News
Airbus has a new management team, and unlike Boeing, has no development programs launched and in process. Boeing has the 777X to complete, and is working on the yet un-launched NMA/797. Airbus is ending production of the A380, and has an opportunity to pre-empt Boeing in one segment of the marketplace, and compete more aggressively in another. What if the new management team, led by Mr. Faury, decides to become more aggressive to cement the middle market share it has taken from the Boeing 757 with the A321, and add a larger version to the A350 product line to better compete with the 777 as well as the 787 this year?
There is a possibility that we could see 2 or 3 new models from Airbus at Paris this year, as they evaluate their market options. Potential models include the A321XLR, the A350-2000, and a A330-600neo.
Analysis
An A321XLR derivative could be launched to put further pressure on the NMA/797 by having the new model ready before the NMA/797 can reach the market. We believe there is a high probability that Airbus will launch the A321XLR to maintain its “best in class” advantage that the A321 has over the 737-9 and -10, outselling them by a four to one margin. The additional range will make the A321 a true 757 replacement in trans-Atlantic capability, as cross-ocean narrow-body flights are becoming more commonplace. The rumor mill indicates that JetBlue could potentially launch this aircraft.
An A350-2000 is also a high probability, as Airbus needs a larger capacity aircraft since the decision was taken to end A380 production in 2021. A larger model with better seat-mile economics is needed to more effectively compete against the larger 777-9. The more modern A350 platform could fare well against the re-engined 777, with a much lighter structure. This could become an interesting battle in the large wide-body twin segment.
Another potential new model is the A330-600, a smaller version of the A330neo that would compete directly with the NMA/797 to provide a small twin-aisle alternative. This model will be aimed directly at keeping existing A330 operators from acquiring the NMA by providing a high degree of commonality with existing aircraft, a common type rating for ease of pilot transition training, and a low price that Boeing would find difficult to compete against, thereby eroding NMA margins.
Airbus moving aggressively to take away the potential market for the NMA could result in Boeing thinking twice about launching the NMA/797 program. Boeing’s new aircraft strategy was disrupted by the 787 delays and cost overruns, forcing the MAX rather than a new small aircraft that was planned. The result is that Boeing doesn’t have a viable competitor for high capacity narrow-body aircraft and has virtually lost that market segment, which it once owned with the 757, to the Airbus A321. Airbus is looking to maintain its competitive advantage.
With Boeing looking at a twin aisle for the NMA/797, Airbus can compete both with more fuel efficient single-aisle aircraft as well as an inexpensive new twin derived from the A330, and tighten the existing competitive position that uses the A321XL and A330-800 to surround the aircraft. The two new models would tighten the competition directly around what Boeing is proposing for NMA.
Insight
Moving even closer to what Boeing is planning for the NMA through the A321XLR and A330-600 would put tremendous additional pressure on a business case that today appears tenuous for Boeing. With their go/no-go decision being postponed until 2020, it does not appear that the business case for Boeing is getting any better, and Airbus competitive actions could make it look even worse.
Will two new models from Airbus kill the NMA? Only Boeing knows for certain, but new derivatives from Airbus can’t be good news for Seattle and Chicago. A decade ago, Boeing had an opportunity to aggressively attack Airbus and improve its competitive position, but the 787 issues resulted in delaying and fundamentally changing Boeing’s new product strategy.
Today, the tables have been turned, and Airbus has an opportunity to make Boeing’s long awaited NMA a very difficult decision. The question today is how aggressive Airbus will be? If the rumor mill is correct, Paris 2019 could be a very interesting show for new product introductions from Airbus, eroding the business case for the NMA into a no go decision. There is a lot riding on the initial decisions of the new management team at Airbus, which will set the tone for the next decade.
