July 4, 2016, © Leeham Co.: It’s looking like all the pain and agony of the 787 development is behind Boeing. (Except for the deferred production costs, of course.)
Boeing is back into airplane development mode.
To be sure, only one of these is a new airplane. The others are derivatives. But at least Boeing seems to be on the move after slowing the train (to mix the metaphors) considerably following the 787 debacle.
Information coming out of Boeing’s pre-Farnborough Air Show briefings paints a picture of aircraft development for the Middle of the Market airplane, or New Mid-market Aircraft (NMA) as Boeing now calls it, that we concluded from our own Market Intelligence a year ago: the NMA moved beyond the 757 replacement to that of a 767 replacement.
Bloomberg News last week reported on the potential of a 777-10. We hinted at this in a piece in July 2015 when we revealed GE Aviation was developing a 110,000 lb thrust engine for the 777X. Then there is the 737-10 study, the on-again, off-again on-again plan to further stretch the 737-9. (There’s also a change in the 737-7 MAX to what Jon Ostrower of The Wall Street Journal calls the 737-7.5. This adds 12 seats to the 7 MAX concept, but it’s a simple shrink of the MAX 8. I don’t consider this a new airplane development, but a refining of an existing plan.)
Boeing is now focusing on an airplane that is seven abreast, two aisles and a range of roughly 4,500nm to 5,000nm. It will seat 220-260 or 270 passengers. This is remarkably like the original 767-200 and 767-300. (The 767-300ER has considerably more range.)
Although the 787 was intended to be the 767 replacement, the range went way beyond what was needed for most operators. Additionally, the design and production problems were of such magnitude that the 787-8 required enormous redesign and rework. The follow-on 787-9/10 are very different airplanes from a production standpoint. The differences are sufficient enough that Boeing doesn’t even want to build the 787-8, concentrating instead on the common-production 787-9/10, which are also the profitable models. Hence, the Middle of the Market starts below the 787-9, not the 787-8 as Boeing often claimed.
Finally, the customers kept telling Boeing (and us) that what they truly want is a 767 replacement, not a 757 replacement. It took Boeing a while to get the message, but it finally did.
Customers were also telling us, and Boeing, that they don’t want to pay more than about $70m for the airplane. Not a surprise. But Boeing hasn’t been able to figure out so far how to build the airplane for less than $100m. A market demand initially identified as low as 1,500 now is claimed by Boeing to be 5,000. This helps bring the price down.
With Boeing now appearing heading toward a launch of the NMA, this puts Airbus into a conundrum. The A330-200/800 is about the right size, though a little big on the low end, but the range is way too much. The A330-200R (Regional) brings the range down to the 5,000nm mark, but it has old engines and the aircraft may be too heavy compared with the Boeing NMA. Airbus has a pricing advantage, but if Boeing can figure out how to sell the NMA for $70m (a highly dubious prospect in my opinion, but let’s say Boeing can), the A330-200 pricing advantage diminishes considerably.
When does Boeing launch the NMA program? Aviation Week reports it will be the end of the decade, for a 2024-25 entry into service. This is a 4.5 year launch-to-EIS.
Didn’t Boeing learn from the 787? That development was supposed to be 4-5 years. I know the NMA won’t be the moonshot the 787 was but neither was the Bombardier CSeries and that took seven years. The A320neo launched in December 2010 and EIS January 2016. This was a minimum change program—4.5 years. If Boeing truly is talking about a five year launch-to-EIS for the NMA, I think Boeing is sniffing its own kerosene. Launch should come in 2017 or 2018. Whether it will remains to be seen.
These are straight-forward derivatives of the 777-9 and 737-9 respectively.
Development of a 450 passenger 777-10 will kill the 747-8I, which is already fundamentally dead (as is the 747-8F, in our long-held view). It also means Airbus either has to re-engine the A380 to improve economics dramatically or it’s a goner, too (some say it already is). Our Market Intelligence so far hasn’t found much demand for the 777-10, the 747-8 or the A380 these days. Even the 777-9 hasn’t proved to be popular beyond the Big Three Middle East airlines.
It may well be the Heart of the Market (as Boeing likes to say) is now the 360 seat arena. Here Airbus has the advantage: the A350-1000 is more economical, though shorter ranged, than the Boeing 777-8. Sales of the -1000 are better than the -8, but the numbers aren’t great. Even sales of the 777-300ER have dried up.
Some evolution of this sector is clearly underway.
The 737-10 is a plane that remains undefined. It’s either a simple stretch or it’s got a new wing, with all the knock-on effects this will entail. Boeing hasn’t decided, though we have a pretty good understanding what the likely outcome will be.
The 737-10 would be a holding action against the A321neo, but too little, too late.
Still, at least Boeing may be finally doing something to fix its 737-9 problem. And that’s good news.