Last week saw the roll-out of the latest Boeing 787, the -10 which is the largest model.  Like all aircraft that are stretched, it looks more graceful than the shorter models.

Boeing released the image above of the 787-10 as well as the image below, that allows a comparison in sizes with key capacity differences.

The 787 is Boeing’s star twin-aisle aircraft.  Last year Boeing delivered 24 787-8s and 68 787-9s.  The market (and Boeing) has moved in favor of the larger -9 over the -8.  The 787 has proven to be as disruptive as Boeing said it would be.  It’s long range and fuel efficiency make it a compelling tool for opening new markets.  Whether used by a legacy like British Airways opening Austin Texas (now migrated to 777) or an LCC like Norwegian opening up numerous US markets, to the chagrin of the US airlines.  Other 787 operators exploiting the 787’s unique range/payload performance are Ethiopian, ANA, JAL and Air New Zealand.  It is a special aircraft and it appears to be a good candidate to replace 777-200ERs, so it should have bright prospects.

The 787-10 has orders from key “name brand” airlines and lessors that underscore its expected impact.  The following table lays out the latest information from Boeing on 787-10 orders. Five of the seven airlines seem to be hedging their bets buying the 787-10 and also buying the A350.

What about the competition?  Airbus offers two options, its redesigned A330neo and its new A350.  The A330 has an excellent sales record and has proven to be Airbus’ most successful twin aisle.  Airbus also has a “new technology” solution in the A350 of comparable size to the 787-10.

The 787-10 closely matches the 777-200ER but offers 26% better cargo space, 1% better cruise speed and 5.4% more seats with a range about 5% shorter.  On the Airbus side, we compare the A330-300 to the replacement -900 model; with the -900 offering 9.2% better range and equal cruise speed.  The A350-900 has 4.5% fewer seats than the 787-10, has 9.4% less cargo space, but has 26% more range with equal cruise speed.

The 787-10 will be competing with the A330-900 and the A350-900. In the following table, we compare these three aircraft and added the A350-1000 as an additional comparison point.

The race is closer than the table indicates.  Boeing will stress its 787-10 as the latest in technology as a key selling feature.  Airbus will offer “a close to 787 technology” aircraft at a lower price in the A330-900 and the A350-900/1000 as technology equivalents.

In terms of fuel burn, we offer the following table.  We selected a 4,000NM mission and we can see from the fuel burn perspective, competition is tight.

This means Boeing will see competition being driven by the A330-900 from below the 787-10 and from above by the A350-900.  Airbus will be the segment price leader and offer a technology equivalent.  Price won’t be the over-riding item every airline is going to look for.  As the first table shows, airlines ordering the 787-10 are focused on high technology and capabilities. If we do a comparison based on list prices we get a rough idea of how these aircraft compare from the following table.

No airline pays list price – but we can assume any airline in the market will be offered an equivalent discount.  It used to be that Boeing bragged about its 787 and 777 bracketing the A350.  Airbus’ decision to develop the A330neo means the 787 is now bracketed by the A330neo and A350.

Collateral Verifications provided market values on these aircraft. The A330-900 values are between $107-110m, the A350-900 between $153-156m, the A350-1000 is between $160-170m  and the 787-10 between $145-150m.  Market values are quite different from list prices.  The industry rule of thumb is that aircraft list prices are typically discounted by 50%.  We took the middle of each price range and produced the following table.

Boeing faces tough competition.  While the 787 and A350 provide equivalent technology which will be attractive to many airlines and lessors, the A330-900 clearly is a credible alternative that will attract orders from airlines (and lessors) that do not want to pay a premium for state of the art technology.  Given that long term air fares are in decline in real-terms, this should be a sizable market.

 

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Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.

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