Boeing’s Middle Market Aircraft Nears Reality

At its pre-Paris press briefing, Boeing revealed additional details about its potential middle of the market aircraft, called NMA or more commonly 797. Boeing believes the 797 will be able to open new city paris that would be unprofitable with larger aircraft, just as the 787 has done in its market segment. source: Boeing Mike Delaney, Vice President and General Manager of aircraft development noted that airlines have opened 140 new city pairs with the 787 family because they offer seat costs comparable with a 777 at a much lower trip cost. “We’re going to put an airplane in that space that has the economics that nobody can touch, and what it will do is open up the city paris and economics nobody else can….That’s the value proposition.” By the middle of the next decade, when the 797 will enter service, infrastructure, capacity and frequency constraints will become more difficult than conditions today. Boeing contacted 57 airlines regarding its NMA concept, and the vast majority expressed a desire for better cabin comfort and shorter turn times at airports. That led Boeing to focus on a twin-aisle design. A 757-type airplane stretched to 270 seats would be 18-25 feet longer than a 757, and Delaney said “I certainly wouldn’t want to be in row 65E waiting to get off.” Boeing has discussed the new aircraft with all three major engine manufacturers, citing that the engine-airframe will be highly integrated. Boeing is pleased with the response of the engine companies and indicated that the integration of the engine with the airplane is Boeing’s secret sauce, and will soon work with them on that next aspect of design. The Large Narrow-body Market Currently, the middle of the market is served by the largest narrow bodies, the A321neo and the 737 MAX9. Boeing is expected to formally introduce the 737 MAX10 at Paris, with a stretch to the existing MAX9, new landing gear, and 10 additional seats to match the 2 class capacity of A321neo. The A321neo is outselling the MAX9 by a 4:1 margin, and Boeing needs a more capable aircraft to replace the MAX9 in its lineup. The MAX10 will close the gap somewhat, although Airbus as two stretch versions of the A321neo- the plus and plus-plus, that it could launch in retaliation to maintain its market leadership. From an economic standpoint, Boeing claims the 737 MAX10 will be more fuel efficient than the A321neo, as shown in the chart below. source: Boeing We are awaiting additional details and data before we compare the two aircraft using our proprietary economic model. Nonetheless, the MAX10 should be an improvement over the MAX9, which it could very well cannibalize in the marketplace. With the lack of success of the MAX9, it is quite feasible that several MAX9 customers could switch their orders to the MAX10 when it becomes available. We anticipate a launch order from Untied and Lion Air at Paris for the MAX10. Nonetheless, the MAX10 does not appear to be an answer for the MOM for Boeing. The Competitive Marketplace The following chart shows the potential middle of the market competitors with seating capacity across the X-axis and range on the Y axis. The A322 and A330-800 will provide similar seating capacity to the 797, but with shorter and longer range, respectively. With Airbus able to amortize the lower development costs of a stretch and re-engining against an all new design, we believe the competition will boil down to price versus capability. The 797 needs to be a low cost aircraft, yet also have enough technology to defeat the competing aircraft from Airbus, which will, of course, be priced at the point of economic indifference in campaigns. Boeing indicates that they will capitalize on the technology and learning from the 787 and 777X in designing the 797. The design trade-off they face is technology versus cost. If they offer too advanced an aircraft, it will still need to be priced to compete with the A330-800. But if they build an aircraft without the advanced features, will it still be economically attractive enough to fend of lower priced competition from Airbus? The Bottom Line: Boeing appears to be placing its bets on the small wide-body market for future growth in the MoM space, while Airbus is poised to offer a larger narrow body, bringing the trade-offs to comfort and cost. It will be interesting to see which philosophy prevails, and how successful Boeing can be in engineering an all-new aircraft that is technologically attractive enough to compete at a competitive price.

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