SINGAPORE/TOULOUSE Stung by the loss of a multi-billion dollar jet order from Japan Airlines (9201.T) to arch-rival Airbus EAD.PA, Boeing Co (BA.N) will mount an all-out defense of its position with Japan's other major airline, ANA, a source close to the U.S. planemaker said.
Boeing executives are still trying to understand why long-time customer JAL ordered 31 Airbus A350s - worth $9.5 billion at list prices - in a deal, announced on Monday, that was the U.S. company's first major loss in Japan.
ANA Holdings Inc (9202.T) wants around 35 aircraft to replace its long-haul Boeing 777s and, like JAL, is considering both the A350 and the Boeing 777X, the re-engined, updated variant of the popular long-range wide-body jet.
After the JAL setback, ANA is fast becoming a "can't lose at any cost" deal for Boeing, whose executives are under pressure to "do everything they can" to win the deal, said an industry source close to the U.S. planemaker.
The United States' close diplomatic ties with Japan, a key U.S. ally in East Asia, could help Boeing's cause, according to industry sources.
But some analysts think ANA will buy Airbus wide-body planes to hedge against delay and avoid getting left with older fleets while competitors fly new jets that consume less fuel. The Airbus A350 is due to enter service in 2015, while Boeing's competing 777X is not expected before 2020.
"For ANA, relying on Boeing for 777-Xs means running the risk that JAL, their direct competitor, will get their A350s as 777 replacements years before ANA does," wrote Richard Aboulafia, analyst at Teal Group in Fairfax, Virginia.
"Therefore, an ANA A350 order is likely."
The JAL order also hedged that airline's risk against having its planes delivered late, as the 787 was. After the 787 "disaster," Boeing has compounded this concern by delaying the launch of its eagerly anticipated 777-X and 787-10 designs, Aboulafia said.
"Now that Japan has hedged its bets (with Airbus A350 orders), everyone else in the region will likely hedge too," he said. "Airbus sales executives should have some busy and lucrative months ahead."
Still, Boeing's relationship with Japanese industrial giants Mitsubishi Heavy Industries (7011.T), Kawasaki Heavy Industries (7012.T) and Fuji Heavy Industries (7270.T), which collectively make around 35 percent of Boeing's 787 and are major suppliers for its other aircraft, remains a key factor that could work it its favour at the political level.
Boeing declined to comment on its ANA strategy.
Despite Monday's victory, Airbus is widely seen as the underdog in the tussle for ANA's business, industry experts say.
Apart from JAL, the European firm has secured marquee airlines such as Singapore Airlines (SIAL.SI), Cathay Pacific (0293.HK), Qatar Airways and Emirates Airline EMIRA.UL as A350 customers.
ANA does operate a handful of Airbus A320s on its short-haul network, but its long-haul fleet comprises only Boeing aircraft. It was the launch customer for the troubled Boeing 787 and is still the largest operator of the Dreamliner.
The airline has said that it could make a decision in early 2014, and analysts expect it to stick to that schedule.
"The good thing in Japan is that when they commit to a time, they tend to stick to that," said a second industry source, who added that it was going to be a "very busy end of the year and a very busy start to the new year" for both companies.
ANA Chief Executive Shinichiro Ito told Reuters last month that the airline would factor in the risk of a delay in the delivery of the aircraft into its decision.
That would appear to be a reference to the delays to the 787 Dreamliner and its subsequent grounding after batteries had overheated.
The Dreamliner's problems tarnished Boeing's image and cast doubt on its ability to deliver aircraft on time, aviation experts say.
Lufthansa is the first customer for the 777X, with an order for 34 aircraft last month, and the high-density 777-9X variant that can seat up to 400 passengers has received interest from several Gulf carriers.
The plane, which will have new engines and wings that give it a greater range than the existing 777-300ER, could be launched later this year and enter into service around 2020.
ANA has received several briefings on both the A350 and the 777X in recent months, and an airline spokesman said that information was still being gathered.
The Japanese airlines are proving to be tough customers for both companies, sources said, asking a lot of questions about the performance of both aircraft.
Airbus may have a slight advantage as the first A350 variant, the -900, had its first flight in June. The data from those tests flights is being used to confirm the information that Airbus has been giving prospective customers.
By the time the first A350 reaches JAL in 2019, the A350 would be a mature aircraft program with deliveries scheduled to begin in late 2014.
The 777X, meanwhile, remains a concept that has not been launched. Uncertainty about its delivery schedule and performance, especially after JAL's decision, means that Boeing executives must build a stronger case, said the source close to the company.
After Monday's big win, however, the momentum appears to be with Airbus.
"Once you have a foot in the door, it makes it easier," said the second industry source.
(Additional reporting by Tim Kelly in TOKYO and Alwyn Scott in NEW YORK; Editing by Alex Richardson and Richard Chang)