DBEA55AED16C0C92252A6554BC1553B2 Clicky DBEA55AED16C0C92252A6554BC1553B2 Clicky
May 27, 2024
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Commercial aerospace is a long run business. The gestation of new programs takes years.   Of late, add a few more years to the newer and vastly more complex aircraft programs.

In studying the following chart, note how Boeing has started to simplify its commercial business.  It may have a number of airplanes in its sales brochures.  But there are three that matter; 777, 787 and of course 737.


Given the capital requirements in the business, Boeing is right to be simplifying its offering.  This means better allocation of limited resources.  Moreover it has the aircraft families to mix it up with Airbus across the board.  Airlines are consistent one respect – they bottom fish.  In an industry with fixed revenues and variable costs, the lowest cost of production is the Holy Grail.

Consequently Boeing is able to offer its airline customers this range of three aircraft and probably exceed 80% of any requirement.  There will always be oddball requests to fly from place X (you know where we mean) to anywhere non-stop.  But this is not the standard, and in order to keep costs low, standardization is a key way to drive down costs.

The 787 and 777 programs are being widened to build out family options so that just about any requirement can be met.  We think Boeing’s best bet to replace a 757 requirement will be a lighter weight 787.  Such a solution is within Boeing’s engineering capabilities even though there are some challenges.  Besides, as matters stand, this is the lowest risk option.

That said, the company’s reliance on the 737 is plain to see.  No wonder there is a determination to produce more and swamp the market.  In this segment Airbus and Boeing want to take all the oxygen and starve the upcoming opposition.  It is a logical play for the duopoly. However, Boeing also shows a potential Achilles heel in this segment.   In terms of next new programs, the 737 is the most obvious for replacement.

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