UnknownThe Boeing 777 has proven to be a remarkable aircraft.  Even though the airplane entered service nineteen years ago, it has maintained strong momentum in the marketplace.  Boeing has demonstrated, once again, that it is a master of derivative designs.  The next generation 777X will extend that to new levels of efficiency.

The evolution of the 777 is interesting to review. The chart below illustrates how Boeing rapidly refined their program with derivative models to improve performance. Each iteration enabled Boeing to obtain additional orders to drive program profitability.

The original 777-200 had a short lifespan; within two years it was eclipsed by the -200ER.  The -200ER also had a great run, but after seven years it too was eclipsed.  The -200LR was a clever niche that managed to attract sales, but primarily it saw off the -500.

The larger -300 also had a brief shelf life, with slow between 1999 and 2003.  The arrival of the -300ER saw the program hit its stride.  By this time it was clear to airlines that the 777 could cover any route that the -600 could, and do so with two fewer engines and at a considerably lower fuel burn.  The 777-300ER established itself as the benchmark airliner in the 350-seat segment. While this was a cause for cheering in Everett, it also led to the demise of the 747-400, and the less successful 747-8. The 777-300ER is that good.


The following chart shows 777 by year and variant.  The 777’s success essentially rides on two models, the 777-200ER and 777-300ER.  Boeing was able to take an exceptionally good design and tweak it – with the LR and F models benefiting from the success of the overall program. A program with a long production run also enabled Boeing’s assembly workers to continually improve processes, ensuring a steady stream of trained people continued to work on the program.  Fortunately, sales and of the -300ER were peaking just as Boeing hit its 787 difficulties.  Profits from the -300ER helped considerably to ease cash flow challenges.


The two peak phases can be clearly seen in the chart.  Airlines quickly moved to the two ER models and, as time passed, the -300ER became the standard-bearer for the program.  In 2013, the -300ER accounted 81% of 777 deliveries.


The 777 program began with strong competition between the engine manufacturers, with Pratt & Whitney, General Electric and Rolls Royce all competing on early models.  But as Boeing developed later derivatives, they wanted exclusively with GE on the 777-200LR and 777-300ER.  The next chart illustrates how GE’s exclusivity on the 777 program has been akin to winning the aerospace equivalent of the lottery.


As 2013 came to an end there were 1,178 total 777s delivered.  GE’s share of the engine installations is 66%, with 15% for Pratt & Whitney and 19% for Rolls Royce.  The next generation 777-X models will be all GE powered as well.  The program going forward is exclusively GE for future production, similar to the Rolls Royce exclusivity for Airbus’ program.

The Market Gap

There will be a market gap to fill with the current 777-300ER production and with the introduction of the 777-X models in 2019 and 2020.  Currently, Boeing has a backlog of 257 777-300ER models, which at a rate of 8.3 per month, represents a little over 2.5 years of production, enough to carry the company through late 2016.  But with the new models not arriving until 2019, Boeing needs to sell 300 additional aircraft in the interim to maintain current production rates.

With a substantial improvement in operating economics, the question is whether Boeing can generate an additional 300 sales for the existing 777-300ER while it builds its order book for the 777-8X and 777-9X variants.  This is always a challenge for manufacturers, as the last aircraft produced of a given model typically do not hold their value as well as earlier produced aircraft.

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