Daily Insight: Tuesday 18 June 2019: NMA – between a rock and a hard place |

News Speculation at The Air Current indicates that Boeing has not yet decided on the NMA, and continues to have difficulty with the business case. The launch of the A321XLR at Paris has eroded another 31 potential sales as of the first day of the show, with more to come as the A321XLR is a better 757-200 replacement than the Boeing 737 MAX10. By the end of the week, we should know a little more about how many A321XLRs will be ordered. AirLease was first, MEA second. JetBlue is rumored to be next in line. New reports indicate that Boeing is leaning towards a larger version of the NMA than previously speculated, while others simply point to the lack of a decision and shrinking market. Analysis The real question is whether there is an adequate market for the NMA, which in Boeing’s case is a 767 replacement that would be about the same size as the 787-8, but lacking the long-range capability and the attendant excess weight. From a replacement standpoint, the Boeing 767-300 is the target for Delta, United and American in the US market. But is there an international market for an aircraft of this size? The A330-800 fits that category, at about 253 seats, but has not sold as well as the larger model. Boeing owned the middle-of-the-market with the 757 and 767, which were introduced together in the early 1980s. Unfortunately, the Boeing 737MAX10 is a less than adequate replacement for the popular 757-200, which Boeing hoped to target with a small twin-aisle NMA. Unfortunately, Airbus has all but sewn up that market with the A321XLR that is launched this week, and if it receives major orders from Boeing customers American, United or Delta, the potential for the NMA shrinks even further. Insight Boeing almost has to build the NMA, even if it doesn’t see a strong business case. The new production processes and technologies that it uses will transcend this model into the next narrow-body to replace the 737MAX in the 2030 time frame. The NMA provides a chance to hone and tune these processes before they are needed in high volume production for the 737 replacement. The NMA will help Boeing down some learning curves. Airbus has the program surrounded, with a better narrow-body in the A321XLR, and an acceptable and cockpit compatible A330-800 that while not a new aircraft, is relatively fuel efficient and inexpensive, since development costs were minimal. Airbus has Boeing’s proposed NMA clearly in its sights, and has the levers to apply considerable pressure to ensure the program is never profitable, and that is the rub. Boeing could build and sell enough airplanes. But can they sell them at a price, or will Airbus undercut them by pricing below the point of economic indifference. We’re betting on the latter. The bottom line is that Boeing can’t afford to cede Airbus the middle of the market, and could benefit from the new processes to be pioneered with the NMA on future products. But can the aircraft actually become profitable? The answer, unfortunately, is not likely. So Boeing is damned if they do, and damned if they don’t. Our judgement is that they will go ahead to avoid ceding a long-term market share deficit to Airbus, and to try and kill the A330neo in the process. This will make for some interesting marketing campaigns in the future as Airbus cuts price against Boeing’s advanced technology, and will be fun to watch. But with the MAX problems putting everything on hold, speculation will rule the day until Boeing’s board gives the Authority to Offer, making the program real, which it won’t do until the MAX is back in the air and in volume production again. Will we have to wait for Farnborough 2020 for an NMA launch celebration. The answer is very likely.

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