Prices set for years, Boeing cost-cutting goes straight to bottom line

April 12, 2016: Prices for Boeing and Airbus planes are set through the remaining decade, meaning any cost-cutting being pursued by Boeing will flow straight to theBoeing Logo bottom line, a new note issued yesterday from Bernstein Research concludes.

“Pricing on more than 80% of deliveries is already set through the decade,” the note says. “Despite the competitive pressures, however, the reality is that most of the competitive situations are about deliveries in the next decade. This creates a situation in which most of every dollar of cost savings will flow to margin during this decade because most of the planed deliveries are already priced. The same is true for Airbus.

“This has not been the case in prior cycles because backlogs then tended to be only about three years of production, rather than the eight years that we see today. In those cycles, Airbus and Boeing would cut costs, but then compete away the value. That price competition will now be happening primarily on deals for delivery after 2020,” Bernstein says.

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Middle of the Market or Mirage of the Market: Boeing’s lose-lose situation

Enthusiast concept of Boeing Middle of the Market airplane. via Google images.

March 30, 2016, © Leeham Co.: Boeing is unlikely to develop a Middle of the Market airplane for a sector that could be a “mirage,” write two aerospace analysts.

Buckingham Research, in a note issued yesterday, did a “deep dive” into the MOM potential and concluded there isn’t a big enough market to support development of a new airplane. Buckingham recently upgraded Boeing stock to Neutral (Hold) from a Sell.

Bernstein Research, in a note published March 15, ventured that the MOM demand could be a “Mirage of the Market.” Bernstein is a Buy on the stock.

Goldman Sachs remains in the camp that Boeing may well proceed with development of a MOM airplane, at the cost of billions of dollars. Goldman concludes Boeing is in a lose-lose situation with the MOM. Goldman is a Sell.

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ISTAT Day 2: MOM business case remains a challenge

March 1, 2016, (c) Leeham Co.: The manufacturers and their customers remain unclearISTAT-logo_no_tag-(2c) about the need and design of the so-called Middle of the Market aircraft, their representatives said at the ISTAT AGM today in Phoenix. The business case has yet to be proved.

Participants in the Middle of the Market Panel are:

Ron Baur, VP Fleet, United Airlines

Robert Lange, SVP Market and Product Strategy, Airbus

Randy Tinseth, VP-Marketing, Boeing

Bert van Leeuwen, Managing Director, DVB Bank

  • We’re at the 2016 ISTAT AGM in Phoenix and will be reporting on presentations and news from the sidelines.

Van Leeuwen, the banker, said financiers would need to see at least 1,000 MOMs in the market with a broad customer base to feel comfortable financing the airplanes.

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Boeing’s 767 revitalized as a MOM stop gap, Part 3

By Bjorn Fehrm

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Aug. 31 2015, ©. Leeham Co: After examining the characteristics of the Boeing 767 to serve the market segment that Boeing is studying for its Middle of the Market (MOM) requirement, the 225 passenger/5000nm sector, we will now finish the series by looking at how the 767 can be made economically more competitive.

We will study the influence of improved aerodynamics like Aviation Partners Boeing’s Split Scimitar Winglet for the 767. We will also look at what engine PIPs can provide and also look at what a re-engine could bring.

Finally we examine at what happens when we add crew costs, underway/landing fees and maintenance costs to form Cash Operating Costs (COC) followed by capital costs to form Direct Operating Costs (DOC).


  • Boeing’s 767 has the right cross section for passenger transportation in the 225 passenger/5000nm segment.
  • Its wings and empennage are too large, however. We make them work harder by transporting the 767-300ER fuselage and passengers.
  • We also introduce aerodynamic and engine improvements. Still, the fuel consumption per seat mile is considerably higher than modern alternatives.
  • At a Cash Operating Cost and Direct Operating Cost level, the higher fuel consumption has less influence in today’s fuel prices. The result is that the 767-300ER becomes an interesting alternative as long as the fuel price stays low.

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Boeing’s 767 revitalized as a MOM stop gap, Part 2

By Bjorn Fehrm

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Aug. 31 2015, ©. Leeham Co: Last week we started to look at Boeing’s 767 to see if it can serve the passenger and range space which is not well covered by modern aircraft: the 225 passenger/5,000nm sector. Boeing calls this the Middle of the Market or MOM. Boeing recently said that there is some increased interest for the 767. We analyze why and what can be done to increase any chances of it having a new life as a passenger aircraft.

We started with comparing the 767’s different variants to the most likely MOM aircraft from our series “Redefining the 757 replacement requirement for the 225/5000-sector”. We will now continue and look at the 767 in detail, its strong suits and its less efficient areas. We will also discuss what can be made to address the less efficient areas.


  • Boeing’s 767 has the right cross section for passenger transportation in the 225 passenger/5,000nm segment.
  • It also carries cargo containers, not as efficiently this time. We show what the consequences are.
  • Finally the wing is not the slender wing of the modern aircraft. We show what impact it will have on overall efficiency.
  • Combined with engines from the 1990s, this gives less than stellar fuel economics. We investigate what can be done about this and how much of an impact it will have in today’s low fuel prices.

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Boeing program update at Paris Air Show 2015.

By Bjorn Fehrm


June 16, 2015, Paris Air Show, c. Leeham Co: On the second day of the Paris Air show we visited several Boeing briefings. The first was Boeing Commercial Airplanes (BCA) update with BCA President and CEO Ray Conner. He elected to not do the usual slide show speech as all slides were available as handout. Instead the whole session was turned into a Q&A, which was good. All hot topics were discussed as questions from the audience. As many were also covered in Boeing’s next session, BCA development update, I will handle these there.

The topics that did not come up in the second briefing were Boeing’s Middle of the Market (MOM) studies for a new mid-range aircraft with 200-250 seats and Boeing’s view on the VLA market. Let’s take MOM first. Conner confirmed that Boeing now has identified that there is a market of around 1.000 aircraft over 10 years which is not served by a suitable aircraft. He dismissed this market being covered by Boeing’s 737 MAX 9 or the Airbus A321LR, both being too small and not having enough range. Range requirement from the many airlines they had visited over the last year was 4,500-5,000nm. The MAX 9 and A321LR have advertised ranges of 4,000nm or less.

Conner said the next step is now to study if Boeing can build an aircraft to serve this market at the price required by the market. “We are early in the studies and don’t expect any concrete decision soon.” He could also not answer if any MOM aircraft parts or technologies could be shared with an up-and-coming replacement for the 737 MAX.

Conner said the Very Large Aircraft (VLA) sector “is a small market. We don’t see that people really want to travel to a point for gathering, then go to the next hub together, only to start spreading out again. People want to go direct to their destination. We are happy with serving this market with our 747-8, especially as part of the small market is freighters.”

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Pratt & Whitney looks to MOM and beyond-Part 1

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April 2, 2015, c. Leeham Co.: Even as Pratt & Whitney prepares for the entry-into-service of its new

Alan Epstein, vice president of technology and environment, Pratt & Whitney

Geared Turbo Fan engine on the Airbus A320neo, it’s looking ahead to the most likely all new airplane that could be launched as early as 2018 with an EIS in 2025: the Middle of the Market (MOM) airplane, also most popularly known the as Boeing 757 replacement.

Except that this new airplane really isn’t a 757 replacement, but one that is more accurately a replacement for the Boeing 767-200 or the Airbus A300: a twin aisle, 250 passenger airplane with 4,000nm-5,000nm range.

Alan Epstein, vice president of technology and environment for Pratt & Whitney, believe a derivative of the GTF will be on this new airplane.


  • The next new airplane will be lighter and capable of using smaller engines than those used on the 767-200 and A300.
  • The MOM will look much like today’s tube-and-wing airplanes.
  • The GTF by then will be 8%-10% more efficient than today’s GTF.
  • Geared engines will become more common.

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