Leeham News and Analysis

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Part 3: Boeing 757 replacement: 757 and Airbus A321neoLR versus clean sheet designs.

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By Bjorn Fehrm

Part 3 of 3

Introduction

In Part 2 of our three-part 757 Replacement analysis, we took a close look at Airbus’ new 97 tonne take-off weight A321neo, revealed in a world exclusive by Leeham logo with Copyright message compactLeeham News and Comment October 21. We analyzed the A321neoLR’s capabilities and limitations when compared to Boeing 757-200W and we saw that it could do the international flights that the 757-200 does with about 25% better efficiency. In this final Part 3, we will now compare the 757 and A321neoLR against what can be Boeing’s reaction, a clean sheet New Single Aisle, NSA, or New Light Twin Aisle, (NLT). First the conclusions from Part 2:

  • When using the United Airlines-configured 757-200W international as benchmark, we came within seven seats of the 757 capacity for an A321neoLR. It covered the same range and had trip fuel costs that were 25% lower.
  • The per seat fuel costs gave a 22% higher efficiency, which was within 2% of Airbus own figures.
  • 737 MAX9 is not suitable for stretch to an international version, not because the wing is not good enough but because the MAX9 cannot bring the wing to an angle at take-off where it can work efficiently; the landing gear is too short.

Summary
For Part 3 we can summarize:

  • A New Single Aisle (NSA) or New Light Twin (NLT) which would enter the market in 2025 would be sized at around 200 passengers with subsequent variants covering the 175-225 seat market, all numbers with OEM standard two-class seating. Figure 1 shows the fuselage cross sections we have used in our modelling of NSA and NLT to cover this market segment.

NSA and NLT cross sections

Figure 1. Fuselage cross sections of our models of NSA and NLT. Source: Leeham Co.

  • In order to cover the market segment of the 737, A320 and 757 it would have a range in excess of 4,100nm. We will use 4100nm for our modeling to maximize the comparative efficiency information.
  • Its efficiency would be higher than an A321neoLR, primarily due to better engines and a more modern wing.
  • The New Light Twin (NLT) wins on comfort and ground turn-around time but pays with a larger fuselage cross section due to the extra aisle. This causes more drag and structural weight, net effect is a reduction in efficiency of around 2.5%.

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 5 Comments

 Posted on October 28, 2014 by

 Airbus, Airlines, Boeing, CFM, China, Comac, CSeries, Embraer, GE Aviation, Irkut, Leeham Co., Leeham News and Comment, Pratt & Whitney, Premium, Rolls-Royce, Uncategorized

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BABC Conference Part 2: Airbus outlook

Barry Eccleston, president of Airbus Americas, presented the Airbus outlook at the British American Business Council Pacific Northwest conference today.

Highlights:

  • The A330 went on longer than we thought it would, and are going to nine a month from 10.
  • He still sees a market for the A330ceo with airlines other than the long-sought China order.
  • We’ve had unexpected success for the A321 as a replacement for the Boeing 757 and 767-200; 934 A321s orders and conversions from A320 in just the last two years. First airplanes from Mobile (AL) plant will be A321s, which had been planned for the A320.
  • The A321neoLR brought to the market place just under two weeks ago and already have interest. There is a bit of wing strengthening, a bit of structural restrengthing.
  • The A330 has become the bread-and-butter of the long range business. It has the largest operator based, 106, than any other wide-body.
  • Our strategy is to take today’s product and improve it. We followed the A320neo strategy with the A330neo. A330neo has 95% spares commonality with A330ceo.
  • Fundamental difference vs Boeing supply chain (in response to a question) that Boeing is out there with Partnering for Success program to drive down costs, it’s a very aggressive program. Our approach is we can’t deal with all our suppliers so we deal with Tier 1s, who we expect to deal with Tier 2 and they with Tier 3s. We are very open to looking at new suppliers. Our cost base is in Euros so we are looking for more dollar-based suppliers.
  • Short-term answer about a Washington State engineering base (in response to a question) is no. We like the idea of coming to the US (Wichita, Mobile) and long-term could expand. However, A350 engineering demands are now behind us. So we are not looking for lots of engineers right now.

 5 Comments

 Posted on October 28, 2014 by

 Airbus, Boeing

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BABC Conference, Part 1: WA State’s position, Boeing’s outlook

The British American Business Council-Pacific Northwest is sponsoring a conference today on the Advanced Technologies for Next Generation Aircraft in Seattle. We’ll have several reports, starting with this one.

Alex Pietsch of the Governor’s Office of Aerospace, kicked off the conference, saying that Boeing employees more than Microsoft, Starbucks and Amazon combined.

“No one should question Wasnhington’s place in aircraft production,” Pietsch said, noting the siting of the 777X assembly and wing production, a rate increase to 52/mo for the 737 and expansion by suppliers.

Thanks to the 777X, Washington will be the only location in the US where composite wings are built, Pietsch said.

Kourosh Hadi senior director of Boeing Airplane Product Development, said that trends in commercial aviation during the next 20 years indicate that single-aisle aircraft and demand remains the “fastest growing, most dynamic segment” in the industry. Traffic demand continues at 4%-5% per year, despite four recessions, two financial recessions, two Gulf Wars and other global factors.

Hadi indicated that “advanced designs” fall within the 2021-2030 timeframe and “future concepts” fall from 2031 and beyond. Advanced designs include advancements in aerodynamics, systems and propulsion. Future designs might include SST and other concepts.

Technology has to add value, Hadi says, for performance, cost, production rates, Cash Airplane Related Operating Costs (CAROC, a common Boeing term) and environmental issues are focus areas.

First flight of the 737-8 MAX is early 2016, with EIS with Southwest Airlines in July 2017.

Hadi said it was “mind-boggling” that Boeing is improving the 777 by 20% with the 777X, a plane he characterized as one of the finest aircraft ever produced.

Flight test of the 777X is slated to begin in 2019, with firm configuration next year and detailed design in 2016 and the production to begin in 2017.

  • Our observation: Hadi detailed the 777 Classic, 777X and 787 families but only talked about the 737-8. FWIW.
  • In a change from practice, and a refreshing one, Boeing compared its next round of aircraft with its own current and past generation aircraft rather than bashing Airbus at every opportunity.

 

 15 Comments

 Posted on October 28, 2014 by

 Airbus, Boeing

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Delta’s wide-body fleet plan: could it include used 777-200ERs?

Delta Air Lines is supposed to make a decision on its Request for Proposals for 50 wide-body aircraft before the end of this year, perhaps as early as next month. The competition is hot between the Airbus A330-900, the A350-900 and the Boeing 787-9.

Delta is understood to use the aircraft to beef up its growing Seattle hub across the Pacific; for its Detroit hub, also to Asia; and its New York JFK trans-Atlantic hub.

In addition, Delta is phasing out the last 14 of its Boeing 747-400s inherited from its merger with Northwest Airlines by the end of next year.

The A330-900 is viewed as a trans-Atlantic airplane, while the others are viewed as largely, but not necessarily solely, trans-Pacific aircraft, according to our information.

But there could be another wrinkle. On Delta’s third quarter earnings call, CEO Richard Anderson made some intriguing comments that could raise another possibility: acquisition of used Boeing 777-200ERs.

To put this in context, recall that Anderson and Delta actively seek out inexpensive used aircraft which, while hardly competitive at high fuel prices when comparing operating costs vs new aircraft, provide low capital acquisition costs and low ownership costs.

Here’s the exchange on the earnings call, as recorded by Seeking Alpha’s transcript:

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 Posted on October 28, 2014 by

 Airbus, Airlines, Boeing, Delta Air Lines

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Oct. 28, 2009: five years ago today, Boeing announced 787 Line 2 goes to Charleston; then, now and the future

This is about eight pages when printed.

It was five years ago today that Boeing announced it would locate the second assembly line for the 787 in Charleston (SC).

The decision was expected and, some say, had actually been made months before–as early as the preceding February. We take a look back at the events leading up to Boeing’s decision to put the second line in Charleston, what’s happened since then and where Boeing will be in five more years.

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 3 Comments

 Posted on October 28, 2014 by

 Airbus, Boeing, IAM 751, International Association of Machinists, SPEEA

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CASM Paradigm: Lower Seat Mile Cost or Higher Yield; Evaluating the GOL competition

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Introduction

As Brazil’s budget airline GOL reportedly evaluates whether to acquire 20 Boeing 737-7s or Embraer E-195 E2s, the principal of the “CASM Paradigm” is a concept worth examining.

Leeham logo with Copyright message compactThis head-to-head evaluation of the E-195 E2 and the 737-7 MAX is a rarity. Typically the head-to-head involves the Bombardier CS300 and the Airbus A319neo. All three have the same seating capacities. The E-195 E2 has slightly fewer passengers than the 737-7 with similar seat pitch.

The competition is also what might be seen as a contrary competition. Airframers agree: the airline industry is upgauging. Capacity discipline, long elusive until after the global financial collapse of 2008, has been driving load factors higher. But lowering unit costs, or the Cost per Available Seat Miles (CASM) has long been the principal measure by which airlines, OEMs and aerospace analysts measure efficiency.

Although Trip Costs of aircraft operating over a route is important, the trend toward upgauging at all levels clearly is the driving force.

It's an age-old debate: the cost per available seat mile (CASM) vs trip cost. CASM typically wins, and the airline industry is migrating toward larger aircraft. Embraer, not surprisingly, thinks this has gone too far. Graphic: Embraer, reprinted with permission.

Figure 1. It’s an age-old debate: the cost per available seat mile (CASM) vs trip cost. CASM typically wins, and the airline industry is migrating toward larger aircraft. Embraer, not surprisingly, thinks this has gone too far. Graphic: Embraer, reprinted with permission. Click on image to enlarge.

Embraer takes a different view, arguing that trip costs and a smaller airplane should trump the CASM obsession. A smaller airplane will mean higher yields, EMB says. A larger airplane provides lower trip costs but drives yield lower.

We visited Embraer’s headquarters earlier this month and received a full briefing on what EMB calls the CASM Paradigm. In our report today, we detail the presentation and discuss other considerations beside CASM vs Trip Costs that drive the size of the aircraft acquired.

Summary

  • The CASM Paradigm becomes a vicious, circular cycle, driving airlines to larger aircraft but lower yields.
  • Extra seats on larger aircraft mean lower unit costs but at the cost of profits.
  • Scope Clauses remain an issue in the US.
  • Connecting traffic, pay scales also are issues.
  • We analyze the operating costs of the E-195 E2 vs the 737-7.
  • We discuss the GOL competition.

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 Posted on October 26, 2014 by

 Airbus, Boeing, Bombardier, CFM, CSeries, Embraer, Leeham News and Comment, Pratt & Whitney, Premium

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Odds and Ends: MTU on A380; lessons learned; Alaska Air v Delta; GOL looking for airplanes; Boeing downgrade and upgrade

MTU on A380: The German company MTU, which is a key supplier on a variety of Airbus and Boeing engines, questions the potential market for an A380neo, according to this article from Reuters. Our Market Intelligence indicates Airbus is moving toward a re-engined airplane, although an Airbus official denied this to us this week. Reuters’ sources suggest work is ramping up.

Tapping lessons learned: The Puget Sound Business Journal has a somewhat different approach to the story earlier this week on the groundbreaking for the Boeing 777X wing factory. Steve Wilhelm focuses on Boeing’s tapping of lessons learned on the 737 and 787 programs.

Alaska Air v Delta Air: Months and months ago (almost a year), we were the first to write that hand-wringing over Delta Air Lines’ growth at Seattle, viewed as a major run at Alaska Airlines, was over-wrought. The growth was to support Delta’s growing international hub and while the growth came on many Alaska routes, Alaska’s dominance would prevail. A few months later, we pointed out that Delta’s growth was coming at the expense of Southwest and United airlines; Alaska was solidifying its position. (It also posted record 3Q earnings this week.)

The Puget Sound Business Journal has this story about how the three generations of the Boeing 737 is helping Alaska face off Delta.

GOL looking for planes: Brazil’s GOL is looking at the Boeing 737-7 and the Embraer E-195 E2 to renew its 737NG fleet, according to this Bloomberg report. Next week we’ll be taking another in our series of looks at EMB’s approach to the market with a discussion of the CASM Paradigm.

Boeing downgrade and upgrade: Credit Suisse yesterday downgraded Boeing from Outperform to Neutral (Buy to Hold) on the basis of 787 deferred costs and lower free cash flow. Wells Fargo reiterated its Hold rating. Zacks went from Neutral to Buy. Stern Agee reiterated its Buy.

 70 Comments

 Posted on October 24, 2014 by

 Airbus, Airlines, Boeing, Embraer

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Part 2: Boeing 757: Airbus A321neoLR as a replacement on long and thin routes

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By Bjorn Fehrm

Part 2 of 3

Introduction

In Part 2 of our three-part 757 Replacement analysis, we take a close look at Airbus’ new 97 tonnes take off weight A321neo, revealed by Leeham News and Comment October 21. We call the 97t airplane the A321neoLR (Long Range); Airbus has yet to name the aircraft, which it began showing to airlines last week.

Leeham logo with Copyright message compactWe analyze the A321neoLR’s capabilities and limitations when compared to the aircraft it intends to replace, the Boeing 757-200W. We have chosen to do so using a real airline configuration as opposed to an OEM’s typical seating layout. By comparing the 757-200W and the A321neoLR over the route structure that United Airlines is using the 757 today, we can better see the characteristics of the A321neoLR and what operational consequences the differences between the types would mean for the airlines. Before we start, a short recap of Part 1 about the 757 and its replacement candidates. Here is what we found:

  • the seating capacity of the A321 is within 10 seats of the 757-200 in a standard configuration; the 737 MAX9 is trailing with about 20 fewer seats.
  • the myth about the strong engines of the 757 is just that, a myth.
  • the good field performance of the 757 is coming from its wing more than any advantage on the engine side
  • the A321neo and 737 MAX9 were hindered in their capability to replace the 757 for long and thin international routes by characteristics that can be changed. For the A321neo, this may be accomplished with rather modest changes to Max Take Off Weight (MTOW) and tankage. For the 737 MAX9, more elaborate changes to the wing and engines are required, both hard to do.

BA 757-200

Figure 1. Boeing 757-200 of British Airways which launched the 757 together with Eastern Airlines 1983. Source: Wikimedia.

Summary, Part 2

  • We will now look in detail on the changes Airbus is doing on the A321neoLR, what each change brings and any restrictions that remain.
  • We will also detail why we think it will be harder for Boeing to match the A321neoLR with a 737 MAX9 development.
  • We detail prime, present 757W long-thin routes.
  • We present 757W international, A321neoLR and 737 MAX9 “long range” configurations.
  • We provide economic comparisons such as Payload-Range charts and Fuel consumption per trip and per seat diagrams.

In the final Part 3, will look at Boeing’s alternative to an A321neoLR, a clean sheet New Single Aisle (NSA) and a prospective Small Twin Aisle (STA) design and how much such an approach would surpass the A321neoLR on medium and long haul networks and when it could be available.

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 Posted on October 22, 2014 by

 Airbus, Airlines, American Airlines, Boeing, CFM, Delta Air Lines, GE Aviation, Pratt & Whitney, Premium

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Boeing’s on the defensive in single aisle market as Airbus enhances A321neo

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Introduction

Boeing is on the defensive in the single-aisle market.

The Airbus A320neo family has about a 57% market share against the Boeing d 737 MAX. As recently as Wednesday’s third quarter earnings call, Boeing CEO Jim McNerney expressed confidence in market share recovery to parity. We don’t see this happening.

The development by Airbus of a 97t “A321neoLR” (Long Range) airplane as a 757 replacement for the long, thin routes of around 3,900nm, although a small market of perhaps 100 airplanes, enhances the A321neo model and could give a boost the the A320neo campaigns.

We had the worldwide exclusive on the development of the A321neoLR Wednesday.

Boeing’s image in the single-aisle sector took a big hit at the ISTAT Europe conference last month. About 1,200 people attended the event and in an audience poll, only 23% voted that Boeing has the most competitive narrow body family; 50% voted for Airbus.

Photo taken at the ISTAT Europe conference in Istanbul last month. Photo via Twitter.

Despite Boeing’s public, professed optimism, our Market Intelligence tells us that Boeing is indeed worried about its single aisle market position. And even though the market potential for the A321neoLR is small, there is the knock-on effect to consider. There is demand for a 757 replacement from airlines and in market perception. The same ISTAT Europe conference asked what Boeing should do next; 54% said replace the 757 and another 18% said replace the 737-9, a combined 72% pointing to a need for Boeing to do something with the single-aisle sector.

Photo from the ISTAT Europe conference at Istanbul last month. Photo via Twitter.

Summary

  •  Airbus’ latest move with A321neoLR increases pressure on Boeing
  • A321neoLR could support additional A320neo sales
  • 737-9 can’t be further enhanced to match A321neoLR.
  • 737-7 unlikely to be built; A319neo becomes niche model
  • Market perception gives “most competitive” edge to Airbus
  • What Boeing has to do next

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 Posted on October 22, 2014 by

 Airbus, Boeing, Premium

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Exclusive: Airbus launches “A321neoLR” long range to replace 757-200W

Airbus has started marketing a long-range, higher gross weight version of the A321neo that it says will have 100nm more range than the Boeing 757-200W used on long range, trans-Atlantic routes, Leeham News and Comment has confirmed.

We learned three weeks ago Airbus was working on what we will call the A321neoLR (Long Range); Airbus doesn’t yet have a name for it, but began showing the details to airlines a week ago. The airplane is a higher gross weight aircraft, at 97 tonnes, and will have three auxiliary fuel tanks. With most long-range 757 configurations around 169 seats (United Airlines), the A321neoLR will have 164 seats, a slight loss, with 20 lie-flat business seats and the remainder in coach configuration.

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 110 Comments

 Posted on October 21, 2014 by

 Airbus, Boeing, Leeham News and Comment

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