”
But Airbus is keen to build on its success. It has set itself a target of a 25 per cent share of total passenger and cargo aircraft operating in Japan by 2020, from about 13 per cent now.
Boeing is contemptuous of the Airbus arithmetic, noting that it has an order book of 98 planes to deliver in Japan, most of them 787s, between now and 2020.
“They’d have to deliver a whole lot of aeroplanes in the very near term to [hit the 25 per cent target],” says Mr Maffeo. “Our backlog, even at this point, is still higher in total than Airbus’s backlog. I’m very sceptical that it is achievable.”
But the Airbus target – and Boeing’s tetchy reaction to it – is a sign of the company’s determination to advance in the only leading market where the two manufacturers are nowhere near parity.
“Maybe because Boeing used to have this market as its private garden, it is upset that competition is entering,” shrugs Mr Ginoux.
Analysts are cool on the prospect of rapid gains for Airbus. If low-cost carriers such as Jetstar Japan, Peach and Vanilla – all using the European manufacturer’s A320 – grow very quickly, there is a chance for Airbus “to get within eyesight of that figure,” says Will Horton, analyst at CAPA Centre for Aviation in Hong Kong.
But Boeing’s share will not be taken easily. The Seattle-based company has had a strong grip on Japan since the end of the second world war, when domestic manufacturers – banned from making their own aircraft by occupying forces – turned into suppliers.
Now, the so-called “Heavies” – Mitsubishi, Kawasaki and Fuji – make big chunks of Boeing planes sold all over the world. The US company says it will spend about $5bn this year on procurement in Japan, helping to sustain 22,000 jobs, or almost half the country’s aerospace industry workforce.
“We think it’s an area of differentiation for us that we’re doing things here in Japan that help the overall economy,” says Mr Maffeo. “We hope, at the end of the day, that it provides us with some additional consideration.”
Airbus is also battling goodwill accumulated over decades by the US aircraft maker. In the 1950s, for example, when JAL was struggling to establish itself as an international carrier, the Douglas Aircraft Company – later merged into Boeing – helped by pushing it up the delivery waiting list for its DC-6, one of the first planes capable of flying across the Pacific.
A sense of “obligation” has infused the JAL/Boeing relationship ever since, says Geoffrey Tudor, an analyst at Japan Aviation Management Research in Tokyo.
All eyes are now on the outcome of All Nippon Airways’ current tender to replace half of its 54-strong fleet of 777s. About one in 10 of its planes are made by Airbus, with almost all the rest by Boeing. ANA would not comment on timing, but some expect a decision within a few months.
With one manufacturer desperate to preserve its momentum and the other desperate to disrupt it, the only clear winners are the carriers.
“It’s a buyer’s market,” says Mr Tudor. “They’ll blow away list prices.”