For the first time in decades, there is an argument over which company sold the most new airliners in 1994. At headline level the dispute is, of course, irrelevant in a business whose time-scales are so long. Underneath, however, the fact that there is an argument at all, suggests that at least part of the industry is far more healthy, than the gloomy headlines, of the last couple of years would have suggested.

Airliners are not like consumer goods whose markets can be neatly defined and are measurable year-on-year, season-on-season. In developed markets, consumers buy warm clothing for the winter, and ice creams in summer, and a fairly predictable number of them will buy a fairly predictable number of items each season. A particular airline might only order new aircraft once in five years and it might order a single aircraft, or 50.

In such a small market (typically less than 1,000 airliners a year of all types), a single large order can cause such a massive distortion as to make comparisons meaningless. One company might profit one year, another the next. The significance of the 1994 figures, if there is one, is that Airbus Industrie and Boeing are now sufficiently close rivals as to have almost identical sales figures after all such distortions had occurred.

That is an illustration (dramatic, but no more than an illustration) of the long-term trend of the last two decades, in which Airbus has become a key player in the market at the expense of Boeing and, to a much greater extent, McDonnell Douglas.

The argument over sales figures is really one about market share, and is probably incapable of being resolved, if only because some people measure markets in dollars, and others in airframe volumes. In any case, the airliner manufacturers should know more than most, because of the experiences of their own customers, that market share is at best a poor indicator of business worth.

The airline industry has proved, probably more comprehensively than has any other, that the pursuit of market share at the expense of profit harms itself and its suppliers.

The old argument used to be that loss-leading market share was OK, because what you lost on the initial sale you'd more than make up on spares and support later. Alas for that theory, the huge technical advances of the last couple of decades have seriously eroded the spares and support markets.

Every part of a new aircraft is more reliable than its equivalent of 30 years ago. Airframe design lives have probably doubled in that time. It is likely that a new big-fan engine delivered today will stay on the wing for more than 15,000h before being removed for its first overhaul. The instrumentation in a "glass" cockpit, is orders of magnitude more reliable than its electro-mechanical predecessors. Even in the relatively recent age of electronics and software, the acceptable failure rate for "level A" safety-critical software, has been reduced by a factor of 100, to 10-9.

All that means that a manufacturer's first priority has increasingly to be towards making a profit on an individual airframe from day one, rather than over its whole life. To do that, a manufacturer must, of course, sell enough aircraft to cover the development costs. Those costs are ever increasing and the amount of government subsidy goes steadily the other way, so the manufacturer has to aim for an ever-increasing rate of return on sales.

The pursuit of market share through pricing will not deliver that increasing return: the only attractive option is to have fewer manufacturers sharing in the market. Having two very strong manufacturers (significantly, two with very broad product ranges) at the top of the market will increase the pressure on the rest to merge and consolidate to build or regain strength. The market is probably strong enough to support no more than six significant manufacturers across the whole range from regional/commuter aircraft to the largest airliners. Perhaps now is the perfect time for the potential constituents of the four remaining groupings to get together - while the current leaders are distracted by the argument over who is top dog.

Source: Flight International