Premium #346 – Middle of Market update

[UPDATE - Boeing creates NMA Office] The "middle of the market" segment for single-aisle aircraft was defined by the Boeing 757 when it was introduced in 1982 as the growth aircraft to replace the 727-200. With its counterpart 767-200, Boeing defined a new class of aircraft in the 185-240 passenger segment. Since then, there has been no "true" replacement for either aircraft, with stretch versions of the 737 and A320 competing in the narrow-body market, and larger 787-8 and A330-200/-800 models competing in the wide-body segment. With many more 757-200s delivered and still in service than 767-200s and -200ERs, we have focused on the narrow-body aircraft as those needing replacement in this segment. The following charts show all active passenger aircraft in the 180-220 size category through the second quarter of 2017 by OEM. The aircraft included are the 737-900 and -900ER, 757-200, 757-300, A321-100, A321-200, and A321neo. The chart illustrates the gains Airbus has made in this marketplace at Boeing's expense, with an inflection point in 2011. This market, once owned by Boeing, has shifted to Airbus. Breaking down the overall trend into individual aircraft models, key trends become obvious. Clearly, market demand for the A321-200 has been accelerating and continuing in A321neo orders. The market demand for the 737-900ER has grown, but only about 40% of the level of the A321. While Boeing has offered the 737-900ER to replace 757s and keep Boeing's fleet nearly level, Airbus has captured virtually all of the growth in this market segment. The market has decided that the A321 is the better replacement aircraft for the 757-200. Looking to the Future Boeing’s introduction of the 737 MAX10 at Paris should provide improvements that begin to close the gap with the A321neo. However, most of the initial sales have come from existing orders for the 737 MAX9 that have been converted to the more capable model. Looking at the backlog and order book for each, we find the following backlogs for Airbus and Boeing (scroll and request a report). Note Boeing does not report backlogs for its 737MAX program by model. We have estimated the breakdown by model from public disclosures and can allocate a majority of orders. Of the 3,843 aircraft backlog for MAX, we estimate that 50 are for the MAX7, 2,050 for the MAX8, 75 for the MAX9 and 252 for the MAX10, with 1,416 orders undisclosed, primarily with leasing companies. Now assuming 13% of Undisclosed are MoM. Our analysis: Going forward, we estimate the market share of orders for MoM narrow-bodies: Totals: Airbus 1,664, Boeing 579 Market share Airbus 74.2% Boeing 26.8% The unknown is whether Boeing's 737 MAX10 can effectively compete with the A321neo. While both are similar in terms of capacity, the A321 is much more capable in terms of range, with the Airbus capable of 4,600 miles and the MAX10 with an auxiliary fuel tank only 3,700 miles.

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