Daily Insight: Wednesday 22 May 2019: Is it too late for the NMA?

News Boeing has been studying the potential launch of a NMA or new middle-market aircraft for the last few years. While the a new 220-270 seat aircraft has been under study for some time, with a launch decision expected this year, the two accidents with the MAX has pushed back the timeframe. At Innovation Days in Toulouse, Airbus CEO, Guillame Faury, hinted that a longer-range A321XLR variant will be launched at the Paris Air Show next month. That adds another competitor in the middle of the market, which lies between the A321neo narrow-body and A330-800neo wide-body. Analysis Airbus spoke about fighting the NMA aggressively at Innovation Days, with a “left-hook, right-hook” approach, and indicated that its programs leave Boeing between “a rock and a hard place.” Having two models to cater to LCCs with single-aisle economics or a wide-body to provide comfort levels for traditional airlines present a competitive challenge for the NMA. We have no doubt that Boeing can build a new NMA that will be much more efficient than todays models, even those that are re-engined. But the key question from a market standpoint is the price point for the airplane, which will be key in competing with re-engined models from Airbus with lower development costs. Airbus and Boeing each have expertise in pricing to the point of economic indifference, and we expect that the two major players will continue to be highly competitive. Insight The industry has been anticipating that Boeing will launch the NMA for some time. There were expectations of a potential announcement at Paris 2017, Farnborough 2018, and now it appears an announcement at Paris 2019 will not occur. In the meantime, airlines have been making 757 and 767 replacement decisions and looking at options for fleet renewal. Most 757 customers have already chosen the Airbus A321neo, and with an XLR model and new interiors now available, the A321XLR can match the 757 in capacity and range. Boeing’s 737MAX10 did not catch on in the marketplace before the accidents, and is being outpaced by the A321neo by a 4:1 margin in orders. Boeing clearly needs a 757 replacement. Unfortunately, the NMA is not a direct 757 replacement, but appears to be more a replacement for the 767. As a twin aisle aircraft, it cannot be as efficient as a single aisle using similar technology. While we expect a double-digit improvement in economics over the 767, will the economic benefits be large enough against the re-engined models to make up the capital cost differential? This is the heart of the business case that Boeing has been studying. But the airplane is only a part of the process today. Boeing is examining new industrial processes for building the NMA, as well as new technologies and data solutions that can improve reliability for airlines. In an era of manufacturing robotics, new materials, additive manufacturing, and big data, the infrastructure that needs to be built around new models is as important as the aircraft itself. The NMA is planned as the blueprint and testbed for future Boeing manufacturing processes and service offerings, and the precursor to the FSA or Future Small Aircraft, currently scheduled for 2030. The problems with the MAX have thrown a wrench into the works at Boeing. If airlines begin to move away from the MAX, the timetable for FSA may need to be moved up. As a more important program than the NMA, getting the FSA absolutely right will be a key priority for Boeing. Could it be time for Boeing to pull the plug on NMA and move straight to FSA to replace the MAX with the latest technology in materials, engines, low cost manufacturing, and services? The market reaction to the MAX crisis will be the telling factor over the next six months.

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