July 18, 2018, © Leeham News, Farnborough: The biggest, longest-running story at this year’s Farnborough Air Show is about an airplane that doesn’t exist: the prospective Boeing New Midmarket Aircraft (NMA or 797).
And the underlying story that’s emerging from the buzz on the sidelines and interviews with key observers and industry participants is that Boeing’s business case for the airplane appears to be getting weaker, not stronger.
LNC reported Monday that Boeing is struggling to close the cost basis on the composite fuselage concept for the NMA, also called by observers the 797.
As a result, Boeing has reconsidered a design that reverts to metal for the fuselage, a more traditional and much less expensive approach to design, production and cost control.
It’s also less risky than the composite, ovoid concept that up till recently had been the conventional wisdom for the next airplane in the Boeing family.
This article detailed some of the challenges Boeing faces. Concurrently, The Air Current and Aviation Week published their own pieces detailing additional pressure Boeing faces from Airbus, which is thinking about yet another upgrade to its A321neo beyond the LR: an A321XLR, with a range of 4,500nm (vs 4,000nm of the LR), economic, engine and aerodynamic improvements.
Additionally, Flight Global’s Day 1 Air Show daily published a full-page analysis of the market size for the NMA.
Boeing, in shifting forecasts, initially saw a market of 1,200. Then it became 2,000, then 4,000, then 5,000 and back to 4,000. The most recent Boeing forecast for the Middle of the Market airplane is between 4,000 and 5,000.
This includes replacements for the Airbus A300 and A310, the Boeing 757 and 767 and the oldest Airbus A330s.
Flight Global notes that by 2026-27, when it assumes entry-into-service, the A300s and A310 will be gone as will most of the 757s and 767s. The oldest A330s will also have been replaced (Airbus hopes by the A330neo, a critical component of its business case for the A330neo.)
The engine makers see a market of around 2,300. Steven Udvar-Hazy, non-executive chairman of Air Lease Corp, forecast 3,000 and Aviation Capital Group sees 4,000.
All these figures are over 20 years. Airbus can be expected to capture a significant portion of any of these figures.
GE Aviation president David Joyce, in a press conference at Farnborough, said GE is struggling with the market demand and business case.
Hazy, considered one of the sagest players in the industry, noted at a May Airfinance Journal conference, that by the time the Boeing NMA would enter service (which he sees as in 2026-27), Airbus will have delivered 2,500 A321neo.
Boeing itself shifted the target EIS from 2024-2025 to 2025 in its first quarter earnings call. Authority to offer the NMA for sale, according to market intelligence, may have shifted from the fourth quarter to the first quarter. Program launch is also a moving target, from early 2019 to mid-2019 to the end of the year to even 2020.
The point is that there is no certainty, or even reasonable certainty, about what Boeing is up to.
Aerospace analysts from New York and London asked LNC at the air show if all this uncertainty is a Boeing “head fake” to deceive Airbus while Boeing prepares a direct launch to the 737 replacement, code-named the Future Small Airplane, or FSA.
While Airbus is as much in the dark as the analysts, it’s not standing still.
Reports of development of an A321+ or an A321++ have been circulating for years. In recent weeks, development of an A321XLR hit the news. One suggests a program launch next year and EIS by 2022.
The longer Boeing waits to decide to launch the NMA, the more beneficial it is Airbus and the more detrimental it is to Boeing.
If Flight Global’s retirement analysis is correct—and the numbers speak for themselves—and if Airbus comes to market with an A321 upgrade next year with an EIS in 2022, years ahead of the NMA, the fewer airplanes Boeing will sell.
This is why Boeing is going all-out to kill the A330neo, aimed at the top of the market.
If Airbus is successful in winning sales of the A330-800, for which there are none, this squeezes the business case from the top while the A321 squeezes it from the bottom.
If all this happens, there is probably no business case.
Which is also why the importance of Boeing Global Services aftermarket increases.
Stan Deal, president of BGS, outlined a shift in strategy in an interview with LNC at the air show.
In September, when LNC interviewed Deal, he said the link between aftermarket services and the NMA business case was not critical to making a successful case to proceed with the airplane.
But in a pre-Farnborough Air Show interview with Bloomberg, Deal revealed a much closer link than previously disclosed.
“Very deliberately,” Deal said of the revelation. “The big focus is making sure we’re highly integrated on the product invention side, so NMA…is ensuring my team is embedded in those product trades to do two things.
“One is to make sure that as the product goes to market, it’s got the best life-cycle type of trade in terms of a promise to an airline, knowing that 30% is acquisition and 70% capex cost is operating.
“Two, deciding what we put into the airplane from a product service feature that’s enduring long-term for our operators and creating value.,” he said.
Boeing Commercial Airplanes CEO Kevin McAllister is leading the NMA development, but services from BGS is increasingly important to the business case.
How critical is the nexus between BGS and the NMA business case?
“It’s very important,” Deal said. “I’m not going to give you a quantum on the business case, but I’d say it’s an important element of it.”
Deal noted that BCA sales chief Ihssane Mounir offers the airplane and the services together in any sales campaign.
The market has been talking about the “757 replacement” for about six years. The conversation evolved, becoming the “767 replacement,” which is what the 787 was billed to be.
That the conversation has been going on for six years and will continue into next year perhaps is indicative about how difficult the business case is to close.