Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- 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
- A350-1000 or 777-9? Part 2 April 11, 2024
- Pontifications: Boeing “transparency”–not so much. April 9, 2024
Pontifications: Unraveling the numbers
By Scott Hamilton
Feb. 1, 2021, © Leeham News: Understanding the real market demand for an airplane sector is a complicated thing.
What Airbus and Boeing say the market is for an airplane sometimes is a matter of what they don’t say.
On the Jan. 27 earnings call, Boeing set the program accounting for the 777X at 350 airplanes. This number declined from 400. Simultaneously, Boeing took a whopping $6.5bn forward loss on the program. (Not all is attributed to the accounting block.)
Later in the same call, CEO David Calhoun said, “Across the total widebody market of more than 8,000 projected deliveries over the next two decades, we see replacement demand for over 1,500 large widebody airplanes which are well suited for the 777X.”
Some interpreted this to mean that Boeing expects to sell 1,500 777Xs.
Well, not really.
So, let’s unravel these numbers and what “market demand” or “replacement demand” means. Everything discussed below applies equally to Airbus or Boeing.
Addressable market vs real market
For starters, one must understand there are the Addressable Market and the Market Demand. These are not the same thing.
For many years, Boeing said the “market” for the prospective New Midmarket Airplane (NMA) was more than 4,000. Internally, officials viewed the market demand for an NMA as just 2,100 aircraft. With the assumption Airbus would capture half of it, this lower number explains why Boeing had so much trouble closing the business case.
Boeing initially defined the “Middle of the Market” “above the 737 and below the 787.” At the time, the 737-10 didn’t exist, so “above the 737” was above the 737-9. Below the 787 meant below the 787-8. Boeing further defined the MOM sector as up to 5,000nm.
When defined by these parameters, these airplanes are well within the MOM sector: A321, 737-900ER/9, 757-200/300, the A300/A310 (there were then a few left) with the 767-200/300ER and A330-200 on the periphery. This is the “addressable market.”
However, some new airplanes were already addressing this market. The A321neo was solidly within this sector. According to an LNA analysis, only 35% of the 787-8’s routes were more than 5,000nm. Airbus promoted the A330-800 covering the top end. But nobody outside of Airbus (and few if any inside) truly believed this.
And Boeing stepped on its own petard with the launch of the 737-10. While not flexible on the range (3,300nm), its capacity fit right across the A321neo. Most routes were much less than 4,500nm-5,000nm as the NMA evolved, anyway.
So, now you came down to the actual “market demand” for the two-member NMA-6 and NMA-7 family. The NMA, instead of being a 757 replacement, evolved into a 767 replacement. Boeing narrowed its addressable market by conceiving an airplane to replace the A310 (almost nil) and the remaining 767-200s/300s.
Airbus’ numbers game
Airbus did the same thing with the A380 and the A330neo.
It’s well known Airbus for some 20 years claimed the market demand for the Very Large Aircraft (400 seats and up) was anywhere from 1,200 to 1,700 over 20 years, including freighters. Boeing hooted at the forecast. Others, more objective than Boeing, had their doubts. A 2002 study called the Shadow Report (funded by Boeing but using independent consultants) famously predicted Airbus would sell no more than 400 A380s over the program’s life.
Despite the public forecast, internally, Airbus thought it would sell only 500 A380s, including freighters. Airbus dropped the cargo version. By the time Airbus announced the program’s termination with the last delivery this year, only 251 were sold.
An Airbus official said some 15 years into the program that the public forecast was the “addressable market.” He declined to say what Airbus internally believed the actual market demand was. The addressable market included every airplane with 400 seats or more, including the rare A330-300 and Boeing 777-300ER configured this way.
It was still an optimistic forecast. There were only about 150 747-8s/8Fs order on top of the 251 A380s.
Airbus publicly claimed demand for 1,000-1,200 A330neos. Two former Rolls-Royce people (RR supplies the engines) predicted only about 400 would be sold. Internally, Airbus put the number at 500 when the program was launched. The public number, it turns out, was once more the addressable market.
Calhoun’s comment
Calhoun’s earnings call comment that there is a replacement demand for 1,500 very large widebody airplanes must be taken with a degree of skepticism, given the realities described above.
First, Calhoun doesn’t define “very large widebodies.” The old VLA description was 400 seats and above. But Boeing dumped this category a few years ago in its Current Market Outlook forecast when it became clear the 747-8 was done for.
Boeing described the 777-9, nominally a 425-seat airplane that fell into the VLA description, as a “medium-sized” widebody.
Before the pandemic-related fleet grounding, there were 507 747s of all makes and models in service. Although the final few A380s were yet to be delivered, add about 250 to the 747 total. This equals ~750 “very large widebodies.” Add a handful of A330-300s and 777-300ERs configured with more than 400 seats. You still can’t get anywhere near Calhoun’s 1,500 replacement number.
The 777-8 is stillborn. The 777-8F remains a concept. These airplanes are “medium-sized” widebodies—the size of the 777-300ER and the A350-1000. This is the “heart of the market” for the medium widebody. And so far, only about 35 777-8s have been ordered. There are no freighters—this program hasn’t been launched. Sales of the A350-1000 stalled at less than 170.
The aggregate number remains far less than Calhoun’s 1,500.
Furthermore, airlines are replacing 747s with A350s and 787s.
777X’s actual market demand
When Boeing launched the 777X, its public forecast sales figure for this airplane alone was 1,200—a figure repeated by GE Aviation, supplier of the giant engines for the aircraft.
At best, this was the addressable market.
In reality, internally, Boeing saw the demand for the X at between 700-800. When times were still good in the airline business, LNA believed the real market to be only about 500. Now, with COVID—and more capable airplanes like the A321LR/XLR, 737-8, A330neo in addition to the 787 and A350—Boeing may be lucky to have 400 sales.
Boeing’s announcement that its accounting block for the 777X was reduced from 400 to 350—over the program’s life—is a reflection of the new realities. The block can be increased, of course. The block can also be decreased.
I can’t see where Calhoun came up with his number (recognizing, of course, that it probably emanated from Boeing Commercial in Seattle). At best, it’s an “addressable market” forecast. But 1,500 for “very large widebodies”?
This sounds an awful lot like Airbus’ fantasy forecast for the A380.
It is not fair to compare the case of a very huge quad like the A380 to a big twin the 777X.
From capacity perspective the two are significantly different.
Capacity is relevant though.
We can discount that 747/A380 market as gone, and what is left is still not the main market (A350-100 – 777X. )
That main market is the 787/A330NEO and the A350.
I still struggle with the term, we are replacing a 747 with a 787. Replacing is really not the right term. Downsizing the market or we are making more flights.
generally they are replacing a 747 with 1.5 787s and greater frequencies.
the behemoths of the air really only make sense on the super trunks (like heathrow-jfk) or in the ME3 model where you have a single superhub with coordinated connection bursts so you can take all the traffic from amsterdam headed anywhere east of the ME, combine them onto one flight and route them to similar collector flights in the ME for their end destinations.
other than that direct flights using smaller aircraft (321xlr, 787) make more sense to the customer and are more flexible and lower risk for the airline.
Airport constraints can also be a problem, both number of gates/slots and curfews, which favours larger airplanes with fewer flights.
The 767 showed the way to more frequent flights and direct to smaller destinations.
Two cases of needing larger:
– at one time UA had two 747s SEA-JFK within an hour of each other.
– PW had people lined up the length of the (modes) terminal at YXD for the shuttle at peak times like Friday afternoon, with fights every half hour. 15 minute frequencies were not desirable including due number of gates I presume, so the 767 was ordered.
(PW would take you if you showed up, no reservation needed. In the old days it sometimes brought an aircraft from the hanger to take a few people, though I suspect offers of dinner and hotel room were made. In the old days of the service you could buy your ticket on board. Many business people flew round trip in the same day so did not have baggage.
Perhaps somewhat like the eastern US shuttles.)
Trivia: PW’s shuttle was originally called the Chieftain Airbus, for Indian Chief and long before Europeans came up with the Airbus name for an airplane.
As the airlines never made any effort for the benefit of the customer I do not buy that.
I assume it works better for the airlines in flexibility and more revenue though.
most leisure customers, given a choice, will pick the non-stop if the price delta isn’t egregious. nearly all business travelers, given a choice, will pick the nonstop even with a significant price bump.
the airlines recognize the competitive advantage of direct flights and the 321XLR and 787 allow them to do that with good economics and low risk.
they are not “doing it for the customer’s benefit” they are doing it because they recognize the competitive advantage of providing a more attractive product.
“generally they are replacing a 747 with 1.5 787s and greater frequencies.”
Whos doing that ?
British Airways who recently were still the biggest 747 operator(and had the A380 as well ) but then ordered 777-9 as the only plane who can carry the premium heavy numbers they need. Same goes for Lufthansa and Cathay and Singapore who have a lot of business traffic
Even the odd man out Qantas who never had 777s to replace its 747s before yet went for the 777W equivalent A350-1000.
I hope you guys know that increasing frequency on long haul routes costs a hell lot of money.
Don’t forget Boeing also bungle its own VLA forecast: 747-8. Losing an est. $40 million on each jet on top of $4.2 billion charge-off.
Once upon a time, 747 is popular and for awhile 747-400 is the only choice for flights connecting distant hubs. Not any more.
I would say less bungled and more Boeing corporate politically motivated as is much of its ops are now.
“I can’t see where Calhoun came up with his number”
It was probably concocted & disseminated so as to create a feelgood sentiment for Boeing stock. After all, stocks in the travel sector currently have very low valuations, and (retail) investors are looking for any morsel of good news as an excuse/trigger to pile in.
Execs at Big Pharma companies regularly perform similar tricks: positive-sounding headline, but the balloon rapidly deflates for anyone who takes the trouble to read the fine print.
Yes, maybe it is a fantasy forecast and, up to March 2020, that would have been a confident call. But with Covid significantly affecting the basic, built on 1st/business seats and their need for frequent departures, profitability model, maybe it is less of a fantasy forecast today.
Re the subscription article on SAF vs H2, I’ve still yet to see any convincing argument that 35 is realistic for H2 but rather that the only way to achieve already set targets is SAF. Nor that H2 is truly the wonder of wonders for airliners.
It is very hard to predict the future and how well the 777-X will do as a freighter. Population and wealth growth effect traffic volumes. Airbus A350-1000 “double sunset” model for Qantas might wipe out lots of traffic thru the ME3 hubs as it becomes common at airlines like BA, AF, LH, DAL, SQ, DHL and UAL
Airbus might to the LH2 turboprop first to minimize risk and see who will adopt engines for LH2. The US Government might tell GE/PWA it is no good idea, leaving it to RR/Safran-Turbomeca/MTU to sort out.
If there ever is a 777F, I predict the 777-8F as the base.
The 777-9F makes no sense.
Even a 777-8F is a stretch and keeping in mind the current 777F is a 200 Model not a 300 model.
Freighters are sold as cash cow to keep the line running after development and tooling costs recovered by higher margin passenger midels.
Normally in the past yes but the 747 8F came out with both versions, clearly because the PAX version was not going to sell.
I can see that happening with the 777X and the -8 is just a short 777-9 so engineering is minimal.
It all depends on the economy, there are no more 747-8F to be built, though you could do some BCF with the Pax retirements to come.
https://leehamnews.com/2011/09/19/more-on-cargolux-weights-and-fuel-burn/
Boeing have almost invariably been very adept at determining the trends going forward. They have defined market movements possibly better than Airbus . The X problem appears to be almost Airbusian in the desire to make a market that seems to have all but disappeared. Even if at some stage in the future the X sized market starts attracting interest by that stage the X will likely be eclipsed by the A350-1100neo or similar. The X development is looking more and more like a major strategic error, draining cash and putting Boeing in a corner of its own making
“Boeing have almost invariably been very adept at determining the trends going forward. ”
They’ve been very adept at “forming” a market. inserting meme: ( most obvious: quads vs twins. a lot less clear cut than what Boeing bent the market into.)
i.e. they did less determining than forming trends.
Today the momentum and credence they used to insert these is spent, worked away in mishaps and excessive share buy backs too much wagging the dog caused it to vomit :-).
Very informative break down of BA’s complex language and market predictions, exploded as free association coded marketing chatter
One assumes BA is still, in the figures analysed above, counting on the China market, nothing could be less certain ; although there are signs that the US may talk down the trade war and real war language
Meanwhile Trade war is continuing as new US administration concentrates on ‘internal affairs’, code for virus crisis and domestic terrorism crackdown
« SEMI, a major association of global chipmakers, including Samsung Electronics, Intel, Micron Technologies and others, urged the US president in an open letter to reassess the export restrictions on Chinese firms from Trump’s administration, SCMP reported.
But Gartner chip analyst Sheng Linghai said any overhaul won’t come quickly, since the mood in the US remains Trumpist and Biden is also likely to first focus on other issues. »
https://asiatimes.com/2021/02/huawei-smic-join-forces-in-sino-us-trade-war/
https://sputniknews.com/asia/202101291081919553-huawei-smic-to-join-chipmaking-standards-group-as-china-pushes-foreign-tech-decoupling-in-trade-war/
https://www.caixinglobal.com/2021-01-27/us-chip-group-calls-for-rethink-of-trump-era-china-prohibitions-101656673.html
From what I can find on the web, Chinese carriers (ex Hong Kong) only ever ordered 95 777s, of which 30 were freighters. They only took 5 A380s. So, despite having a huge population, it seems that China never really warmed to the VLA concept.
For the A330, Chinese carriers (ex Hong Kong) took 237 frames, and they also ordered many 787s.
As regards the semiconductor war: if China can’t import US semiconductors, and won’t import Boeings, then what else can the Americans sell them besides animal feed (soy)?
@Bryce
Thanks for China market analysis – it would indeed be interesting to calculate the full weight of this across the board for BA, and Airbus
At the moment it looks like China has seized the ‘fact’ (if I dare use the word) of US trade war to invest massively in the developement far beyond US standards of an independent semi conductor industry, as well, presumably, as in aviation, although perhaps with significant input from AB as a result of CAI
If the US is reduced to the status of a feeder nation, at the mercy of China dominated shipping, climate change and US self inflicted over exploitative ind ag, with competition from a number of sources including Brazil and Aus, then….oh dear.. Muilenberg will be out of his new job
The only world class export the US has is WS : which is being let into to China, with caution : the other export is war, which will not be
The reason for the A330 and 777-200 being a dominant long range plane ( and even regional and internal routes) is that the A330 can reach almost all the usual locations in Europe, Australasia and North Africa – now a large diaspora.
Due to congestion at the China mega city hubs, direct flights from the next level cities – as we know even Wuhan was having direct flights to major US and european cities- which clearly dont need VLA
The 777-200 was not dominant, the 300 was in its various versions
@DoU: What are you talking about? BJ has just opened a brand new international airport, so it has two international airports now. Both Shanghai and GZ have opened and expanded their airports in recent years.
Delta flies seven daily flights between Haneda and seven U.S. cities including Portland and Seattle.
China’s population is four times of America.
“”within the MOM sector: A321, 737-900ER/9, 757-200/300, the A300/A310 (there were then a few left) 767-200/300ER and A330-200 on the periphery””
Now there should only be the A321LR and XLR on the lower size end.
737 don’t have the range,
757 and 767 are old
and A330-200 is bigger than 787-8.
The 767-300ER is in the middle in size between 787-8 and A321. This is the size which needs a new plane and this is what the MOM meant, 270pax with 4000-5000nm range.
Yes, I have seen numerous requests by Delta and either American and / or United for the 767 replacement. These airlines have said they would order hundreds of these planes. But here is the problem: Boeing CEOs and the board of directors are chickens. They can’t build this plane. It would be a moonshot that would require even more outsourcing for them to get their absurd bonuses.
I’ve deleted a number of comments that went off-topic and into goofy China stuff.
I’ve been tolerant but I’ve also repeatedly told y’all to stay on topic. I’m tired of the nonsense so I will simply delete entire comments rather than try and edit or police them.
Hamilton
Only a little bit off topic (hopefully it won’t be axed by Scott):
Jet Blue has revealed its *stunning* new “Mint” business class for use on its A321LR transatlantic services. With a product like this, one can see how longhaul narrowbody could develop into a lucrative market. Even if “business” travel stays at a low par, there are plenty of wealthy individuals (on certain routes) willing to pay extra for a luxe experience.
Who’d fly LaCompagnie when this is available?
https://onemileatatime.com/jetblue-mint-suite-studio/
Question is how many wealthy people that don’t have their own jets?
Singapore (was?) going to run to New York with 172 seats on an A350-900. That is purely sad though what you need for the range.
That is two of the world largest business centers.
There are a few routes that work, but not anything of any numbers than 1 or two.
Interesting that they have returned to the herringbone configuration, from the previous alternating two in a row to one, in a forward facing layout. The Mint Studio looks nice with the extra triangle of space. The herringbone is a space packing solution where usable width exceeds needed seat width.
One advantage of an economy 2-2-2 new aircraft, is that the width is about 160″. With forward facing lie flat seats, that can be done in 1-2-1 with 30″ seats and 20″ aisles, 30,20,30,30,20,30.
EU is interested and looks set to invest in blue H2 and green H2 as part of recovery effort. As a whole, EU would continue to have a need to import energy, I believe.
Whether it’s a success remains to see.
I guess there must have been some advantage to taking the loss up front on the 777x, rather than later.
I’m curious as to putting a number on things in the overall scope of things, how much did MCAS cost, how much will Covid cost Boeing and Airbus, how much does BCA or ACA make on average?
How much do they make? Is 50B a year a ballpark number, and is 5B profit on that reasonable? Is 20B for MCAS a good number? That would wipe out 4 years of profit for BCA.
How much was the 737 supposed to make? 25B a year with a profit of 2.5B a year? Over 16 years, 40B? Did MCAS just wipe out half the profit over the program life?
What’s the cost of Covid, 5B a year loss for dropping production in half? Assuming full production in 2022 and 2023, the profit will be wiped out to pay for 2020 and 2021.
Ted:
The problem is you are attempting to interject logic into this.
No, all the money goes to pay Calhhoun for his wondrous magical act of the 737MAX back in the air (he did what?)
And you can bet they are eyeballing loans for dividend and share buy back as soon as possible.
No sire eee, at Boeing we don’t have profits, we have an investor pig trough.
Ted – I am well versed in the financial verbiage that covers this sort of situation. The highly technical term is a sh!tload.
In March of last year, BA ball parked the cost of the grounding at $20 billion. As we all know, bad news is to be down played and announced with a minimum of fanfare, so as to not spook the investors and shareholders – while anything neutral or positive is to be trumpeted to the heavens.
Boeing is very adept at covering the actual numbers, but every once in awhile you get nuggets from 10Q filings which are very revealing. For instance:
https://seekingalpha.com/filing/5206107
Southwest 10Q from Q3/20 – Page 29
Sale-Leaseback of Aircraft
“In second quarter 2020, the Company entered into transactions with third parties, involving ten of the Company’s Boeing 737-800 aircraft and ten of the Company’s Boeing 737 MAX 8 aircraft that qualified as sale-leaseback arrangements under applicable accounting guidance. The Company sold the ten 737-800 aircraft to a third party for $405 million, then immediately leased the aircraft back for approximately ten years. The Company sold the ten 737 MAX 8 aircraft to a third party for $410 million, then immediately leased the aircraft back for approximately 13 years. As such, the aircraft were de-recognized from Property and equipment at their remaining net book values. All of the leases from the sale-leasebacks are accounted for as operating leases, and thus are now reflected as part of the Company’s Operating lease right-of-use assets and operating lease liabilities in the accompanying unaudited Condensed Consolidated Balance Sheet. The 737-800 and 737 MAX 8 sale-leaseback transactions resulted in a recognized gain of $153 million and $69 million, respectively, reflected within Other operating expenses, net in the accompanying unaudited Condensed Consolidated Statement of Comprehensive Income”
Seems straight forward enough – right? LUV did a sale-leaseback deal for 10 – 738’s and 10-Max 8’s. But delving into the numbers, we get this:
They sold 10 Max’s for $410 million. Got $41 million an aircraft. But they had to recognise a GAIN of $69 million (or ~$7 million) an aircraft on the transaction. So these Max’s, which were at best a few years old, were on their books for $34 million.
Even if you throw in $3 million for accum, deprec,, you still get a cost of $37 million, that LUV paid BA for it’s Max’s.
Part 2 is in the Boeing financials. In it’s 2018 EOY (the last year before the grounding and covid) BA made $12 billion on over $101 billion in sales. Commercial was $8 billion of that profit (66%) on sales of $60 billion. So the margin of BCA was 13%. Says so right here:
https://s2.q4cdn.com/661678649/files/doc_financials/quarterly/2018/q4/4Q18-Earnings-Release.pdf
Now, widebodies (bigger ticket items) have a better margin then narrowbodies. What that margin is, is a closely guarded secret. But let’s be generous and say BA makes 13% on the Max. Remember – this is when Boeing delivered over 800 jets, margins were at an all time high and fixed costs got allocated over a wide number of units.
Back to that $20 billion cost estimate for the Max grounding. The backlog is some 3300 aircraft, which means in order TO BREAK EVEN on the program, they must make a margin of ~$6 million to cover the costs.
13% on the $37 million planes they sold to LUV is $4.8 million. When production was super high, fixed and variable costs were low.
Also there is this tidbit from a recent filing from SouthWest:
https://seekingalpha.com/news/3645010-southwest-expects-boeing-max-planes-to-be-in-service-in-march
“Taking into account planned retirements of its 737-700 aircraft, the Company does not intend to grow its fleet in 2021, compared with its fleet of 747 aircraft as of December 31, 2019. The details of the Boeing Agreement, which included the settlement of 2020 estimated damages relating to the grounding of the Company’s 737 MAX 8 aircraft, are confidential. However, as a result of certain delivery credits provided in the Boeing Agreement, as well as progress payments made to date on undelivered aircraft, the Company currently estimates an immaterial amount of aircraft capital expenditures in fourth quarter 2020 and full year 2021.”
LUV is taking 35 Max’s in 20/21. This is the key statement:
“the Company currently estimates an immaterial amount of aircraft capital expenditures in fourth quarter 2020 and full year 2021.”
They will not be paying anything more for those 35 jets, then the progress payments they already have.
Which begs the question; how many other carriers have similar arrangements? How much is Ryanair and the notorious cheap O’Leary getting their Max’s for?
Production on all three lines has now slowed, which increases the amount of fixed costs that must be allocated to the cost of each jet they sell.
Sell 800 planes and the debt pool is divided by 800. Sell 400 and you just doubled the fixed cost of each plane.
Interesting thing, this detective work no?
@Frank
Very interesting, not sure I follow it all but it all adds up
Thanks for this
@Gerrard
It’s takes a very special mind (read: neurotic, paranoid, OCD, drugged, alcohol induced haze and generally nuts) to pour through a 10Q. Either that or I seem to have a lot of time on my hands lately, enjoying the current lockdown with not much else to do.
Point being, I do not consider myself to be the most brilliant mind on the face of the earth – and if I can come up with these things, then other airlines can and probably do.
If so, no one will pay over say….$45 million for a Max. Everyone will try to get down to LUV’s $37 million price. Everyone knows Boeing is over a barrel and are in no position to demand top dollar for their products.
Finally – everyone is short on cash. Airlines will take the opportunity to bail out of deliveries and save deposits, if they can. Air Canada just recently did, cancelling 10 Max’s and 12 A220’s – losing deposits on the Airbus planes, but not the Max’s.
Times are tough…
@ Frank
Great analysis — thanks!
No wonder Boeing had to return to the bond markets to do a debt rollover: it seems they have no means of generating actual earnings!
Keep in mind that the Airbus “forecast” for A380 deliveries was influence by how much of the government subsidy would have to be paid back for each delivery. If they ended up delivering fewer, then too bad for the risk-sharing partner.
Similar to to the L1011/DC10 market, the 747-8/A380 split the market in a way that helped doom both programs.
The success of the 777-X program is entirely dependent upon the fleet profile at Emirates. As of January 21, Emirates fleet was comprised of 117 A380s, 10 777-200LR, and 129 777-300ER. Provided that Emirates business model of using the Middle East as the logical transit and logistical hub between Europe, Asia and Africa–a role that this region has been since antiquity–these airplanes will be retired and replaced at some point with airplanes roughly equivalent in capacity.
Emirates gave both Airbus and Boeing the opportunity to improve the economics of the 777 and A380. Airbus deferred. One should take into consideration that perhaps launch of 777-X when it was done was a strategic one to put the nail in the coffin of the A380, leaving the replacement market entirely to 777-9. Boeing has done this before with the 747SP and the L1011, and with 737-600 and MD-95.
Certainly, the A350 and 787 are both easier to fill than the VLA 777-9 and A380, which would favor a less heavy weighted fleet mix. However, mega-trends of increased urbanization and increased wealth of urban middle-class in India and China mega-cities might suggest that fragmentation favoring smaller airplanes may not be a long lasting one. Fragmentation in favor of large twins–787 and A350–is going to highlight even more which airports are slot constrained.
My perspective is that the pandemic will have reduced traffic growth and reduced the wear and tear on the existing fleet of VLA aircraft. The costly major D-checks for the current fleet have slid out by 3-5 years, which just means that the replacement cycle is further deferred out to the future. The pandemic makes the business plans very difficult to project because one just does not know when traffic will return.
The 777-300ER had a seventeen-year production run of 2004 to 2021. And should the 777-9 have a similar production run, it would only need a yearly delivery of 21 airplanes per year, or a 2 per month rate, to achieve the 350 accounting block. Given the replacement size of the market of 777-300ER, 747-400 and A380, it doesn’t seem a stretch that this will happen. The financial cost though is that production has slid out which raises the costs associated with serving the debt on development.
The time for VLA will come, but not this decade.
The 777-9 won’t beat the A330-900 in OEW per seat and fuel burn per seat.
777-9 orders were cancelled before Covid and more will be cancelled. The 777-9 is a lost case.
Boeing compares a 10-abreast 777-9 with a 9-abreast 777-300ER, that made me smile.
Interesting mention of 747SP.
Observe that its big advantage was range, and parts commonality with the full-size 747 though te flaps were different, and perhaps crew commonality.
FTR, L1011-500 was the intercontinental version of an airplane originally designed for transcon. A _shortened_ version BTW (did I ever say I like shortened to get range or field performance). Seemed a good airplane to me, as a 707 replacement, but Lockheed were not good at selling. (250 total including both lengths, versus 440 of DC-10 including 60 tanker versions).)
BTW, another case of inability to sell was the YS-11 twin turboprop (think Convair 600, the re-engined Convair 240). Many operated in Canada and US, but only 182 built.
The YS-11 was a government project, motivated by the typical desire to increase national capability.
Designed and built by a consortium of Japanese companies, some other investors, and a huge government investment.
Wikipedia relates accusations that some of the component suppliers were not serious enough about commercial success of the product. (Reminds me of the different case with people like Smith’s Industries obstructing 787 development in cost squabbles, ‘cutting off their nose to spite their face’ by delaying cash inflow from sales of the airplane.)
And sales of the YS-11 were impeded by a change in currency values, something to be kept in mind for today’s turboprops both in production and wannabe. While Canada’s currency relative to the US fluctuated for decades, it has declined in recent times to about 75%, which gives a 1/3 advantage for costs incurred in Canada. (Some parts of the airframe are build in other countries, engines built in Canada, avionics substantially elsewhere. I’d look at things like seats to build locally.) Canada’s economy is heavily dependent on trade, but eco-activists and scummy US companies pushing politicians harm trade. (The softwood lumber scam continues, for example.)
In contrast to poor sales of the YS-11, the Fokker F-27 sold well for its time, even without some additional sales from the Fairchild FH-227 derivative. But the F-27’s sales started slow until airlines saw reliability proven and realized its greater potential and passenger comfort compared to DC-3s. (Re-engine Convair twins were competition to, pressurized turboprops – CV600, CV640, CV5 80).
I see about 400-500 sales for the 777-9 and that’s me being optimistic. The 777XF will help push this up.
For the -9 they don’t need too much to get to 400. They will definitely get something nice from China then a few new orders from some Carriers like Korean and Turkish, add some repeat orders, BA and LH will come back. I see KLM too given they’ve gone all Boeing now, there’s nothing else suitable enough to replace their 300ERs I think you’ll get to 400 orders. I think given the size of the jet. That’s not bad. The 777XF will help push the number out to about 600? Over the course of program? I don’t know if my numbers are too high. I also think United will take it. They love their ERs but not any time soon. Boeing needs to bring the price down to help with sales. It will reduce margins but it will help. It’s a very good jet.
Surely the 777X is going to be murdered by the much lighter A350 NEO? Particularly if AB launches the relatively cheap 2000 stretch.Its window of opportunity has been destroyed by covid19.
I don’t really understand all of the “post covid-19” commentary, most potential developments are 10 years away, flights are likely to consolidate and if business flights become less important leisure travellers are much less time of flight sensitive.
Keep in mind that the -1000 has not sold all that well either.
Market is the 787 to A350-900
You’re absolutely correct. Market now is the 787 to 350-900. I see them eating into 300ER replacements. Especially the -10 in the Asian regional. Fantastic cargo capabilities, the range is not an issue for the region and good passenger load. What will be really an issue for the 777X is if Boeing were to optimise the -10
“Keep in mind that the -1000 has not sold all that well either.”
The reason for that is not what you think but this:
Since its EIS of the 777-300ER in 2003 there has been delivery of 820 pax versions and 200 cargo versions. the last 6 years has seen around 300 777-300ERs delivered. The 350-1000 did have competition.
10-12 production per month of that category of VL twin was very good numbers
The 777F was not a 300 variant, it was a 200 variant.
The 777F was a variant of the heavy gross weight 300ER, just shorter , just like the -200LR….that makes them the same developed family.
The IGW was not a few tonnes, but almost 50 tonnes extra over the same length 777-300
@TW: I agree that the 777F is built on the 777-200LR.
I think there’s a illustration from FG showing that.
What is the EIS for a 787neo or an A350neo? This could still be 15 to 20 years off. I think if they are smart, the engine makers and airframers will spend their money on a 45K to 50K engine for a new platform instead.
> I don’t really understand all of the “post covid-19” commentary, most potential developments are 10 years away, flights are likely to consolidate and if business flights become less important leisure travellers are much less time of flight sensitive.
If you mean that you expect some radical downscaling
in orders as a result of the Situation, I fully agree with you; and am surprised that POV is not getting more attention.
Too much exposure for Airbus. Also the ultrafan will need to be more developed an have a committed airframe manufacturer. RR does not have the bandwidth to bring ultrafan into the market atm or I would say this decade. We can see how depressed the market is. Wide doors are currently a no go for development. But when demand does come back if we are saying it will to 2019 levels. The first thing would be repairing of balance sheets. So expect 777-300ERs to hang out a bit longer. IMO Airbus still has a VERY GOOD line up. Boeing needs a new narrow body. But expect significant PIPs on the XWB and GEnx. That will improve the 1000s competitiveness to the 777-9 which btw is still formidable, there’s absolutely no guarantee the 777-9 will sweep up most of the 300ER replacement compared to the 1000. That is something we have to wait and see. And also fragmentation to smaller 900s and 787s. But I think the big 777-300ER and A380 carries will probably stick to the 1000 and the -9 but some fringe 300ER operators will down gauge
Also I should note that till we start seeing oil prices close to 100/barrels the demand for new widebodies will still me somewhat undermined due to the favourable cost structure of existing widebodies. Case in point the 300ER
But this is more talk for 2025+
“For the -9 they don’t need too much to get to 400.”
You would be surprised if you only look at the gross order. Boeing just confirmed there are only 191 “firm” order of 777X. Even reaching 300 order by EIS looks increasingly at risk (without another big delay).
I wrote this before I saw that! LOL
Boeing may have empty slots (20+ ??) to fill in between now and EIS at the end of 2023.
I posted on Jan 30
“Boeing’s unfilled orders for 777 (including 777X and 777 freighter), after ASC606 adj. is 232 only.”
Thanks Scott.
Even range is a variable consideration.
For example, Pacific Western’s scheduled routes had an average flight length of well under 45 minutes, but it used the five-hour (IIRC roughly) going to Nevada and Mexico in the middle of the night and on weekends. PW purchased the 767 to meet demand on the YYC-YXD shuttle of 150nm, but used it going deeper into Mexico, and on Vancouver-Calgary-Toronto. It also planned to take advantage of its big belly for freight. But that was a small airline compared to many in the world today.
Larger airlines may schedule to put longer range airplanes on longer routes, but there is benefit of having some routes pick up traffic on shorter legs then take them overseas. Southwest Airlines – now huge – has vintages of 737s and juggles them, I understand some to Hawaii which is a hike needing remote/ oceanic fuel reserves. Alaska varies, perhaps using Embraer jets on shorter routes due fewer pax, though SFO-LAX must be a high traffic route (as was PW’s CalgaryEdmonton shuttle).
There are choices.
Newbie here, with a question…
The 787 and 777x have experienced huge delays. The 777x seems to have had the misfortune of slipping schedule into the midst of a global crisis, although this fortune could change in sunnier economic climates.
Another issue with the 777x it seems to me is that frame of the aircraft is based on ‘old’ materials (not the lightweight configurations for the 787/A350). Factor in that both plane makers (with the world watching the aviation industry) are committing to providing greener planes in the 2030s, the 777x begins to look even more vulnerable.
Then there is the MOM, whereby it seems that Boeing has been caught with its pants down by Airbus’ ambition/A320 family that could be feasibly life extended to see out the 2020s.
It seems to me that a whole host of corporate indecision, poor forecasting and bad decisions have plagued Boeing for a long time now. Noting the current problems/lack of industry/public trust around the 737Max, the lack of an answer to the A321 range/payload capability, and Boeing struggle to break even on the 787, if the 777x is not a success (of sorts) or at least breaks even, what impact will this have on Boeing in the Commercial Aviation sector, and the perception and confidence in Boeing by its customers?
“…issue with the 777x it seems to me is that frame of the aircraft is based on ‘old’ materials..”
Previous posts by LNA have discussed the small advantage of a carbon fibre fuselage, the 777X has the carbon fibre where it matters in the wing ( flexible but increased span) and complete rear empennage( low drag and smaller but more effective moving surfaces).
https://leehamnews.com/2015/04/02/bjorns-corner-lighter-fuselages-practical-considerations/
The 777X internal fuselage ring frames werent carbon fibre but changed to integrally machined from the older ‘riveted’ sheet metal sections
Heres an interesting pdf for Kawasaki ,who produce the same work packages in metal for 777X as for the older model, where the discuss the production changes ( aslo assume the robotic assembly tested by Boeing worked out when it did not)
https://global.kawasaki.com/en/corp/rd/magazine/179/pdf/n179en03.pdf
Remember for ‘new material’ planes like 787 and A350 you only end up with around 50% plus of the empty weight ( including engines of course), the rest is ‘old materials’
The ground was shifting on the 777X before Covd, Covd may be the death knell for it but the world was already changing.
The A380 demise was the indicator that area had no future as was the failure of the 747-8 Passenger.
Those two planes are quads …and bigger then even the 777-9X.
Best idea is that the existing 777 -300ER/777F heavy weight class production has been selling stongly over the last 5 years ( pre covid) when orders for the quads had dried up.
Lufthansa ordered both A380 and B747-8 , (but not the 777-300ER, they had the A340-600) because they were different sized planes
https://airinsight.com/comparing-very-large-aircraft-the-a380-and-747-8/
Essentially using same pitch for the 3 different classes its a 405 seater to 525 seater ( the 777X is even less than 405 seats for the premium carriers)
I think if you put 777x economy seats & aisles on a A380, it is easily 11 breast main deck. And you should put the typical A380 bars, hanging areas on the 777x too. In reality the 777x are really close, main deck.
https://lh3.googleusercontent.com/proxy/3xU_WUizNCNJw3sFidkky93KTrH9b4eJoMRFICZN7hwRyfjsnHon2AB4I1AkEWXwQHv_jENCAW16IUpZRaIHLU7SQQo7Rl97FuxsnYQ0XvHyiXQ
So Airbus was not wildley far off on A380 demand, 63%, but a bust depending on break even, and close if enhanced 747s were considered.
The 777X is a different situation IMO. Launching into a market impaired by the SARS-CoV-2 panicdemic and climate catastrophists influencing politicians. Probably useful in the long term but a drag today.
The 767 would be an interesting study, envisioned not just as a sizeable twin but a trijet for oceanic remote. (Hence a big wing, and touches like numbering engines Left, Center, Right to labels need not change.) In the event, ETOPS for twins became viable, so the trijet configuration was not needed, the big wing supported stretches and range extensions (higher gross weight). A very successful program, combined with narrow body 757 using essentially the same flight deck and digital avionics to get a common crew rating.
If Boing hadn’t recently given the world the MAX debacle,
I’d say they ought to re-engine the 767; short/med-term problem
solved. But they did..
Indeed, re-engine 767.
Short-field Keith says shrink as well – make a -100. :-o)
(He also wants that big belly for places that are several hours by truck – he remembers watching automobile fenders being unloaded from 737s in the Thompson-Okanagan area of BC. Presumably worth the extra cost to repair shops and insurers to get quick delivery, keeping in mind trucking outfits tended to be very slow at getting freight out of their terminals whereas airlines had got organized to be quick so earned much business. There’s a broad economic lesson.)
MAX-10 delayed to 2023.
But some new systems have to be installed on MAX-8 and -9 within one year, right?