Feb. 13, 2018, © Leeham Co.: Skeptics who question Boeing’s market demand forecast of 4,000 airplanes for the New Midrange Aircraft aren’t thinking “outside the box,” says Randy Tinseth, VP Marketing.
Tinseth heads up the team that prepares Boeing’s annual Current Market Outlook for the next 20 years.
Boeing’s CMO forecasts a need for about 5,900 small twin-aisle aircraft (fewer than 300 seats but larger than single-aisle airplanes of more than 200 seats). About 4,000 of these are for the NMA.
Others, including Airbus, Pratt & Whitney, Rolls-Royce and some key suppliers see the market as between 2,000 and 2,500. Leeham Co.’s own estimate is 2,300.
A little bit here and there
“You take a little bit from the top of the single aisles, you take a little bit from the bottom of the wide-body market, you stimulate some growth and, of course, you have a little bit of a numbers game because you’re replacing some aircraft,” Tinseth told LNC on the sidelines of the Pacific Northwest Aerospace Alliance
conference in Lynnwood (WA) today.
“What’s different about this airplane is this isn’t a conventional airplane,” he says. “This is an airplane that’s all about changing the fundamental way the networks of our customers. Those who seeing a low forecast aren’t thinking out of the box.”
Tinseth says airlines will take the NMA and grow their business in much the same way they did with the 787. Tinseth told the conference that 170 new routes have been opened with the 787 since entry-into-service in 2011. About 700 787s have been delivered.
Filling a gap
“The NMA is a mid-market aircraft. We have short haul. We have long haul Now we have mid-haul aircraft. This will be the first aircraft that will be the mid haul aircraft that does in many ways what the 787 has been able to do,” Tinseth says.
Ron Epstein, the aerospace analyst for Bank of America Merrill Lynch, did an in-depth study of the NMA for one of his research notes a few years ago. On a later panel at the PNAA conference, he remains skeptical Boeing can produce a plane for the $65m-$75m airlines and lessors want.
“That’s a hard hurdle,” he says.
Richard Aboulafia of the Teal Group, appearing on the same panel with Epstein and consultant Kevin Michael of AeroDynamics, sees two distinct Middle of the Market requirements—one for a single aisle airplane and another for a twin-aisle. He pointed to the concurrent development of the Boeing 757 and 767 are the example to follow.
“It’s really two different markets, two different production costs and two different operating economics,” he says.
Not one airplane, but two
Michael said Boeing’s current drive to vertically integrate its operations might not make sense for one aircraft program (the NMA), but would for two (the NMA and the New Small Airplane to replace the 737). “Maybe not at the same time,” he said. This could produce “a steady stream of work into the 2030s,” Michael said.
Although Boeing has said there will be no cannibalization of the 787, Epstein disagrees.
There will be some cannibalization of the 737 MAX 10 at the bottom and the 787-8 at the top, Epstein says.
He agrees there will be some stimulation like the 787. But some of the wide-bodies currently being used on the routes for which the NMA will be designed results in cannibalization.
It should be noted that in his presentation to PNAA, Tinseth shows the NMA replacing the A330/340, the 767 and 777-200ER/300. Missing are the 757, larger 737s and the 787-8—a selective set of examples, noted a few delegates afterward.
Some also questioned just how stimulative the NMA will be for new routes. While Boeing touts 170 new routes opened by the 787, some failed. More to the point, skeptics asked, was how many of the 700 787s delivered were needed for the 170 new routes; and that the average stage length for the 787 is 2,000-3,000nm, a figure similar to the A330.
“What you think the stimulative demand is for the new markets is the variable,” Epstein says.