Is that true? Assume you and I are starting a new airline. From our perspective, the 737NG and A19/320 are largely interchangeable, especially because we = have no existing fleet to worry about for commonality purposes. If Airbus is selling their product at $50 and Boeing is selling theirs at $100, the choice becomes pretty simple. (jetBlue, in fact, was certain that they would be purchasing 737NGs until they got the final bids from Airbus and Boeing.) If we change the facts a bit, so that Airbus is selling their product at $95 and Boeing is selling again at $100 (and the $5 = difference is attributable solely to the extra cost of a CFM engine), think about the pressure Boeing will put on CFM to lower engine prices to make the plane competitive. Plus, GE does not get to set prices willy nilly on the CFM 56--it must answer to Snecma as well. If we move to an airframe that has engines sourced from a single, = non-joint venture supplier (the 777LR you reference, for example), we, as a whole, = are actually better off from the exclusive arrangement. Assume the 777LR provides a societal surplus of 100 (this is the "extra value" associated with the production and sale of the airframe). That 100 exists _solely_ because of the engine exclusive--if there was no exclusive, there would = be no 777LR and thus no surplus. Surely, the benefit of having the = airframe outweighs any potential costs associated with a single-source engine = deal. Boeing saves costs on testing and certification, and those savings are passed directly to the customer (and ultimately to the individual = traveler in the form of a better cost structure for the airline). GE is assured = of some revenue (likely at least enough to cover the engine's development costs). Airlines get an additional airframe from which to choose. Who = is the loser? You cannot just say "oh, well we'd all be better off if = there was a choice of engines." There is zero justification for that--in = fact, if anything, there is a justification that more choices leads to higher = costs (through type certification, etc.). GECAS does not mandate the purchase of GE engines for leasing, nor the = use of GE maintenance facilities. If the GECAS package is not competitive, = ILFC is happy to provide financing. At the end of the day, it costs money to make an engine. What is the difference if GE pays for that engine = upfront or over the life of the airframe? -----Original Message----- From: The Airline List [mailto:AIRLINE@xxxxxxxxxxxxxxxxx] On Behalf Of Matthew Montano Sent: Thursday, October 02, 2003 8:48 PM To: AIRLINE@xxxxxxxxxxxxxxxxx Subject: Re: More 737 stuff GE has to sell engines and reasonable prices, but if it's the only one available for Boeing's plane, the customer doesn't get a competitive environment for engine procurement. From Boeing's side, of course they want to keep their plane reasonable priced, if they are in a competitive environment. Which they are. But when Boeing's LR project was dangling by a thread, neither Pratt, RR = or GE were willing to ante up the considerable engine development dollars = to develop the required engines... UNLESS they were the exclusive (i.e. not subjective to a competitive environment) supplier. Boeing, as you say, wants to sell planes, so they signed an exclusivity = deal so they can go ahead and build it. .. and since GE not only builds and sells the engine, they will service = it, and finance the whole plane through GECAS, even if they sell the engine = at garage sale prices, they have the financial discipline to ensure they = make it up elsewhere. Matthew On Wednesday, October 1, 2003, at 06:38 PM, Douglas Schnell wrote: > Assuming GE wants to sell engines (which is a pretty safe assumption), = > what is its incentive to price them uncompetitively and lose orders? > > Plus, you have Boeing pushing _very_ heavily against any price changes = > by GE. Boeing, incidentally, is interested in selling as many=20 > aircraft as possible. > > I just don't see a competitive concern. > > -----Original Message----- > From: The Airline List [mailto:AIRLINE@xxxxxxxxxxxxxxxxx] On Behalf Of = > Matthew Montano > Sent: Wednesday, October 01, 2003 10:59 AM > To: AIRLINE@xxxxxxxxxxxxxxxxx > Subject: Re: More 737 stuff > > > Boeing also cut a deal with GE for the engines on the 777 LRs. > > GE's way, or the high-way. > > (which also means GE's price...) > > But of course, Airbus with their 330/340s are just across the street. > > Matthew > > On Tuesday, September 30, 2003, at 08:47 PM, Alireza Alivandivafa > wrote: > >> In a message dated 9/30/2003 8:36:44 PM Pacific Daylight Time,=20 >> damiross2@xxxxxxxxxxx writes: >> >> << It would require new certification >> Airlines with large fleets of 737's wouldn't buy (no commonality=20 >> with current fleet) If it ain't broke, don't fix it >> >> >> That explains that. It is interesting the Boeing made that deal.=20 >> They must have made a deal that keeps the engines from being priced=20 >> too high