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Negotiations for ten Boeing 777s: Firm but fair

With the choice of ten Boeing 777-300 ERs as the new backbone of the long-haul fleet, one thing was clear: Swiss was to become a new client of Boeing. But how did the negotiations go between an industry giant and a rather small new purchaser? How does one comport oneself, what are the telling arguments?

Swiss Boeing 777-300 ER
Swiss Boeing 777-300 ER
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340 passengers, 25 tons of freight, substantially lower seating costs, and deliverable from 2016 – at the time of the evaluation, the Boeing 777-300 ER was the ideal new long-haul airplane for Swiss in terms of size, economy and availability. But up until then, not one Boeing airplane was part of the Swiss fleet, so the negotiations started from the ground up.

New customers especially interesting

The product was right for Swiss, even though specific wishes were still outstanding. For Boeing, the deal was important for three reasons: first, each new customer is interesting from a sales point of view. Second, when as prestigious a customer as Swiss decides to buy a Boeing airplane, it is good for one’s reputation. And third, every opportunity to penetrate a fleet made up exclusively of Airbus airplanes is a temptation. Elisabeth Lund, general manager for Boeing’s 777 programme, explains, “Boeing had wanted to acquire Swiss as a client for a long time. We were convinced that our 777s would help Swiss grow, increase profitability and lead to economic success. For us it was a challenge and an incentive to incorporate a Boeing product into an existing Airbus fleet.”

As a part of Lufthansa, Swiss is big

Compared to other companies that buy hundreds of aircraft from a single manufacturer, Swiss comes across as a small buyer with its ten Boeing 777s. That is misleading. Ever since it joined the Lufthansa group, Swiss plays as a part of that group. Beat Locher, head of Aircraft Asset Management at Swiss, says: “Because Lufthansa was already a Boeing customer and had a very good basic contract with them, we could build on that relationship and negotiate the desired specifications. The decisive factor when working out an airplane contract – apart from the way the airplane is fitted out – is not just the purchase price; just as important is the product support agreement that lays down the guarantee obligations and the cost of spare parts and their future costs over the expected lifetime of the aircraft.

Tough negotiations over the configuration

The configuration Swiss wanted led to tough negotiations with Boeing, among other things because the suppliers Swiss insisted on were not Boeing-accredited suppliers. Examples of these are the Northern Irish manufacturer Thompson Aero Seating that makes business-class seats and the Swiss producer of on-board galleys, Bucher Leichtbau AG. At first, Boeing was opposed because the risk seemed too great to start working with new suppliers given the short time frame. Lund explains: “It’s not easy to get onto Boeing’s supplier list. You have to go through many tests and certifications.” This was the subject of hard, intense negotiations. Peter Wojahn, chief technology officer for Swiss says with a smile, “we debated so long with Boeing until they accepted our requests.” But he admits: “Once Boeing was convinced and approved, we got their full support!” The fact that Thompson and Bucher are now accredited Boeing suppliers is also thanks to Swiss.

Negotiations: protracted, professional, fair

In order to achieve the goals, deft negotiating tactics were decisive. “Our side stuck to the facts and was professional, never arrogant. In order for a lasting business relationship to be successful, it has to feel right for both sides”, says Locher. Wojahn describes Boeing as follows: “Boeing was a tough but decent negotiating partner. After an extremely tough negotiation session, we still went out for a casual dinner together.”

Lund confirms the professionalism and fairness from Boeing’s point of view, too. “The Swiss representatives were very demanding. They had very clear concepts and paid attention to the smallest details. This is an approach that Boeing respects.” Monty Oliver, Europe Head of Sales for Boeing concurs: “Swiss displayed professionalism and commitment, efficiency and open, transparent communications – the best prerequisites for the best collaboration.”

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