Daily Insight: Tuesday 19 February 2019: The Business Case for the NMA Appears Tenuous

News

Several industry observers remain uncertain as to whether Boeing will be able to successfully launch the 797 to compete effectively against the A321LR and potential A322 competition in the middle of the market.  In a recent story, Jon Ostrower of The Air Current indicated that Rolls Royce may be willing to share aftermarket revenues on future engine programs with Boeing, a break with tradition.  That could shift aftermarket revenues and potentially provide the additional revenue Boeing needs to pursue the airplane.  But a fundamental problem remains.

Analysis

A wide-body aircraft tends to cost more than a narrow-body aircraft, and have higher seat-mile costs based on its larger design and increased space for an additional aisle that is not present in a single-aisle aircraft.  The result is that the aircraft must have a more dramatic cost improvement than a typical increment over a prior generation aircraft, as the twin-aisle 797 would compete against a single-aisle A321/A322.  The second element is that Boeing will need to cut production costs to meet similar acquisition costs per seat for its customers, which means even more pressure on an already stretched supply chain.