Boeing’s clarity provided at BCC meeting

Update, May 11: UBS had Boeing’s Mike Bair, the head of the 737 future program, for presentations yesterday and issued its report. Much of the UBS report is similar to the Credit Suisse and Buckingham information captured below; here’s some of the new stuff.

  • While still not taking a re-engined 737 off the table entirely, it was clear from our discussion that BA’s preference remains an all new NB for initial delivery in 2019-20. While no major announcement is expected in Paris, BA anticipates material selection in 2012 (metal vs. composite), followed by component selection strategy
    (make vs. buy) in 2013 and official program launch in 2013-14, assuming a launch order is in place. BA envisions an eventual production rate of 60-70/month, which it sees as high enough to justify a dual source strategy for some major components.
  • While still not taking a re-engined 737 off the table entirely, it was clear during our discussion that Boeing’s preference remains an all new narrowbody with initial delivery in 2019-20.
  • Boeing does not expect to make a major announcement at the Paris Airshow. It commented that it would expect a launch decision on a potential new aircraft to come roughly five-six years ahead of first delivery, putting program launch in the 2013-14 timeframe,
    assuming a launch customer is in place by then.
  • Boeing commented that it would take a defection by a current 737 customer to get it to think more seriously about re-engining. Boeing sees this as unlikely and noted that Easyjet is the only 737 operator ever to defect to A320 and that it took very aggressive pricing by Airbus to achieve that outcome.

Our comment on the last point: Bair is wrong, of course: United and Frontier were two 737 customers to defect and Air Berlin also bought A320s; we believe there were more but don’t recall specifically.

Original Post:

In what is the clearest picture yet of Boeing’s intentions for program development, Boeing Capital Corp. officials met May 3 with aerospace analysts and financial types in one of BCC’s periodic meetings. What emerged from the meeting is a clear understanding of Boeing’s current thinking for the current 737 line and the New Airplane, which for this report we will identify as the 7X7.

This report is based on conversations with participants of the meeting, subsequent analyst reports that were issued and presentations to the group by Boeing.

First, let’s recall that Boeing CEO Jim McNerney said on the 1Q earnings call that Boeing will first address the “heart of the market” (145-185 seats) before addressing the 757 segment. Recall also that Boeing officials said the 737 is expected to be produced to “at least 2026,” and Mike Bair previously told us the 7X7 will not be a replacement airplane for the 737 but an entirely different and complementary airplane.

During the May 3 presentation, BCC officials confirmed that Boeing’s “heart of the market” approach is to continue to update the 737NG.

Boeing does not believe the Airbus A320neo provides sufficient all-in benefits to airlines to be a serious challenge to the 737NG that can’t be matched, overcome or at the very least have a gap that would be diminimus. Accordingly, Boeing believes there is no need to re-engine the 737 and that improvements to the airplane by 2016 will result in a further 6% gain vs. today’s 737NG in efficiencies when the cost of ownership is also calculated vis-à-vis the NEO.

Credit Suisse wrote in a post-meeting note, “BCC also spoke to product evolution, reiterating that Boeing will focus on continuous improvements to its 737NG instead of a re-engine and is exploring clean-sheet replacements for the end of the decade. Boeing conceded the NEO is a bit more fuel efficient but has similar operating costs given other efficiencies. Further, 737 should continue to compete with NEO and CSeries on price given product maturity and large installed base.”

Although Credit Suisse referred to a “clean-sheet replacement” by the end of the decade, we think there remains some terminology confusion based on our own conversations with Boeing’s Bair, comments by other Boeing officials and in talking with others attending the BCC meeting.

Buckingham Research wrote in a post-meeting note, “Boeing is considering a range of options for a new aircraft and believes the technology (propulsion, materials, avionics, etc.) will be available to support a service entry in 2019/2020 (consistent with our 2010 Farnborough Air Show takeaway). The new airplane should not be considered a replacement for the 737, 757, or Airbus narrow-bodies. Like the 707, which first replaced turboprops with turbojets, the 747, which first introduced jumbo capacity, and the 777, which first introduced 4-engine capacity with a 2-engine airplane, Boeing’s new aircraft will likely address a new market with new capabilities.”

We think this scenario outlines the basic “clarity” Boeing plans to provide at the Paris Air Show. There won’t be a program launch, and things still remain fluid. But we are certain there won’t be a re-engine of the 737NG.

Airbus’ John Leahy has publicly stated that he believes if Boeing “loses” a solid 737 customer, specifically naming Delta Air Lines, Boeing would be “forced” to re-engine. Buckingham reports in the May 3 BCC research note that Boeing may no-bid Delta, largely due to the inability to offer production slots (Boeing’s 737 line is sold out to 2016/17); there is, therefore, nothing for Boeing to “lose.”

Furthermore, we know from a variety of sources that while Boeing has a technical solution and option to re-engine the 737, the changes required to the airplane are such that we concur with the now-prevailing opinion it simply doesn’t make sense to do so.

We know from two sources that Boeing is talking with Spirit Aerosystems, maker of the 737 fuselage, about taking production into the mid-50s per month. Recall, too, that we previously reported a Boeing executive told employees the company was looking at taking production to 50/month. Such a high rate requires expansion of the Spirit plant in Wichita (KS) and probably the Boeing plant in Renton (WA). Returns-on-investment will be key considerations for expansions.

Separately, Aspire Aviation has this thorough analysis of the PW GTF vs the CFM LEAP-X.

58 comments on “Boeing’s clarity provided at BCC meeting

  1. Interesting stuff. It sounds like Boeing is getting very numbers oriented here, thinking that they can still sell a lot of 737s even if they permanently give up market share to Airbus. Going from a 50/50 share or whatever to 60/40 sounds bad from a rivalry standpoint, but not having to invest billions in the risky new aircraft project while collecting steady profits on 737 sales must have its attractions.

  2. I mostly agree, Rpx. But I think Boeing is looking at maintaning the 50/50 split with EADS for the next several years. Then maybe relying on what Scott is calling the 7X7 to increase market share (for Boeing) later this decade.

    BTW, wasn’t the 7X7 the name of the program that became the B-777?

  3. The game of chicken continues. IMHO Boeing will not show its real plan until Airbus is sufficiently sunk into the NEO. At that point Boeing can squeeze the market by delivering a new concept.

  4. That could be what Boeing is doing, Ck6. I think that is a good plan. The question is, how will EADS respond to this?

  5. The amount of efficiency Boeing continues to claim it will squeeze out of the NG seems endless, just how much more slippery can they make it? Every performance percentage point counts, but one wonders as a counter to the NEO are these promises achievable, which begs the question are these a panic reaction to the NEO threat, just pulled from the ether, if not why have they not arrived sooner. As a magician just how many more rabbits does Boeing have in its hat to pull out,

    One imagines EADS with the newer airframe has more scope to fine tune weight loss & airflow, this ability allied to the re-engining process must be a major concern for Boeing.

    Paris is keenly awaited.

  6. Boeing does not seem to concerned about the NEO program. The A-32X-NEOs will be heavier than the A-32X-CLASSICs. The wing on the A-32X is much older than the wing design on the B-737NG, and less efficent. Structures have to be added to the A-32X wing to support the new engines as well as the sharklets.

    The current A-32X family are all heavier than their competing B-737NG model.

  7. CK6, “Airbus is sufficiently sunk into the NEO” already, with 330 units already sold and expected to raise this up to 500 by the time of the PAS, which will make it impossible for them to either get out or change the huge financial commitment they already made in the NEO program.

    Boeing, however, is in a very strong position v.v Airbus, to produce a serious challenge to the NEO, by taking it’s time and launch an all-new airplane by the end of this decade, which may well make the NEO obsolete, for the following reasons:
    1. The 737 production line is sold out until late in the decade and even if Boeing increases the
    production rate to 50 a month, Boeing has ample time to develop an all-new aircraft, to
    replace both the 737 and the 757 if necessary, by the end of this decade.
    2. Re-engining the 737 makes absolutely no sense from a cost point of view, as well as the now
    “old” design principles of the 737 structure, in spite of the fact that it is much lighter per seat,
    compared to the A320.
    3. However, the expected continuing rise in the price of fuel, will force Boeing to install more
    fuel-efficient engines of some kind on the 737 and because either of the two new agents
    being offered cannot be installed on the existing 737, Boeing will have no choice but to
    produce an all-new aircraft before too long.
    4. The experience Boeing gained with the carbon fiber 787 structure, will give Boeing the ability
    and the confidence to build an all new carbon fiber aircraft, which will obsolete the A320NEO!
    5. Boeing, I expect, will therefore announce it’s intentions at the PAS, to produce an all new
    aircraft for introduction into service by the end of this decade to replace the 737 and 757
    without specifying the exact capacity until a later date.
    6. A firm commitment to the all new aircraft, will not be made by Boeing until after the 787 and
    747-8s have gone into service, which will give Boeing ample time to produce and deliver the
    new airplane by the end of this decade, putting Airbus in a very precarious position with the
    A320NEO, as soon Boeing firmly commits to the all new aircraft, hopefully around the end of
    this year.

  8. In order to get a “cost statement” one needs to assume average fuel prices. 200$/bbl is perfectly possible (in today’s USD value). This will completely change the cost structure of airlines and benefit the design with lower fuel burn. As long as Boeing does not openly show its assumptions on fuel price development I wouldn’t take any cost statements too serious.
    Previous comments on this site have shown that even today claims that the B737NG is less costly to operate (COC!) are largely based on different seat counts.
    My take is that with 200$/bbl the cost advantage of the B737NG will completely vanish.

  9. Schorsch :In order to get a “cost statement” one needs to assume average fuel prices. 200$/bbl is perfectly possible (in today’s USD value). This will completely change the cost structure of airlines and benefit the design with lower fuel burn. As long as Boeing does not openly show its assumptions on fuel price development I wouldn’t take any cost statements too serious.Previous comments on this site have shown that even today claims that the B737NG is less costly to operate (COC!) are largely based on different seat counts.My take is that with 200$/bbl the cost advantage of the B737NG will completely vanish.

    Oil at $200 BBL, not only will the B-737NG disappear, but so will the A-32X-NEO. There will be fewer airplanes flying and those that do fly will be big airplanes. AA and DL will park every MD-82/-83/-88, B-737NG, A-32X, and anything smaller than a B-767-300. Frequency between cities will be just one or two flights per day per airline. AA will go from 9 MD-80, B-738, and B-757s per day between DFW and BOS down to just one or two B-767s or B-777s. Big airplanes will be all built in two versions, a short range, max seat version, much like the old B-747SRs with 650 seats, and a long range version. EADS will build an A-380SR that seats 850 and has a max range of about 1500 nm, the same with a B-747-8SR (they may only have two engines, or just move two engines to idle inflight after take-off and climb out). Airline fleets will be much smaller, with maybe 40 aircraft. The LCCs will all be out of business as they can not get large WB aircraft fast enough, then could not use airports like DAL.

    Most passenger service will shift from flying in airplanes to riding the rails in trains.

    Business worldwide will slow down to the speed it was in the 1960s and 1970s. A good year for Boeing or EADS would be to sell about 100-125 airplanes.

    A $200 BBL oil price will be a different world for all of us.

  10. Oil was at 147 USD/bbl three years ago), probably 160 USD/bbl in today’s money. The world didn’t stop then, neither will it do so when oil reaches 200 USD/bbl.

    @Rudy – which huge cost for the NEO please? USD1bn, half of which is going to be covered by the engine manufacturers? Seems small change to me. I see no reason why Airbus could not do the NEO and launch a new NB in 2016 for EIS 2023. Which would give Boeing a 3-year advantage of sales. Nice, but hardly earth-shattering.

  11. 200$/bbl is no showstopper for air transport, it just raises the price. If an aircraft provides 15% better fuel economy, a part of the additional cost can be compensated.
    Sure, the ticket price will increase, but only about 10-30% on average. As today the most expensive ticket easily is 100% more expensive as the cheapest, it will be another driver for competition (and yes, some capacity will exit the market).

    I just want to say: if Boeing thinks it can sell a 1960 vintage aircraft with a 1990 engine in an environment that has fuel prices 15x/4x as high, it exposes itself to a huge strategic risk of becoming marginalized.
    That isn’t any very advanced conclusion, that is pretty straight thinking. So I am really amazed that all these high-paid analysts are actually buying the – sorry – crap-talk by McNerney and others. Boeing has an easy time though, as the people of Buckingham et al are all MBAs and business people, which demonstrate to have no clue when it comes to aircraft design.

  12. Oil costs are just a fact of life, and the issue always will be the cost of time, so IMO there will be no impact on travel habits due to cost of oil.
    The impact of this is more an issue for the bean counters.
    Frankly I do not believe half of what is being touted as fact by industrial analysts.
    I simply cannot accept that CFM “invented” the Leap X without some conception of how to fit it onto the 737(their bread and butter).
    Sorry Scott, I usually agree with your analysis but this time I truly believe Boeing are going to re-engine the 737 despite all the counter claims.

  13. Getting past the spin, I think what this boils down to is that the 737 doesn’t need to be as good as the A320 because Boeing are going to run their backlog down faster. Their backlog should last 5 years or so at the higher rate. If they get another 2000 sales over the next 10 years, they will have worked out their backlog just at the point when the new plane comes on board. This should be possible because Boeing can offer earlier slots on an inferior (because not re-engined) plane. Then they will focus sales on the new plane. Airbus will want to keep their backlog going into the 2020’s.

    I think this also suggests the new plane will have a similar capability to 737. It will address the same market.

  14. Talking about money, worst case is that Airbus is forced to design a new aircraft for 2022 EIS (launch in 2015) instead of late 2020. That would put the NEO investment into question. However, it is only 1.2bln, something they sunk on the A380 in a single year.

    Even if a B737NEO isn’t as easy and good as the A320NEO, it will certainly make its profits. Offering something like a 5-10% fuel burn advantage will pay off in a 200$/bbl environment, especially when we talk about 400 planes a year. Get a 2 million USD extra for the NEO and the program pays itself quickly.
    A typical single aisle burns about 70000-100000 bbl kerosene per year (4000hrs, 2.66t/FH), which represents 8.4 mln USD at 100$/bbl and consequently 16.8 mln USD at 200$/bbl. 10% lower fuel burn is about 1.5 mln USD at 200$/bbl.

    • The A320NEO is a interim solu

      Schorsch :
      Talking about money, worst case is that Airbus is forced to design a new aircraft for 2022 EIS (launch in 2015) instead of late 2020. That would put the NEO investment into question. However, it is only 1.2bln, something they sunk on the A380 in a single year.
      Even if a B737NEO isn’t as easy and good as the A320NEO, it will certainly make its profits. Offering something like a 5-10% fuel burn advantage will pay off in a 200$/bbl environment, especially when we talk about 400 planes a year. Get a 2 million USD extra for the NEO and the program pays itself quickly.
      A typical single aisle burns about 70000-100000 bbl kerosene per year (4000hrs, 2.66t/FH), which represents 8.4 mln USD at 100$/bbl and consequently 16.8 mln USD at 200$/bbl. 10% lower fuel burn is about 1.5 mln USD at 200$/bbl.

      Exactly, JL is on record saying that the bussines case for the A320NEO was based on 8 years of production. I don’t see a big problem if they need to produce a new NB 3-5 years aerlier that they hope

  15. Boeing realizes is has to develop an uncompromised aircraft for around 160 seats. Something that can also move 230 passengers/4000NM just isn’t going to be competitive against stretched 5 abreast aircraft.

    Interesting to see Boeing say they hope their 737 marketshare will not diminish after 2015. Improved 737s should match the NEOs.

    I would also hope so.

    Lets wait if airlines agree with Boeing marketing, before jumping to conclusions.
    Maybe Boeing should take Southwest, Delta and Ryanair comments even more seriously then they did sofar. The “We hear you, respect you, but know better” approach could have some unpleasant consequences. Boeing was confident on the 737-900, Sonic Cruiser, 747-8, 787-3, 777LR, 767-400ER and 757-300 too, but sometimes reality proves differently.

    IMO only so, if they reengine the 737. The CSeries vs the 737-700, NEO’s, Comacs and MS-21 above, will force Boeing to act.

    In the background it seems the 787-9/777-200ER/LR are not holding up against the A333/A350-900 in the crusial 300 seat segment.

    Though choices and a lot of marketing ahead.

  16. I love these fishing trips by Boeing to see if they can get a rise out of the Busboys. If Boeing doesn’t come up with something very modern and dazzling to replace the little whale 737 then the 7Late7 will need to pull a rabbit out of the Hat so to speak, such as meeting all performance parameters and getting back on schedule. The 747-8 appears to be dead on arrival and now Boeing also needs to make good on its bid for the Tanker, good luck with that one too.
    After all the research and tax money that has been spent on the Blended Wing, where is it? NASA and most everybody else that have been involved in the development programs think it’s great and should be built, but as usual a good idea just never makes it anymore. Maybe Burt Rutan needs to start designing passenger aircraft so we can get great performance and a real modern shape.

  17. Given the way product development has been going at manufacturers in recent years, planning for a 2020 EIS at launch means that the actual arrival time will be something like 2022-24. That will give Airbus more time to make Neo sales. There are benefits to incremental changes over new programs because they are less technically risky.

    I have an open mind, but does anyone think that Boeing (or Airbus, for that matter) can deliver an all new, revolutionary aircraft on the schedule announced at launch?

  18. Andreas :Oil was at 147 USD/bbl three years ago), probably 160 USD/bbl in today’s money. The world didn’t stop then, neither will it do so when oil reaches 200 USD/bbl.
    @Rudy – which huge cost for the NEO please? USD1bn, half of which is going to be covered by the engine manufacturers? Seems small change to me. I see no reason why Airbus could not do the NEO and launch a new NB in 2016 for EIS 2023. Which would give Boeing a 3-year advantage of sales. Nice, but hardly earth-shattering.

    Are you sure about that? When oil hit $147 BBL a few years ago, supply was not the big issue, refining it was. Gasoline in the US went to an average price of just over $4 per US gallon, and those prices burst the housing market just a few months later, then the near global collapse of most of the economies of the world. In today’s market, oil hit “only” $110 BBL, yet the average price for gasoline in the US has exceeded the just over $4 per US gallon.

    Do you know why?

    It is because not only is oil refinery capability still lacking (no new refineries have been built in the US in about 35 years, thanks to the US EPA), but now the idiot in the White House won’t let any oil drilling in the US or coastal waters. That is because of just one oil spill last year when the BP Horizon drilling platform met its tragic end.

    The EU has many of these same policies, some different, some the same. With policies like that from the US and EU we are shooting ourselves in the foot just to save some unknown slug that will go extinct anyway.

    Airbus does not have the economic or engineering resources to launch a new airplane in 2016, no matter what they do with the NEO. They are cash strapped, to the point they have ignored the WTO rulings against them on the A-330 and A-380 launch aid. They have their hand out, again, to the various European Governemnts for aid to keep the A-350 program going. They still are having design and production problems with the A-380 and A-400 programs. The NEO program requires major redisign of the internal structures of the A-32X common wing (that is not being paid for by P&W or CFM). Then there still is the notorious A-350 program that is eating up engineering hours by the thousands.

    Boeing, OTOH, is about to free up engineers as the B-747-8F and B-787-8 programs come to a close in the next few weeks. The B-747-8I program still has several months to go before deliveries can begin. All Boeing has on its engineering and design plate after that is the B-787-9, the KC-46A, and the new light twin (B-797? or as Scott calls it the 7X7). Cash should also start flowing in from the B-787-8 and B-747-8F/I deliveries.

    So who is in the best position as far as resources goes?

    Schorsch :200$/bbl is no showstopper for air transport, it just raises the price. If an aircraft provides 15% better fuel economy, a part of the additional cost can be compensated.Sure, the ticket price will increase, but only about 10-30% on average. As today the most expensive ticket easily is 100% more expensive as the cheapest, it will be another driver for competition (and yes, some capacity will exit the market).
    I just want to say: if Boeing thinks it can sell a 1960 vintage aircraft with a 1990 engine in an environment that has fuel prices 15x/4x as high, it exposes itself to a huge strategic risk of becoming marginalized.That isn’t any very advanced conclusion, that is pretty straight thinking. So I am really amazed that all these high-paid analysts are actually buying the – sorry – crap-talk by McNerney and others. Boeing has an easy time though, as the people of Buckingham et al are all MBAs and business people, which demonstrate to have no clue when it comes to aircraft design.

    Whaaattt? Perhaps you need to go to work designing and marketing the next generation of aircraft, then? It seems you have all the answers. Those MBAs and Business people have Engineers that work for them and advise them. So I doubt they are clueless to airplane designs, like you say they are. That is just as true for EADS as it is for Boeing.

    Yes, Boeing does think their “1960s vintage aircraft” is competable now, and even into the 2020s. They have already said as much. But the B-737NG designs are not the B-737-100/-200 designs of the mid 1960s. It is an advanced aircraft with a much newer wing than the 1980s vintage A-32X design. That alone makes the B-737NG more advanced (aerodynamicly) than the A-32X. Have you noticed that Airbus has yet to compare the A-32X-NEO to the B-737NG? Have you ever wondered why? Just think about that for a while, please.

    As for $200 BBL price for oil, yes it is a show stopper. That is a nearly 90% increase over the price of oil today. A 15% improvement in fuel consumption for the next version of the A-320 still makes that aircraft 75% more expensive to operate, just on fuel consumption, over today’s airplanes. A 30% price increase in ticket costs just will not cover those expenses for the airlines. They will still be at a 45% loss by flying it. How long do you think they will stay in business? My guess is not very long.

    The airlines would have to double the costs of buying a ticket (that does not include airport and other taxes). I fly DFW-BOS several times per year, at a round trip cost of about $500 per trip (I usually book 12 weeks in advance). Push that price to $1000 per round trip, and I will seriously be taking a look at AmTrack (current cost is about $250, not including meals and a berth, but it is a 2 day trip). Should that not be a good option, I just won’t be going as often, as driving costs will be out of the question (it is a 30 hour non-stop drive).

    Business travel for the airlines (their bread and butter here in the US) will slow by a huge factor, and leisure travel will almost stop completely.

    keesje :Boeing realizes is has to develop an uncompromised aircraft for around 160 seats. Something that can also move 230 passengers/4000NM just isn’t going to be competitive against stretched 5 abreast aircraft.
    Interesting to see Boeing say they hope their 737 marketshare will not diminish after 2015. Improved 737s should match the NEOs.
    I would also hope so.
    Lets wait if airlines agree with Boeing marketing, before jumping to conclusions.Maybe Boeing should take Southwest, Delta and Ryanair comments even more seriously then they did sofar. The “We hear you, respect you, but know better” approach could have some unpleasant consequences. Boeing was confident on the 737-900, Sonic Cruiser, 747-8, 787-3, 777LR, 767-400ER and 757-300 too, but sometimes reality proves differently.
    IMO only so, if they reengine the 737. The CSeries vs the 737-700, NEO’s, Comacs and MS-21 above, will force Boeing to act.
    In the background it seems the 787-9/777-200ER/LR are not holding up against the A333/A350-900 in the crusial 300 seat segment.
    Though choices and a lot of marketing ahead.

    Keesje, When you talk about the poor sales record for Boeing, you forgot the B-717 (which they never put much marketing into as it was a leftover MD project called the MD-95), and the B-737-600. But you also forgot to mention the A-350 Mk.I, Mk.II, Mk.III, MK.IV. and Mk.V, all of which were soundly rejected by the airlines, as is the A-318 and the next to useless A-310-200. Also don’t forget all those white tail A-300B2s Airbus built when they started and no one wanted. Just how successful were the A-340-500/600, and the classic A-340-8000?

    How is the A-330-200F doing these days? Ooops, sorry, I forgot the B-777-200LRF has just about killed it. Even the smaller B-767-300ERF has outsold it.

    Seems to me the B-737-600/-900, B-717, B-767-400ER, B-757-300, all outsold the combined Airbus failures. The B-787-3 did have sales from NH and JL, but that program was “put on the back burner” (much like the A-380F was after its sales were canceled) after both converted those sales to the B-787-8/-9. The B-777-200ER has sold hundreds of airplanes, the B-777-200LR has killed off the A-340-500, its direct competitor!

    BTW, the biggest of the C-Series, the CS-300 only seats 130, not as many as the B-73G, nor does it have the range of the B-73G. So they are not competitors. The CS-100/-300 are more direct competitors to the B-736 and A-318, both of which have poor sales.

    What, exactly, makes you think Boeing is not listening to DL, WN, AA, UA, and the rest? I agree, no one should be listening to the idiot running FR.

    Wikipedia has some interesting comparison charts of Boeing vs. Airbus aircraft by groups.

    http://en.wikipedia.org/wiki/Competition_between_Airbus_and_Boeing#Airbus_A320_vs_Boeing_737

    http://en.wikipedia.org/wiki/Competition_between_Airbus_and_Boeing#Airbus_A330_vs_Boeing_767_.26_777

    http://en.wikipedia.org/wiki/Competition_between_Airbus_and_Boeing#Airbus_A350_XWB_vs_Boeing_787_.26_777

    http://en.wikipedia.org/wiki/Competition_between_Airbus_and_Boeing#Airbus_A380_vs_Boeing_747

    No one is “forcing” Boeing to act on improving the B-737NG or designing the new light twin.

  19. Should comments be closed? KC135TopBoom is becoming very partisan to the point of abusing others who read his comments.

  20. How realistic is this notion of ramping up 737 production to 50 per month? And waht is the time scale for it? Won’t they have enough on their plate with ramping up 737 production?
    Sorry but the ramping up option just seems to be a bit of smoke and mirrors to me.

    I believe that, contary to KC135Topbooms belief, Boeing will still struggle with manpower for a few years to come. They still have work on the 787-8 not to mention the 787-9 and now have to get serious about the tanker. Oh, I forgot to mention the 747-8I. I woudl not be surprised if a new program launch did not occur until 2015 or so.

    If Boeing no bids on Delta and Airbus also manages to get an order from Southwest (assuming they meant it when they said they cannot wait until 2020 for a new plane: Flightblogger), what, if any, impact could this have on Boeing’s strategy?

    I also donot believe that Airbus will come out with a new narrow body in the 2025 time frame. I am under the impression this wouldn’t have an EIS until around 2030, thus making the NEO that much more important for them.

    Also are their any takers on the possibility the Airbus will come up with a way to extend the life of the A330? Not that it is looking shaky yet anyway. But I am wondering if Airbus might resurrect parts of the original A350 concept as part of an A330 NEO program.

    • I am of the opinion that Boeing would never let Southwest go. They are just such a reference client for them and they generate more sales of the 737 than they actually buy and they also generate more parts sales.

      Boeing’s resources are as busy as they Airbus resources, however, new projects are always in the pipeline.

      I would argue that Boeing will develop two products. One in the 737-700/800 category and the other in the 737-900/757 category.

      What comes first? I think is the 737-900/757 replacement because at this time Boeing does not have a direct response to the A321NEO.

      Would this product be single or twin isle? Its up to Boeing and they are good enough to make their own decisions although I would like to see a twin isle.

      • Not that bad if there are two products and two assembly lines that are sharing major components such as cockpits, electronics, landing gears, fuselage, etc.

        Is this what he was meant when he made reference to “high enough to justify a dual source strategy for some major components”?

        • Not having been present, we can’t directly answer the question. But consider this: Boeing is “dual sourcing” some key components on the 787 as a strike mitigation contingency. Also, because of the industrial partnership screw ups on the 787, Boeing plans to bring in-house (or “dual source” if you will) the aft fuselage/tail plane from Alenia for the 787-9 and perhaps the 787-8 (as yet undecided).

          Given the large rates Bair talked about, it would make sense to have dual sourcing so that production snafus at one supplier wouldn’t bring down the entire production stream, as has been the case with the 787.

  21. British Airways is another airline that switched to the A320. They inherited them through an airline acquisition and decided they liked them better than the 737s (Classics at the time) that they themselves owned. With increasing acquisitions there are fewer and fewer single manufacturer airlines. I think it quite possible for a Delta or the like to buy some A320NEOs to tide them over before buying the new Boeing when it comes on stream.

  22. @Topboom
    A) Supply was (and continues to be) the issue. Look at marginal cost of production. Refining exacerbates that but is not the root cause. China becoming a net importer in 2004 is.
    B) Airbus is not cash-constrained. They sit on USD15bn of cash at present I believe. They roll out their cash-cows A320/330 like there’s no tomorrow. Within 1-2 years A380s are going to be cash-positive. They won’t even notice the spend on the NEO.

    Since these are the two key elements of your response to me and Schorsch, I won’t spend more time dismissing the subsidiary points.

  23. There are scores of carriers that switched from 737 to A320. BA, AF, SAS, US Airways, ANA, Czech Airlines and more. I guess he ment switched from 737NG to A320. Also an odd conclusion because 737NG are years newer.

    I think Delta is at risk for Boeing. The have a very large 757 fleet, of which some are not so old and others way to old to wait for 10 yrs. And a substantial A320 fleet. Le Bourget?

    • Even with regard to NG, Bair’s statement isn’t correct.
      (Not to mention that Easyjet was a bigger 737-300 than 737-700 operator at the time they switched to A320.)
      An example of a 737NG defector would be SAA, who even went 737-A320-737NG-A320.

  24. Oil at $200 will an economic disaster, yes airlines can reprice tickets to the new rate but what will happen to demand. All plastic materials will cost 30 to 50% more, the essentials of each household will exceed budgets so personal trave will drop like a stone. Businesses will do more sales via internet and teleconference etc.

    One important thing right now is that the dollar devaluation is the major factor, it is 18% down vs the currency basket in 1 year, that accounts for a $.75 cent rise in gasoline (3.25 to $4.00). The rise of oil prices in euro is far less than we have seen.

    Care needs to be made in evaluating biofuels. Ethanol takes nearly as much energy to produce as it contains. If using 80 gallons of diesel to make 100 gallons of ethanol as well as the bushels of corn, have we gained much.

    If we assume that markets are efficient, when a train takes a 50% subsidy (often more like 80%) to match the plane trip fare without subsidy it says that the train consumes twice the resources. How has that improved anything

  25. Switching from B737(CL/NG) to A320 was a major move in the mid to end 1990ies. It is not a major move today or in the near future. The A320 has become the benchmark for a single aisle, both in performance and in comfort/payload. The B737NG of course holds some significant advantages (fuel burn on short trips, ease of maintenance, passenger capacity compared to the direct competitors [usually 6-12 more]).

    Boeing’s PR strategy is actually making me wonder.
    Saying firmly that they will not re-engine and proposing a possibly new aircraft sometime in the future (without giving any particular information, and putting launch decision 2 years into the future), they are taking their long time customers as hostages: they have to gamble on Boeing’s strategy and hope for a better aircraft (and timely delivery and production slots), in the meantime they have to accept to operate an increasingly inferior aircraft. Alternative is to switch aircraft, which no airline really likes to do. Boeing is really making the job of John Leahy easier these days.

  26. For Delta to replace old 757s the options ar 737-900ER, A321 sharklet, A321 NEO.

    Although, there a is lot of NWA culture in Delta these days, so a radical upgrade of the 757s should not be excluded. I can imagine TechOps together with Boeing (might be very cooperative at this stage) could work out something that includes a new cabin, replacement of most troublesome components, and a deep overhaul of all live limited parts, smart cockpit etc. NWA’s tactic on the DC9s proved very succesfull.

  27. Good point, Keesje. I had not thought DL could completely refurbuish the B-757s. They did that for the L-1011s, DC-8s, and B-727s, as well as NW doing it for the DC-9s, as you mentioned. NW also did it for the DC-10s, and long ago the B-707s and early B-747s too.

  28. In regard to Bair’s comments about 737 to A320 defectors, perhaps he’s only referring to 737NG operators that switched to the A320. If you only consider 737NG’s I believe he’s correct. United and Frontier were 737 Classic operators, and Air Berlin switched but then switched back to the 737NG. If you consider all generations of 737’s add British Airways and Lufthansa to your list, and there’s probably even more I’m not thinking of.

    • US Airways (both USAir and America West) was another 737Classic operator that went to the A320.

      Oh, and it should be considered as well that a “defection” by Delta could be spun as only a partial defection because of Northwest A320 fleet they now own.

  29. Whilst Boeing dithers an increasing number of its customers become more vocal about the need for a new single aisle type its apparent will loose a number of its vanguard domestic customers who will abdicate the relationship in favour of the more immediately available & frugal NEO

  30. “Our comment on the last point: Bair is wrong, of course: United and Frontier were two 737 customers to defect and Air Berlin also bought A320s; we believe there were more but don’t recall specifically.”

    Correct, of course – British Airways also comes to mind, as does Lufthansa.
    Actually, you previously (in 2006) did a nice diagram on the “defectors” on both sides.
    To be found here:
    http://www.leeham.net/filelib/ScottsColumn071806.pdf#search=%22encapsulated%22
    Bottom of page 4

    At that point, the tally was:
    32 switched from 737 to A320
    20 [i]upgraded[/i] 737 fleet with A320
    2 switched from A320 to 737
    2 switched from A320 to 737NG and back to A320 again

    • …in that tally, you only counted “real” defectors, i.e. airlines that basically got rid of their whole 737 fleet in favour of A320s.
      British Airways, who only gradually got rid of their 737s, but haven’t ordered a single one since their first A320 order, were counted as an upgrader.

  31. Refurbishing B757-200:
    We have to keep in mind that the DC-9’s of Northwest
    > were usually flown on short routes
    > did have different design life (Douglas-like)
    > the concept was pretty much scrapped when fuel prices hiked

    The B757-200 fly longer routes, making fuel a much higher proportion of the bill. The question is if DL needs a one-on-one replacement. As I noted else on this site, the majority of North American B757-200 fly with 180-190 seats, so only a few more seats than a B737-800 and perfectly within the comfortable zone of a B737-900ER.
    So, DL could chose to downsize its capacity slightly and go for additional B737-800. Going A321NEO would clearly mean a capacity increase, as I would assume a 200-seat layout. The only current US operator of A321 has 184 seats.

    • Airbus claim a 14% improvement in fuel burn per seat by moving from the 757 to the existing A321. They then claim a further 15% improvement by moving to the NEO. Allowing for manufacturer exaggeration, the A321 NEO should be more efficient than the 757 by well over 20%. That’s huge. I don’t see the 757 lasting long in the current high fuel price regime.

      The A321 NEO won’t just be more efficient than the current version and the 737. It will be more capable too. That’s another reason to switch now.

      It’s the same thing with Delta’s MD-88s and the CSeries or A320 NEO. It’s a question of how quickly their financing allows a fleet upgrade and whether they can get production slots.

  32. In Leeham’s article, the author corrects Bair and mentions a number of 737 operators having defected to A320 besides Easyjet. He names United, Frontier and Air Berlin as examples.
    But how about lessors ? Airbus write in their April orders & deliveries report about having inked a firm order contract with ILFC for 100 A320neo’s at once (60 of them re-engined with Pratt & Whitney engines). I remember ILFC once having been a staunch supporter of Boeing, leasing a lot more Boeing than Airbus aircraft.
    Certainly a nice boost for the A320neo, but also an unmistakeable signal for Boeing, I guess.

    • Lessors are not an example of “defections” from Boeing (or vice versa). Lessors buy airplanes in demand by airlines. The recent order by ILFC for the NEO is anticipating demand; and ILFC had not had a new airplane order throughout its parent’s financial troubles from the global financial meltdown. It would not surprise us to see ILFC order more 737s.

  33. Andreas made a very important point earlier, the NEO investment. The figure he quoted is exactly what *Airbus* is going to spend on the programme to extend the production run by another 10-15 years, at high production volumes. Airbus never had a business case better than that, a lot of people forget that. That investment may well pay off this year alone with and anticipated 500-1000 orders.
    As far as the Boeing attitude to NEO is concerned, they can continue dismissing it, saying that the current NG is 2% better and so on but this is nothing new. They completely dismissed the original A320, saying it will be in the market for only 4 years, so nothing changed there really. I have not seen any clarity about the Boeing position, to be honest. They continue to say: We are thinking about a new plane but the re-engine option is still on the table.
    Looking forward to the PAS and the spin coming from both sides :-)

  34. “the majority of North American B757-200 fly with 180-190 seats, so only a few more seats than a B737-800 and perfectly within the comfortable zone of a B737-900ER.”
    :)

    The 757-200 is 47.32 m long, the 737-800is 39.47m long, the 737-900 42 m and the A321 44.51 m. Lets take it from there.

  35. Sorry, but it’s still a mystery to me, how Boeing can apparently make little to no improvements and keep up with Airbus’s $1.5bn worth of improvement? Then why are Airbus even bothering at all then.

  36. You forget that Airbus are a bunch of incompetents who can’t even hold the water to Boeing, who in turn can walk on water, feed the 5000, and design a perfect airplane from scratch in the time it takes me to tie my shoe-laces.

    Get with the programme.

    Meanwhile, in reality, Airbus said today they had EUR12.2bn (USD17bn+) of cash burning a hole in their pocket. Of course that won’t stop the usual suspects claiming they are cash-strapped, but hey. :D

  37. Andreas, Keesje, Schorch and others, I stand corrected on the “huge investment”
    I claimed Airbus will have to make on the A320NEO, which I now agree will actually
    be relatively low, especially taking the engine manufacturer’s financial support into
    account, as you indicated.

    Because Boeing cannot and will NOT re-engine the 737, I believe that because of
    the generally expected rapid increase in the price of fuel and thus an increasing
    popularity of the NEO, Boeing will have no choice but to come out with an all-new
    seven-abreast, two-isle aircraft for quick turnarounds, which as Steve Hazey
    indicated will be increasingly valuable to airlines like South West.
    The new Boeing airplane will probably become available around the end of this
    decade, or only a few years after the A320NEO comes on the market.

    Whether the new 737 replacement aircraft will also cover the 757 capacity/range,
    has obviously not been decided, but I believe that it will, for cost reasons and
    stay below the capacity of the smallest 787, the -7.

    The all new Boeing 737/757 replacement aircraft with an all carbo-fiber structure
    and the latest engines/avionics, will pose a serious challenge to the “old fashioned”
    A320NEO, which will force Airbus to match Boeing with an all new aircraft around
    the
    same time period, which will make the NEO a short-lived program.

    The above predictions are predicated on the assumption that Boeing finally will
    put the 787 and 747–8 into service this year and launch the 737/757 before the
    end of this year, following an announcement of it’s intentions re. “The All New”
    737/757 replacement airplane at the PAS in July.
    This in turn, will put an immediate end to “the rush to order” frenzy for the NEO.

  38. Most comments here focus on sfc, doc, xyz$/barril, ie on parameters affecting the COST-side of the yield equation… why not give a thought to the REVENUES ? Be aware : a Thompson-staggered cabin version of the C919 in a twin aisle (1+3+2) configuration will cut off 20′ on turn-around times, with a carry-on capability of some 300 IATA-size rollerbags in the cabin. If charged 35 $ a piece for admittance into the cabin (RYR policy ? …) that gives the same revenue as 35 passengers paying 300 $ for their tickets, so the C919HQR (H9XQR) would make money as it were a (2+3+2) aircraft, with the extra daily productivity and the extra freight revenues as cherries-on-the-top. Boeing needs to start thinking in the way of H3XQR, in the same way as people in Toulouse are thinking in the way of H2XQR…

  39. Pingback: Aviation Fun and Stuff » Did Boeing’s Albaugh hint at a Delta A320neo order?

  40. Pingback: Aviation Fun and Stuff » Delta to order 100 737-900ER to replace 757 fleet, delays order for next 100 aircraft (Update1)

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