Having won the US Air Force tanker award, keeping the Boeing 767 production line active for the foreseeable future, should Boeing introduce an updated commercial version of their venerable (and highly successful) small wide-body aircraft? We believe that the time could be right for a 767NG, with new technology engines and an upgraded interior.
The Business Case
For many customers, the 787-8 is simply too much aircraft for their existing route structure. Transatlantic operations need 5,000 mile range, not 8,000 mile range, and the extra weight required to support the long-range capability make the 787-8 heavier that it needs to be for such routes.
Despite its use of composites, the empty weight of the mature 210 passenger 787-8 will be 242,000 pounds, which is 22% heavier than the 198,440 pound, 218 passenger 767-300ER. While the 787-8 will fly thousands of miles farther, a transatlantic (or any 5,000 mile route for that matter) operator does not require ultra-long range capabilities.
Physics are physics; the thrust required to lift a heavier aircraft is greater than that required to lift a lighter one. If appropriate new engine technology, from Rolls Royce, GE or Pratt & Whitney were available for the 767, we believe this aircraft would offer seat mile costs approaching those of 787 or A350XWB on shorter routes, and wouldn’t require the technology risk, capital investment, or re-training of pilots for airline operators.
With the 767 already a major player in the transatlantic market, a 767NG would enable customers to maintain a great deal of fleet commonality and upgrade their medium range fleets with the NG while adding the 787 for their long-range operations. A fleet change is a traumatic event for an airline, with ramifications throughout the organization, including spares, MRO, and crew training. Upgrading a fleet maintains commonality and enables smoother, lower cost fleet transitions.
The airlines know this well, and have learned that lesson from Boeing, which has kept the 737 (first introduced into service in 1967), competitive with newer Airbus models through the NG process and continuous improvements. Should Boeing do the same with the 767? We believe it could and should.
The PW4000 engine that has been selected for the Boeing tanker is mature technology and, with rising fuel prices, will need to be replaced by new technology engines, just as JT3Ds were replaced with CFM-56 on the KC-135. The Rolls Trent, GEnx, and PW GTF are all possibilities for new, more fuel efficient engines that could be applied to the tanker and 767NG.
Having Pratt & Whitney replace the PW4000 with a version of its new technology GTF engine could improve fuel efficiency and performance of both the tanker and a commercial 767NG, and potentially be part funded by the Pentagon (and PW). An opportunity to leverage the tanker contract for the commercial side of the business now exists, and provides a unique window of opportunity for Boeing. Boeing has already moved the 767 to an exceptionally cost-effective lean manufacturing process, with lower costs than the previous process. With development costs long written off, the costs of an NG program would be quite manageable, and low risk.
A 787-like interior, combined with new engines, updated avionics, and other minor upgrades could result in an extremely cost-effective airplane, and should extend the commercial program life another two decades. Since the tanker contract is a 40 year program, Boeing could cost-effectively continue production of a 767NG for the foreseeable future while either generating very high margins or enjoying a significant capital cost advantage over Airbus.
Cannibalization of the 787
While this could likely take some business away from the 787, it could reduce risks for Boeing, who by moving the 767 to a low cost manufacturing process could generate substantial profits on an aircraft it could price to very effectively compete with the A330. It would take delivery pressure off the 787, and help that program by easing the production ramp-up for the Dreamliner. It would also help to reduce and possibly turn defecting customers who have been buying the A330 given 787 delays.
Airlines don’t like to pay for things that they don’t use. One of those is the capability for ultra-long-range operations. The additional structural weight required is a detriment when an ultra-long-range aircraft is operated on routes that can’t exploit its unique capabilities. That extra weight makes the 787 difficult to justify as a true 767 replacement, because the 767 became a success as a medium haul airplane capable of handling trans-Atlantic, US transcon and even US to Latin America routes. The 787-8 certainly can perform well on all these routes, but a re-engined 767 would be nearly as cost-effective.
With -ER and -LR versions of virtually every wide body aircraft becoming the standard offerings, Boeing appears to have forgotten about the bread and butter routes many airlines fly, and the A330 is capturing an increasing share of that market. Why buy a fleet of extra-long range aircraft if you only have a couple of routes that long? Why pay extra for things that you don’t need? About twice a year, I need a truck, but haven’t purchased one because a car meets my normal needs quite well. We typically don’t pay for this we don’t need out of our own pocket, and airlines, under increasing pressure from rising fuel prices, are coming to the same conclusion!
The Bottom Line
The tanker win, combined with new technology engines, could give Boeing an opportunity to quickly, cost effectively, and very profitably serve a market niche it helped create, and gain a strong competitive advantage in the process. A re-engined 767 would be a highly disruptive airplane.
A GTF version of that size thrust engine could therefore power both. We suspect that such a size GTF is exactly what PW is working on. Listen to Scott Hamilton’s interview with P&W’s Bob Saia for confirmation. The size of the market is too attractive to ignore.
Similarly, the GEnx engine, which exists today, could be used for the 767 and A330, and no doubt GE is aware of that potential. Fundamentally these aircraft are excellent designs that could see dramatic performance improvements from new engines.
Has management taken its eye off the ball, seduced by new airplane designs and the bragging rights that go with unique capabilities? The tanker win might be just what Boeing needs as a wake-up call for a 767NG upgrade. It may be time to re-think product strategy in Seattle, and focus on success. The 737NG has been extremely successful. Perhaps it is time for the 767NG to replicate that success.
© 2011, Ernest S. Arvai. All rights reserved.