The MoM continues to be a subject of considerable chatter among aviation and financial pundits and analysts.  It is generally focused on replacing the Boeing 757.  Today, the consensus is that the A321 continues to be the 757 replacement because it is the best aircraft in the segment.  But Boeing has frequently made the point that when speaking to customers, these customers want something more than what the 757 was.  A lack of obvious movement on the market by Boeing has been as odd, both by and others.

But taking a closer look at this market indicates that Boeing is likely doing the right thing in taking its time.  Aircraft programs are very big bets, and an incorrect bet can be disastrous.

A MoM aircraft will be difficult because it will be expected to do many things, and do them well.  Aircraft are invariably mis-used because there is no perfect aircraft that can do everything.  The consensus definition of the MoM starts at 150 seats and goes to 250.  Within this, airlines have range requirements from 2,000 NM to over 5,000 NM. Airlines also want the ability to carry a decent sized cargo load along with passengers.  Most importantly, which drives crazy, airlines also want a price point under $100m per plane.

To build an all-purpose aircraft is very difficult.  Nobody has anything like it, and consequently smaller aircraft are forced to fly longer stages than they were thought to do (757).  Or aircraft that can carry over very long thin routes (787) are used in shorter operations than the range for which the aircraft was optimized.  This points back to the earlier mis-use comment.

It seems that any aircraft that hits as many checks for MoM might focus on 201-250 seats and have a maximum range of about 4,500-5,000 NM. Airline requirements vary widely. But if one can at least define a few parameters and work from there, where does that take us?  We have decided to define the MoM optimized aircraft to seat 201-250 with a 5,000 NM range.  This almost certainly points to a twin aisle. We also think airlines will need such an aircraft around 2022 or sooner.

First, let’s look at the market to get some perspective.  The chart below shows a yellow section which represents the 201-250 seat market.  We regard this as the MoM sweet spot.  The chart shows that this segment was 7% of the overall market in 2000 and has steadily shrunk each year to 4% in 2Q16.  This segment has been stable at 4% since 2009.  The 201-250 seat segment is equivalent to double the size to the >400 seat (VLA) market in 2Q16.  The segments showing the largest growth are between 100 seats and 150 seats.

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So right away we see that the MoM sweet spot may not be as large a market as first thought. Below 200 seats, in the former 757 spot, Airbus is doing well with its A321 and beating Boeing handily.  This has to be annoying to Boeing.  But if the MoM is truly 201-250 seats, let’s focus there. After all, this seems to where Boeing’s customers looking at a 757 replacement seem to be focusing.

The next chart will demonstrate that this segment is a Boeing stronghold.

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The 201-250 seat has been Boeing’s preserve for a long time.  But it was not the 757 that was the market maker; rather it has been the 767.  The 767 has dominated this segment.  Note no A321s show up here, as they are typically operating with around 180 seats, and the 757s that show up are the larger 757-300 model, not the most popular -200.  The A321LR and the A321neo have the potential to be in the segment with tight cabins. But as yet, none are, as airlines still like premium cabins and won’t configure to the 240 seat maximum capacity.

Boeing’s 787-8 looks to be the new segment dominator.  Only it currently has the ability to replace the venerable 767 with similar size.   Airbus brackets the 787-8, with the A330 slightly larger and the A321 slightly lower, each a few seats out of the MoM parameters.

Boeing therefore looks to be doing fine since its 787 easily handles the seat capacity and also offers unique, for this segment, payload/range capabilities.  In fact, the 787’s special are a threat to larger aircraft as hub-busting takes hold.  Airlines can effectively serve secondary city markets on a point to point basis, even if they are 7,000 miles apart using the 787-8.  But where the 787 fails as a MoM aircraft is its price.  Therein lies Boeing’s conundrum.

MoM requires current aircraft mis-use.  The A330neo matches many of the 787 traits – but it is a larger and heavier aircraft. Airbus will discount it accordingly – bringing it closer to a MoM.  The A321LR also can serve this segment in terms of moving over 200 passengers 4,000 miles, but it is smaller compared with the 757-200 and is not an ideal replacement.  As a result, in the MoM segment the 767 remains the yardstick.

If the MoM sweet spot is between 201-250 seats, Boeing should be well positioned to maintain segment dominance with the 787-8, but can’t because of pricing.  Airbus has bracketed the MoM and offers both narrow-body and wide-body offerings that are close, but not quite what the airlines are looking for.

Boeing has challenges to dominate the segment.  The 787 has too much performance – its wing, for example, is optimized for long ranges. The current 787-8 may have too much weight for the MoM as we have defined it.  The MoM is an aircraft that has to operate broadly within climb, cruise and descent.  Boeing had a MoM model of the 787 on the drawing board, the 787-3.  Unfortunately, it became a victim of the development debacles associated with the 787 program technical difficulties.  With more capability than is needed, MoM pricing is a challenge for Boeing’s 787-8.  The 787-8 for MoM applications cannot sell at what airlines want to pay and still enable Boeing to recover substantially higher than anticipated program development costs.

Airbus’ solutions are easy to offer because they require little technical changes on their aircraft, the A321LR, the A330neo and A330Regional.  They bracket, but don’t hit the ideal sweet spot for a MoM aircraft.

The reality is that there is no MoM aircraft that exists today.  The closet MoM might have been an updated 767 – but Boeing won’t go there.  So it all comes down to offering a new aircraft.  But at 4% of the market, is there enough demand to cover the substantial anticipated development costs for an all-new design?  The answer, unfortunately, is that the business case simply isn’t there.  People will argue about the market size for MoM – some see it at around 3,000 aircraft. Current market is closer to 1,000.

The MoM is a very tough segment to work with.  Its requirements demand an aircraft with tremendous flexibility and aggressive pricing.  Whether a new generation equivalent to the DC-8-60 narrow body or a new technology version of an A310 or 767, a MoM airplane will need to be optimized for its mission.  Today’s alternatives simply are not.  Given the size of the potential market, the big two don’t look to be rushing ahead with a clean sheet solution, as the business case simply isn’t there today.

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