Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
- Bjorn’s Corner: New engine development. Part 3. Propulsive efficiency April 12, 2024
Airbus, Boeing square off with A330neo, 787 in advance of NMA launch
Subscription Required
Introduction
Feb. 8, 2018, Leeham Co.: Boeing hasn’t launched the New Midrange Aircraft (NMA, aka 797) and may not until next year.
But the maneuvering to capture, solidify or preempt moves is already well underway by Airbus and Boeing.
Reuters synopsized this during its reporting at this week’s Singapore Air Show.
This is only the tip of the iceberg.
Summary
- Boeing 787 production rate increase to 14/mo next year is, in part, a head-‘em-off-at-the-pass maneuver to prevent customers from buying the Airbus A330neo.
- The 787-8 could see a new lease on life as interim airplane.
- A330-800 has steep uphill slog.
- Airbus, Boeing face off 787, A330neo.
Discussion
787 production rate increase
Boeing hasn’t had a 1:1 book:bill for the 787 since 2013. It’s been burning off the backlog faster than it’s been taking orders, raising questions whether the production rate of 12/mo was sustainable past 2021, let alone support an increase to 14/mo.
Boeing 787-8. Photo via Google images.
But an analysis of the Airfinance Journal Fleet Tracker and the Ascend data bases showed the 787 was over-booked at rate 12 in 2019 and 2020 and close to it in 2021. Rate 14 clearly supports these three years.
Market intelligence indicates other motives as well. First, sources say, is boosting cash flow during a time of transition on the 777 line from Classic to the X. Shareholder value is, after all, the No. 1 priority of The Boeing Co. (Market demand will require production rate boosts for the 737 as well, also contributing to increased cash flow. Only half of the 737 operators have ordered the MAX and even rate 57, effective next year, won’t fill the demand.)
Another reason to boost the 787 production rate: to prevent airlines from turning to Airbus for the A330neo for lack of available delivery slots at Boeing.
A330neo uphill slog
Airbus is struggling with the A330neo right now. The A330-800 has only six orders, from Hawaiian Airlines. HA is running a competition between the 787 and the A350-900, with the intention to cancel the -800, LNC is told.
The first A330-800 test airplane rolled out from production, sans engines, last month. Officials outlined their strategy to LNC for a successful program in December.
Airbus A330-800. The first test plane is ready, except for missing engines. Source: Airbus.
They’re betting that demand for this model will pick up in 2020 as A330-200s age and near retirement; and the long-haul, low-cost carrier business model expands.
In the meantime, Airbus is pitching the -800 as the solution to the requirement for the upper end of the Middle of the Market sector.
The competing airplane is the 787-8. The two aircraft are similar in size and range. The -800 is a little larger and carriers about a dozen more passengers than the -8. The -800, being heavier, is about 5% more costly on a trip cost to operate on a cash basis, according to LNC’s analysis. With eight more seats, the seat-mile cost is the same. But the capital cost of some $80m vs the 787-8’s $115m offsets the small COC deficit.
But the 787-8 has an installed operator base with key customers in current campaigns.
In the USA, a key target market for the Boeing NMA launch, American and United airlines have aging 757s and 767s that only get older as the market waits for the NMA entry-into-service in 2024/25.
The A321neo and, on many routes, the 737-10, replace the 757. The A321LR can replace the 757 on 4,000nm routes.
Competing for the interim airplane
Airbus and Boeing are competing to replace the aging 767s in advance of the NMA. Boeing is seen as having the advantage.
The 787 is operated by American and United. Both operate the -8 and -9. Airbus is an incumbent at American with the A330-200, a legacy from the US Airways merger. But American officials have been public that the A330-800 doesn’t appeal to them because it’s an “orphan” airplane.
At the same time, the 787-8, ordered by Legacy American, found that it’s configuration doesn’t work well in the New American business model. Interest in more -8s is said to be limited, but not out of the question.
At United, the company has 45 A350-900s on order, but the first isn’t set for delivery until 2022. Otherwise, the wide-body fleet is all-Boeing.
Conventional wisdom has long-held that United’s management, finance and fleet planners—at one time all ex-Continental Airlines, an exclusive Boeing customer—would only order Boeing. But fleet planner Ron Bauer is gone, having left the company last year. Finance officer Gerald Laderman has a new boss, Andrew Levy, and the president and chief operating officer is Scott Kirby, formerly of exclusively Airbus customer US Airways. Levey and Kirby are said to be more interested in the deal than the airplane.
Still, a sale of the A330-800 into United seems a long shot.
American and United could choose to upgrade the 767 while waiting for the NMA. Boeing can wheel-and-deal with both airlines in a way that Airbus is not, offering concessions on existing orders, throwing in Boeing Global Services maintenance deals and supporting refurbishments of the 767s and, in American’s case, even the 787-8s. Tie all this into a launch order for the NMA, and it’s a tough sell for Airbus and the A330neo.
Face-off
Boeing has long said on earnings calls it prefers to focus on the more profitable 787-9 and 787-10. The 787-8 design-and-production problems significantly reduced the commonality between it and its larger siblings.
But the interim lift requirements of AA, UA and other carriers around the globe potentially could give a lift to the 787-8. There have been few sales for years.
This year might be different.
One option not discussed in this post for replacing “aging 767s in advance of the NMA” is to buy or lease used 767’s or A330’s with enough hours and cycles left to last until NMA deliveries start, like United Airlines has just done with the assistance of guess who – Boeing Capital.
The following excerpt is from the Air Transport World Article at the link after the excerpts.
“United Airlines, broadening its used-aircraft acquisition strategy to widebodies, will add three Boeing 767-300ERs to its fleet in 2018, continuing a trend that has seen it tap the second-hand market to boost its fleet significantly in the past two years.
The 767-300ERs are said to be coming from Hawaiian Airlines via Boeing Capital and will join United’s fleet in the second half of 2018. Hawaiian plans to retire its 767 fleet this year. While the 767s are the only used aircraft included in United’s latest fleet plan, which envisions adding 24 mainline aircraft in 2018, executives are leaving the door open for more deals.”
“I love used airplanes, as many of you know,” United CFO Andrew Levy told analysts on a recent earnings call. “There will be many more used aircraft to talk about as time goes on and as we take advantage of the spot market.”
http://atwonline.com/airframes/united-add-three-used-767-300ers-fleet
The 767 is my favorite plane to fly on. So comfortable, even in coach.
The interesting summary is that Boeing is obviously right that there is a gap in the market only an NMA can fill. It is interesting to see that the gap is large enough that buying new widebodys now, and moving them on to a different mission once the NMA is available is not as straight forward as it would looks. So it again boils down to the question of Boeing being able to sell the NMA cheap enough and still be able to sell it in quantities to make a profit (technically, I am sure they can get it right – commercially is the challenge).
Actually – even though it is only second best to selling its own planes – Boeing should promote the A321LRplus with about 500 miles more range that Scott has outlined. Now, while this at first seems to be a contradiction, let us look at what it could do for Boeing. First, it could be used to pioneer routes well in advance of the market entry of the NMA. Second, it would be a benchmark to work against, the NMA would need to have superior economics to be a success anyway. Third, once the NMA is on the market, the A321LR would either keep this role, and indirectly help the NMA, because it could still continue pioneering markets, or – it could be dumbed down, moved to different missions, and that way the success of today would hurt Airbus tomorrow with less sales.
To the writer of this article :
With eight more seats, the seat-mile cost is the same. But the capital cost of some $80m vs the 787-8’s $115m offsets the small COC deficit.
Are you saying the airlines can expect a price including airbus discounts at 80m USD while the list price is 259,9m USD?
I haven’t seen info on the 330NEO’s OEW’s, the engines could add ~3T, changes to remainders’ impact unknown?
If you add 5T to the 338’s OEW (124T?) compared to the 332 the OEW per seat is 486Kg’s while that of the 788 is 496Kg/seat (OEW120T/242 seats), thus the 338 lighter per seat?
Results from the T7000’s are unknown and could be a deciding factor. Boeing has done an excellent job in down grading the 330 NEO’s, I think once the hard facts about the 330-800 gets realized and its abilities appreciated it could sell well.
…and my usual seat width story; 18″/17.2″=1.05, and its 2-4-2, the 330’s have only two middle seat and the 787’s three, so 3/2=50% advantage to the 330’s vs 787’s?
I also think the A330-800 will sell. The 251 tonne version will pack a range of 8150nm. That will smoke the 787-8 and 787-9. The 2-4-2 configuration will make it a much more comfortable ultra long ranger than the 787.
It will be an intruiging comfortable mid-sized longranger at a good price.
In a most recent interview, Hawaiian CEO is on record saying he will stick with the A330-800.
Delta may also jump on board because it will allow long thin routes to Asia, Africa, and the Middle East. Delta looked the A330 so you just never know.
@Jose, do you have a URL link to the Hawaiian interview?
I am not Jose; however here is a quote from a 1-23-18 Business Insider story that might be interpreted as retiring Hawaiian Airlines CEO Mark Dunkerley having said that Hawaiian was going to keep its A330-800’s. See the link after the quote for the full story.
” In 2014, Hawaiian Airlines ordered six next-generation Airbus A330-800neo airliners. The new jet is expected to give Hawaiian the ability to reach Europe. However, Hawaiian is the only airline in the world to order the -800 and there have been questions as to whether or not the airline and the aircraft manufacturer are committed to the plane.
But, Dunkerley is confident Airbus will continue on with the A330-800neo.
“Airbus is going to build the A330-800. I don’t there’s much question about that,” he said.
So what about the flights those flights to Europe that the A330neo will be able to complete?
“What we always say about Europe is we do have the ambition that we could, one day, fly to Europe,” Dunkerley explained. “There’s no point in us contemplating European service until we have an aircraft that is capable of flying the 15 hours non-stop between the Hawaiian Islands and points in Europe.”
The Airbus A330-800neo is expected to fly sometime in 2018. ”
http://www.businessinsider.com/hawaiian-airlines-ceo-says-asia-growth-opportunity-2018-1
The following quote from what is described in a 2-7-18 FlightGlobal story describes as a recent interview with Dunkerley, leaves an entirely different impression regarding Hawaiians commitment to its A330-800 order. See the link after the quote for the full story.
“Can you update us on Hawaiian’s widebody plans beyond the A330-800 order?
Both Boeing and Airbus, and, perhaps more important, the engine manufacturers… build quality products and we are very fortunate to have the degree of choice we have. We are looking at that, and getting close to the end of a decision process. Beyond that, I can’t say much.”
https://www.flightglobal.com/news/articles/interview-hawaiians-mark-dunkerley-reflects-ahead-445486/
Thanks AP, saw those, conflicting messages.
The mean distance from Hawaii to Europe is around 6300Nm if you go the polar route.
Not an Airbus salesman but an A338 and 359 mix could give you the range but also the flexibility to rotate aircraft on a seasonable and even time of the week basis.
Another similar situation is AirAsiaX that now says they will keep the 330NEO’s, maybe AB has sharpened their pencils?
Hi there, see AP Robert’s post.
https://www.google.com/amp/s/amp.businessinsider.com/hawaiian-airlines-ceo-says-asia-growth-opportunity-2018-1
Boeing’s advantage is being able to offer their customers
the option of choosing a plane today and accepting a swap once the NMA is announced and firmed.
Airbus will be at a disadvantage until governments start (read Mary Kirby site) to regulate seat size depending on mission length. In the meantime, I always take advantage of the extra space typical of an Airbus.
Leg room is more important than seat width.
I always book on schedule and price. Very seldom do you get a choice between an Airbus or Boeing plane with both criterion being equal. No one is going to take a longer flight or pay more for an extra thumb width of seat bottom, even less at the shoulder.
Is Boeing hiding their incompetence from airlines or showing disrespect to passengers building torture cambers for aircraft?
Apologies this is a bit rough, but lets see what they come up with next.
@Anton, tone it down.
Hi Scott, my apologies, will do, was over top and out of context.
@Rick: Actually, I just chose Hawaiian over Alaska to Hawaii because HA flies the A330 with wider seats in coach than Alaska does with the 737.
The economics of the A330neo vs. 787 significantly changes when the A330neo is configured with a 9 abreast seating in Y-class.
A 9 abreast seating might be more acceptable when the aircraft is only used for medium haul (as a MOM aircraft).
Along similar lines, I don’t know how it is to fly on a 787 in cattle class for more than 12 hours, I have done 9 hours once and said never again.
Flew 332’s and 343/6’s on 12-15 hours flights in the back many times, its not just the seat width but also because the 2-4-2 layout is better than 3-3-3, the IFE’s under the window and aisle seats of the 787’s also doesn’t help.
The A350’s 3-3-3 on paper not a big difference on paper with the 787’s but the 350 feels much roomier inside