VLA sector dead, Boeing claims, but Large Wide Body also struggles

Discussion
Smaller is better

When Boeing launched the 787 in December 2003, one of its strategic reasons was the down-sizing of wide body aircraft. Boeing predicted a shift from Very Large Aircraft (VLA) (more than 400 seats) to smaller aircraft such as the 777-300ER and the 787.

Airbus, which launched the A380 in 2000, disagreed, and still does. It sees a 20-year requirement for more than 1,200 aircraft with 400 or more seats in the next 20 years.

Boeing dropped the VLA sector from its CMO this year. Only the 777-9 nominally seats more than 400 passengers (407-425 in Boeing’s advertised seating), although the 777-300ER is configured with as many as 459 by Air Canada.

But fewer than 400 777Xs have been sold, with 72% being ordered by three Middle Eastern airlines. Sales have been anemic since the 2013 launch (with many orders firmed the following year).

Sales of the 777-300ERs dried up. Already hurt by the launch of the Airbus A350, launch of the 777X sealed its fate.

But sales of the A350-1000 also have been anemic.

Downsizing trend begun with the 787

Downsizing from the 747, which entered service in January 1970, really began the following year with entry-into-service of the McDonnell Douglas DC-10. It continued the following year with EIS of the Lockheed L-1011. The 777 followed in 1994, as did the Airbus A340.

But the trend picked up speed with the 787.

The market fragmentation that Boeing predicted with the 787 launch proved correct. The A350 and improved A330 further supported fragmentation. Sales of the 747 and A380 entered a steady decline.

Boeing has all but dropped the 747-8I passenger model. The A380 is hanging on by its slats.

Dropping sales of LWB

But sales of the LWBs also haven’t done well in the 10 years.

An analysis of the Boeing and Airbus orders for all their twin-aisle aircraft (excluding tankers but including business/VIP jets) shows the smaller, 220-349 seat aircraft outselling the larger 350-600 seat aircraft by a wide margin: 68% to 32%.

In only three of the last 10 years have orders for the LWB exceeded the MWB and in two of these three years, there were extraordinary events: the launch of the 777X program and the 2011 order by Emirates Airline for 150 777-300ERs.

Even today, the once-again-delayed anticipated order by Emirates for either the 787-9/10 or A350-900 represents MWBs, not LWBs.

What does this mean?

Except for a 2016 order for 25 -1000s and a single order so far this year, Airbus hasn’t sold a -1000 since 2013.

Airbus was hit this summer with United Airlines swapping the 35 A350-1000 orders it has for 45 A350-900s. Cathay Pacific Airways swapped six -1000s for the smaller -900s. The backlog for the -1000 is now less than 200.

Boeing’s small customer base for the 777X and lopsided reliance on the Middle Eastern carriers is cause for concern.

Market intelligence indicates one of the Big Three Middle Eastern airlines wants to swap 777-9s for 777-200LRs, which is a huge down-sizing if this occurs: from nominally 425 passengers to nominally 301.

Based on the orders ratio for the last 10 years, using Boeing’s current CMO as a basis, Airbus and Boeing can expect to sell about 2,500 LWBs over the next 20 years. The competitors are the 777-8/A350-1000 and the 777-9.

This seems a generous projection.

The 777-8 is a replacement for the 777-200LR, carrying about 50 more passengers in typical three-class configuration. An ultra-long-haul airplane has never sold more than about 100 aircraft. The 777-8s economics, by LNC’s analysis, aren’t as good as the A350-1000, though it has about 1,000 miles more range.

The 777-9 needs a much broader customer base than the struggling Mid-East 3.

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