Boeing’s troubled 787 program appears to finally be approaching stability. But the three-plus delay has been costly to the company’s competitive position vis-a-vis Airbus. Had the 787 entered service on schedule in 2008, we would now be discussing the 2012 entry into service of the narrowbody replacement for the 737, and how the 777 replacement program would be shaping up against the A350XWB for EIS in 2016.
The 2012 EIS of a 737RS showed up in a 2006 CFM strategic presentation obtained by AirInsight.
But alas, as shown in the chart below, that is not to be. Comparing what Boeing was expecting to accomplish in their strategic plans, and what they’ve been able to accomplish, shows a wide variance. It has also fundamentally eliminated a rare opportunity for Boeing to seize competitive advantage in both narrow-body and wide-body aircraft back from Airbus, which was floundering after its own A380 debacle.
(Click on all charts to enlarge.)
Boeing had initially planned a 737 replacement aircraft for 2012, and engine manufacturers CFM International (a joint venture of GE Aircraft Engines and SNECMA, a member of SAFRAN group) and Pratt & Whitney were working on new technology engines that would be applicable to such a program. Our discussions with engine manufacturers in 2006 indicated that both manufacturers were looking at aggressively developing new technology for a 2012 entry into service, with the LEAP-X and GTF, respectively. Pratt & Whitney, with its GTF, will enter service in 2013 on the Bombardier CSeries, while the LEAP will enter service on the Airbus neo in 2016. Boeing is talking about an all-new replacement for the 737 with a potential entry into service date of 2019.
Unfortunately, that delay enabled Airbus to leap-frog the current 737NG series with the A320neo family. With high fuel costs, airlines are attracted to 15% fuel savings the neo promises, and are ordering the neo in record numbers. The 737NG series, introduced in 1998, had eliminated the gap in operating costs with the A320 family, and in fact pushed Boeing, with winglets, into a narrow lead. A new airplane in 2012 would have cemented market leadership, and forced Airbus into an expensive development program to keep up. Instead Airbus has taken the lead, and with record orders at Paris has taken 777 orders in the first half of 2011.
As shown in the chart below, which illustrates Boeing advantages in green and Airbus advantages in orange, Boeing should have had a market advantage from 2012 until Airbus could match its offering in 2017. Boeing would have essentially forced Airbus to develop an entirely new aircraft rather than simply re-engine the A320, and have a substantial lead in both technology and time to market had it not been forced to defer its 737 replacement program. As a result, rather than have a lead and at worst a competitive offering, Boeing is now behind the neo, with Airbus having the upper hand by forcing Boeing to develop a new program that would not provide as dramatic a level of differentiation as it must use the same engines as the neo. Airbus, with a viable offering, can now afford to wait until 2024 for its replacement, which should provide it time for additional technology maturity to one-up the 737 replacement aircraft.
A similar story of lost opportunity exists in the wide-body market. The Boeing 787, if introduced on time, would have build a significant advantage over the A330, and enabled Boeing to work on the 777 replacement for entry into service shortly after the A350XWB. Boeing would have maintained parity or a market leadership position in the narrow-body market had the 787 entered service on time, but now must defer its 777 replacement or attempt to remain competitive with a refresh and re-engining much later than initially planned. The chart below also shows a Boeing advantage in green and an Airbus advantage in orange, with the difference between what should have been and what actually happened quite striking.
After difficulties with both the 787 and 747-8 programs that resulted in both programs being delayed, Boeing has now decided not to pursue two programs simultaneously. While this seems to be the obvious decision, this is a bit surprising, given that one of Boeing’s greatest successes was the simultaneous development of the 757 and 767 models in the early 1980s, with both entering service on time and on budget. The fundamental question that must be asked is why Boeing is no longer capable of the simultaneous development of two programs — is it a lack of engineering resources, a lack of financial resources, increasingly complex technologies that require additional engineering resources, or a lack of management skills and oversight acumen?
Or is it that having muffed two high-profile programs, the Board of Directors is reluctant to approve even one all-new airplane, let alone two?
Boeing had, and squandered, an opportunity to take a leadership position in both narrow-body and wide-body aircraft over Airbus and force its competitor to play leap-frog to keep up with it. Instead, it has handed Airbus the lead, and will be forced to itself play leap-frog to catch up to the A320neo and make the 777 competitive with the A350XWB.
Throughout its history, Boeing had been able to consistently deliver new models within 48 months of formal go-ahead. The A380 experience at Airbus and the 787 experience at Boeing have changed that norm. If Boeing could focus its resources and regain the capabilities it once had, it could potentially accelerate the 737RS to 2016 from a 2012 go ahead, followed by a 2020 777RS EIS with a 2016 go ahead. Unfortunately, it appears even Boeing doubts it can do what it once did with regularity.
The true cost of the 787 delays may be a lack of confidence, and that can quickly turn into an organizational cancer in a highly competitive environment.
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