Boeing suggests long life for 767

Boeing rolled out the 1,000th 767 Wednesday (Feb. 2) and BCA CEO Jim Albaugh suggested there is a longer life for the airplane even if the USAF doesn’t choose the KC-767 for its next tanker.

Dominic Gates has this story about the event. The Seattle PI quotes Albaugh as predicting 2,000 767s before the line peters out in this story.

We first suggested there might be a longer life in January 2010 with this posting.

We don’t really have much to add to Gates’ story or our previous post except for this refreshed analysis:

Boeing has the opportunity to refresh the 767 into an “Advanced” model (we’re not sure the “Next Generation” would accurately reflect an upgrade, but it might) that, coupled with a dramatic price reduction in actual sales prices if not published list prices might be fairly attractive for cheap lift, especially for airlines unable to afford the going rates on 787s and Airbus A330s or A350s.

Consider the following hypothetical in product improvement, none of which is out of the realm of possibility:

  • Winglets: 3.5%-4% fuel savings, already implemented as an after-market approach–make this standard equipment;
  • Aerodynamic improvements: 1%-2%; and
  • Engine improvements: 1%-2%.

If Boeing and the engine makers could achieve these savings, you have a combined reduction in 5.5%-8%, at least in theory. While this is still well short of the savings promised by the 787 and A350, coupled with low capital costs (both in the acquisition price and the attendant financing costs), and an airline could buy a lot of fuel.

If Boeing further spruces up the airplane with the Sky Interior along the lines of the 787 and adapted for the 737 and 747-8I, and you could have a pretty attractive airplane.

40 Comments on “Boeing suggests long life for 767

  1. It took them over 28 years (first delivery in Sept, 1982)to deliver the first 1000 and now they hope to sell another 1000 units of a 30 year old design?
    Isn’t all this minor sprucing up in the attempt to make the A350 competitive with the 787 what cost Airbus time, orders and respect?

    I am skeptical that such minor changes (Airbus will also reap the benefit of advances in engine technology and are certainly making their own minor aerodynamic improvements), along with a 5%-10%(?) reduction in price will make a plane that was getting consistently by the A330 for the last 10 years, that much more attractive to customers. As is always the case, time will tell.

    Interesting to read that despite Loren Thompson’s assertions as to what Boeing believes, Mr. Albaugh thinks they are going to win the tanker competition (Settle PI). Maybe Mr. Albaugh didn’t get the doom and gloom memo.

    • Last time I recalled, the fuselage of the A330 is based on a 40 year old design as well..that hasn’t stopped sales now has it?

      Just like the A330 of today isn’t the same as the A330 of 1993 (nor that of the A300 of yesteryear), the B767 of 2011 isn’t the same as the B767 of yesteryear either.

      Of course, the A330 has much more capabilities than the B763ER, but the B763ER is quite an efficient aircraft in its own right. Its much lighter than both the A330 and B787. Making a few “teaks here and there” as mentioned in the commentary will make the B763ER just that much more efficient.

      • Not really a good comparison, isn’t it? While the A330 used the fuselage of the A300, everything else is new, so I find it hard to say that it ‘is based on a 40-year old design’, other than that it is a twin-engined widebody tube with wings. By that token, the 767 is also based on the same 40-year old design. In fact, both of them are based on the 107-year old Wright design, of a machine heavier than air that uses engine power to lift off the ground.

        An updated 767 would be nowhere near the change that was seen between the A300 and the A330.

      • IF the 767 could have been prettifyed and boosted in attractiveness in an easy way Boeing would have done it some time ago.
        787 customers getting interim lift from Airbus must feel like some poisoned dart in Boeings side.
        If we look at orders and deliveries
        While A330 orders went through the roof after 2005 the 767 just got ~20 frames per year more interest.
        While Airbus after 2003 increased production by quite a margin every year (following the curve to top out at 120+/a ) the 767 went on lifesupport (10/a).

  2. This argument did not work so well for the A345/6 vs. the 77W. The reason for this must partly be that while acquisition costs are a fixed cost item (once you have financed, you know what that’s going to cost you over the life), fuel cost is not, and at present the risks are very clearly on the downside. So by buying cheap now and thereby reducing financing cost, you are exposing yourself to higher risk of operations cost in the future. Exacerbated by moves to include aviation in a CO2 pricing regime.

    So while you load yourself with all this risk, you also have a less capable plane, which imposes operational restrictions on you and your company’s ability to innovate in terms of product offering.

    I think the current sales numbers tell us all we need to know about the potential for another 1,000 sales. If you take the numbers of the last five years, it’ll take another 55 years or thereabouts to do so. If you look at those of the last two years, it’ll take 200 years.

  3. The barrel crude just hit the 100 USD mark. So, this is largely driven by speculation. However, with each increase the life expectancy of “legacy” programs shrinks. Another 1000 seems unlikely, another 100 possible.

    • The speculation is driven by the fundamentals. Easy oil is running out quickly. The marginal cost of oil production must be around US$60 now, if not higher. It will only get worse with cost increases for e.g. deep-sea following Macondo. Political instability in North Africa is not helping either. Libya, Algeria are not insignificant producers. The speculators know that they are on to what looks pretty much like a one-way bet, and in such cases speculation plays a useful role by providing an early-warning system for the market, and for investors, and indeed by opening up new sources of supply with higher marginal cost.

    • Schorsch and Aero, we weren’t there at the event to hear and get the “feel” of how Albaugh said it, but we think probably the “1,000” was probably “employee marketing” as opposed to a true “market forecast.” But as we said, we weren’t there so we have to take it at face value.

      • Hi Scott,

        I did see it the same way. The actual quote started with, “I hope..”.

        But I still had to have some fun with it.

  4. The key sentence in Dominic Gates’ article is this one:

    Boeing has sold just 10 of the midsize wide-body jets in the last two years, half of those heavily discounted sales … to compensate for not delivering the long-delayed 787 Dreamliners

    Boeing have already tried a discounting route for the 767 and it didn’t work out. The strategy also depends on Airbus not following suit with the A330. I expect them to discount that plane, if they haven’t done so already, as they try to compete with the 787.

    Finally, you need to consider residual values, which have the biggest effect on the cost of financing new planes. As the 787 at last comes on stream, we will see a glut of 767’s entering the second hand market, depressing prices. A big difference between the second hand and new prices makes new plane purchases very expensive, even if the price is discounted.

    The silver lining though, is that the older 767’s will be very attractive on the secondary market. You get a good choice of ideally sized planes for very little money. You can use the planes flexibly – you don’t have to worry about them being idle and not sweating their value in off-peak times. This allows you live with high operating costs. So I agree with the title of your post, “Boeing suggests long life for 767”. But I don’t it will translate into many more purchases.

    • Question of delays, I guess, to some extent. How much does demand exceed supply? How much of this can be soaked up by production increases? How much of the demand could be supplied by older A330s/767/777 over the period?

    • “…, will increase production to nine jets a month in early 2012, and go to 10 A330s from the second quarter of 2013 …”

      Last year Airbus built 87 A330. Is Airbus speculating about a furhter delayed production of the B787? I think the plant in Mobil will come soon after the winner of the KC-X competition is anounced.

  5. That’s the other thing. Lots of people seem to assume that without the tanker contract, Airbus would not open the plant in Mobile. Why? if they can ensure sufficient demand for A330F and passenger planes, why not assemble them there, tanker contract or not? The rationale of being inside the dollar area is the same, and with planned production increases it would make sense too.

    • Hello Scott, due you agree with Andreas comment about AIRBUS in Mobile or do you have a different thought?

      • We think Airbus should do Mobile anyway but Airbus insists there is no business case without the tanker. French unions also an issue without the tanker.

  6. I wonder if it is being considered to put the GEnx-2B67 on the 767, which is the 747-8 engine. It does weigh some 3,000 pounds more but if it saves 20% on fuel? Coupled with the glass cockpit envisioned for the KC-767 it could be a winner.

    Possibly do as a re-engining with conversion to a freighter also. There are a lot of A-300’s flying that are probably getting very tired.

  7. A production run to date of a thousand isn’t to be sneered at, with a moderate safety record she still is the medium range darling of many loyal Boeing operators.

    Whilst she may struggle to match the 330’s economics their may be some mileage in new orders, but only as a 787 compensation tool & at a Boeing reward price to maintain carrier loyalty.

    When you consider 330 production would absorb the total 767 backlog within six months indicates what the airline industry thinks about the type, to suggest otherwise and claim a potential exists for thousand additional airframes is flying in the face almost total industry rejection of the 767

  8. Why would Boeing want to sell another 1000 767’s.
    many 787’s were sold at prices that turned out to be close to or below cost. assuming some of the potential 767’s replace 787 sales, why would Boeing want to keep the old one on the books?

    it would just drive prices on the 787 down and not earn any real money.

    • My guess is Boeing still thinks they can get the tanker deal. Just a question of
      the right acupuncture application 😉

      Then: Perception management:
      With the 767 line lean and ready it is not any longer potential new jobs
      but the gory killing of existing jobs. Politicians take note. These people vote!

      Fringe benefits:
      Gifting 767 away ( well, rebated 😉 to famished customers in compensation will hurt less.

    • Are Boeing people considering pulling the plug of the 787 and writting a full loss?

  9. 2,000 was just hyperbole. Jim Albaugh was caught up in the moment. Boeing has no intention of selling 2,000 767s, even if we win the Tanker contract.

  10. “If Boeing and the engine makers could achieve these savings, you have a combined reduction in 5.5%-8%”
    But how much investment will it require? Why would the engine makers spend money on a product which is clearly not desirable, at least, in the civil market?

    “…coupled with low capital costs”
    Didn’t Airbus try to keep up with the 77W by dramatically undercutting their rival? In fact Leahy suggested this as their basic tactic. I don’t believe it worked…

    “… and you could have a pretty attractive airplane”
    You could but perhaps airlines are more interested in the revenue potential which the A330 can bring. Not to mention the tag team of -200 and -300 models, commonality and all the rest of it. With the A330 ramp up and the likely launch of additional improvements for the A330 product line (Paris Air Show should be very interesting), I really doubt the 767 can pick up 1000 additional orders, with or without the tanker win. Nevertheless a very popular message for the workforce from Albaugh, no doubt.

  11. Man, they sure are expecting a hell of a lot of 787 compensation sales.

    I kid, I kid. 😛

  12. The 767 was initially maintained on the production line at the lowest rate possible, because:
    1.Boeing initially wanted to keep the team together, by
    drastically reducing its price until they could win the
    T/T competition they were sure of winning, which was
    good reason, based on that assumption.
    But when that decision dragged on for almost decade,
    it became necessary to:
    2.Continue the expensive practice, because of the now
    three+ year delay on the 787 airplane.

    Sadly, a very expensive way to build and sell airplanes,
    especially if Boeing also loses the T/T competition!

  13. leehamnet :
    We think Airbus should do Mobile anyway but Airbus insists there is no business case without the tanker. French unions also an issue without the tanker.

    I think the French unions are overestimated in this case. They won’t bite the hand that feeds them.

    As for Airbus insistence, I see that as a poker move. It gives them political leverage with congressmen from Alabama. Of course they’re not going to give that up while they still need the support for the tanker campaign. Once the campaign is over they’ll announce they set up shop in Mobile in any case.

    You read it here first.

  14. Jacobin777 :
    Last time I recalled, the fuselage of the A330 is based on a 40 year old design as well..that hasn’t stopped sales now has it?

    This may be a bit missleading. They share a common fuselage crosssection across A300, A310, A330 and A340:
    http://en.wikipedia.org/wiki/File:Airbus_A300_cross_section.jpg
    The first two are conventional craft while the latter are fully FBW.
    The widened tailsection of the A310 carries over to the A3[34]0 family.
    Highest comonality is between A340 and A330 afaik: 1(+1) wings, variable count of engines, 6 fuselage length, same cockpit same tail (except sizes ).
    No idea what effects the “spring cleaning” (A330-200F) will have for the family.

  15. Boeing 767’s rival product Airbus A330 is stepping up production rate to 10 units per month due to unprecedentedly high demand (there are HUGE orders to be announced during the coming months !):

    Toulouse, Jan 3, 2011
    Airbus has decided to raise the production rate for its A330 Family to ten aircraft a month from the second quarter of 2013.

    Currently Airbus turns out eight A330 Family aircraft each month. This monthly rate will increase to nine in early 2012, before reaching rate ten in the second quarter of 2013.

    “We are increasing the production rate for the A330 Family due to the strong market demand for the aircraft,” said Tom Williams, Airbus’ Executive Vice President Programmes. “In the long-range, mid-size category, the A330 is the right aircraft for airlines worldwide”.

    The A330 is not only a bestseller as a passenger airliner but also as a Multi Role Tanker Transport (MRTT) aircraft, as a VIP aircraft and also as a freighter.

    The A330 MRTT achieved civil and military certification in 2010. Currently five are flying with a further four undergoing conversion. Delivery of the first two aircraft to the Royal Australian Air Force (RAAF) is in the final stages. It is planned to deliver five A330 MRTTs to three customers in the course of this year.

    2010 has also seen five deliveries of the brand new freighter variant to three customers as a first step towards satisfying a market of some 400 new build mid-size freighters over the next 20 years.

    The reliable and efficient A330 is one of the most widely used widebody aircraft in service today, with one taking off each minute every day. To date, Airbus has won over 1,100 orders for the different models of the aircraft. Some 750 A330s have already been delivered and the aircraft is currently flying with 90 operators worldwide in 50 countries.

    Source: http://www.airbus.com/newsevents/all-news/

  16. 28 years to sell 1000 767s. Times have changed. The mkt for 200-300 seat wide bodies has become huge, and, unlike the 100-150 seat narrow body segment, it will belong exclusively to AB and BA at least until 2030, IMO. Together, BA and AB have sold more the 1000 767s, 787s, A358/9s and 330s in just the last 5 years, and more orders are on the way.

    The core reason BA may do well with the 767 in the next 10 years is that neither they nor AB can meet mkt demand with the 787/A358-9 alone because they are sold out for years to come (assuming they ever get delivered). This why 787/A350 sales have nearly dryed up. So, airlines must go for what is available and works reliably. What airlines want most are low prices and reliability (like 99%). To me, Albaugh’s key point was that the new 767 line would allow BA to lower prices dramatically and still make money. Airlines HATE down time due to glitches. The 767/332 are both proven and reliable with huge supply chains/maintenance systems in place to keep them in the air.

    AB’s spin has been that the A332 killed the 767. That is only partly true. BA did not refresh the 763/4 and airlines stopped buying them mainly because they all thought (actually fantasized) that BA would deliver 788s by 5/08, be at 10/mo by 2010, and perhaps reach 16/mo in some parallel universe by 2015. Now the best they can hope for is 10/mo by 2013.

    Do not underestimate the 767. They and the 332s are very different planes serving different segments of the 200-300 seat mkt. And don’t forget the 764. BA’s success with the 788 (for which AB will have no competitor once it is being delivered in large numbers) proves the 200-250 seat mkt segment is alive and well, as does the large number of 767s that airlines around the world are keeping in service. The 763/4s fit very well into the new P2P world.

    How the 767/332s get refreshed may not, IMO, depend that much on expensive improvements to increase fuel efficiency, such as re-engining. I believe it was Tony Tyler at Cathy Pac who said, “The best fuel hedge is a fuel surcharge.” Qantas just added to theirs in the last few days. See http://www.flightglobal.com “Qantas increases fuel surcharges for first time in three years.” But if AB can put GTFs/LEAP Xs on the A320 family, BA can do it on the 767s.

    It is ironic that both BA and AB have had so many problems building new tech planes that were supposed to replace old tech planes that are now having to rely on the old tech ones, which they designed and put into production very smoothly, to keep themselves in business.

    Lastly, as I have said before, the USAF will order both tankers, which will help BA more than AB. That is the only way to over come the political obstacles. To do that, and get AB to put a line in this country, the AF will have to increase the total number so AB will get at least 150. This is just my opinion.

    • IMHO the current rush towards the A330 indicates that the Dreamliner will not significantly overperform the older plane over the majority of routes.
      i.e. buying for interrim capacity but with an eye on good viability later on.
      Remember that Boeing toutet their horn to the tune of the Dreamliner being
      20% better overall than the 767. Then take into account that the A330 is very
      close to the Dreamliner.

      • Maybe. But, Boeing’s delivery delays gave airlines a chance to cancel 788s and buy 332s. They have not done that in large numbers. But that may only be because the mkt is too big for AB and BA to fill with only the 787/A358/9. The airlines may feel they haves to take what they can get, wherever they can find it.

        My guess is that BA do not know enough now to know how the 787 will perform in service because the whole concept is entirely new; eg they don’t know the engine fuel burn for sure, how much weight they can take out, and what aerodynamic improvements they can make. They will only know once the plane is in serice and they have begun adding incremental improvementson the prodution line. What the performance turns out to be wsill be evolutionary.

        • Cancelations:
          Pricing for eary orders was something you just don’t walk away from.
          ( How many of the ~800+ orderbook actually ?) that ugly duckling may
          still learn to be a beautifull swan. As long as no large customer
          defects all is well. Prospective Dreamliner users sit in a boat on
          the same ocean riding the same storm. No advantage. Todays managers
          go by the book and god forbid do nothing out of the ordinary.
          Except maybe the exquisitely inept going by the recent swan song of
          Mr. Joice ;-?

          Performance:
          IMHO Boeing should have some basic insight into performance characteristics
          after 75% of certification are (said to be) done.
          Wonder how that annoucement to take “the tail back in house away from those
          hamhanded Italians” and use Hybrid Laminar Flow on the horizontal stab “for reduced drag”. A bit of fibbing maybe. My guess is they have problems with
          control authority.

          Will initial nonETOPS use actually produce meaningfull performance data for improvements?

          Do you think that any performance improvements will be applied before
          manufacturing has been debugged to turn out more than 2/4 frames per month?

    • Christopher Dye aka CubJ3 :
      BA did not refresh the 763/4
      And don’t forget the 764.

      Boeing did refresh the 767. The refreshment was called the 764, it came with a glass cockpit, changes to the wings, cabin, etc.

      I am sure it is hard for anyone, especially Boeing, to forget what a total failure that was. 38 ordered.

      • Fair point, but that was then this is now. I would be interested in your views on my main argument, that the mkt for 200-300 seaters is so strong going forward that there will be room more 767 and 330 orders. My understanding is that BA hopes to reach 10 787/mo in 2013. AB will likely deliver their first A359 in late 2013 or early 2014, but their production rate will not reach max out for several years after that. A while back I read that they would produce 25/year the first couple of years, and eventually go to 16/mo, but I have seen since from AB about their production rates. If all goes as planned, some part of their production will be A351000s which are not intended for the 200-300 seat mkt. It seems that a decent estimate that the most both air framers will produce in the 200-300 seat mkt will be will be about 20/month by about 2015, or 240 year. Whatever that figure turns out to be, both are sold out until 2017-18, if memory serves. For some airlines, this means they will have to wait 8-10 years to get their planessir rijseagure riof when the airframers wuikksase frt some otheorwanted 16/mo)amhopes to deliver their fialope toreach fore btdoes not address what I saidnThey only refreshed the 764All true

  17. My apologies. Please excuse. I pressed the post button by mistake.
    The key seems to me to be exactlly how long will this wait be? Keep in mind, for example, that some customers have options/purchase rights in addition to orders which each mfrer will have to plan for; eg. in BA’s case, there is the AA non-order, which is said to be for 49 firm and 51 options. This is source of Albaugh’s “optimism” I think.

    • What production schedule was initialy planned for the Dreamliner?
      EIS in Summer 2008 and a fast production ramp up to 10 per month.
      Achieved after 6 month? ( lets be bombastic 😉
      That is 30 ( in 2008 ) + 120 + 120 ( in 2009/10 ) ~= 270 Dreamliner
      equivalent transport capacity missing in the market today as planned.
      The GFC downturn partially compensates for this “sea of missing seats”.

  18. I really appreciate your analysis and insights….

    Please note, however, that percentages don’t “add” ! You suggest that
    4% + 2% + 2% = 8% but it only adds up to 7.8%… Put it another way, the engines cannot save 2% on the fuel already saved by the winglets.

    Otherwise, once again, thank you for your writings.

Leave a Reply

Your email address will not be published.