The 180-200 seats segment is getting the attention of Boeing and Airbus.  It is growing fast as airlines up-gauge their narrow-body fleets and 757s retire.  The chart below illustrates the growth in this segment, with the fleet of about 600 aircraft in 2000 doubling by 2014.  And who is winning this segment’s competition? Airbus and its A321.  Boeing used to own this segment with its 757.

2015-04-14_11-19-56Airbus has seen its share of the segment rise from 17% in 2000 to 53% in 2014.  Given that the A321neo is comfortably outselling the 9MAX, this is likely to continue in the near and medium term.

However, one should not assume that this success is going unnoticed in Seattle.  Even as Airbus offers an A321LR – seemingly surrounding this segment with options – Boeing is almost certainly going to respond.

The question is when, and how far Boeing will go.  The 737 MAX9 is not competitive against A321neo or A321LR, either in range or runway performance.  The 737 MAX8, even in a MAX200 configuration, doesn’t measure up in size or range.  As there is little more Boeing can do with the 737MAX than what it has already done, it is apparent that Boeing will need a new aircraft – effectively a 757 replacement.

With average seating capacity moving upward, Boeing’s next generation narrow-bodies will likely be optimized around a 180-190 seat profile, offering longer-range for those who need to replace the 757 for transatlantic services.  The industry rumor mill is rife with suggestions that a new design will be the ultimate solution.

But as Boeing is yet to deliver a MAX, which needs an 8-10 year production run to provide a strong ROI, we don’t foresee Boeing introducing a new single aisle design for quite some time.  From a timing perspective, and a six-year development cycle for new models (up from the traditional four years), we expect Boeing to announce a new program in 2018 for initial entry into service in 2025.   The problem is how to introduce a new narrow-body family without killing the MAX, for which production rates are currently being increased.

Timing is everything, and Boeing missed a window of opportunity with the 787 delay.  Had the 787 been on time, Boeing would be working on a new model to leapfrog the A320 family today, rather than playing catch up with a re-engining program that seemed to be conceived in a hurry to have something to counter Airbus’ narrow-body win at American.

Of course, by the time a new model could enter service, most 757s will be retired, as the youngest will be 21 years old in 2025 and the oldest models 43 years old.  With the majority of the 757 fleet retired, Boeing will need to leverage its technology to re-build the market share it lost, and continues to lose, to the Airbus A321.

Airbus will, of course, also need a new clean sheet design to replace the A320 family, and while their target was the 2030 time frame, action by Boeing could force them to move their timetable forward.  For Airbus, the two year lead for the neo over MAX provides an opportunity to capitalize on their investment earlier, and leaves Airbus in a strategic position to force Boeing’s hand, if it chooses to accelerate its own new aircraft development timetable.  But each OEM seems content, for now, to milk their existing re-engined products as long as they can.

The Bottom Line:

Now that Airbus has gained the lead in this segment, the question becomes how aggressively will they defend it, and will Boeing launch a new design and take back share without a fight.  As the industry has evolved into a duopoly, we’ve seen “me too” behavior with the MAX reaction to the neo, and the A350 reaction to the 787.   The 737 began life in 1967, and the A320 in 1988.  Both will be in need of a technology upgrade a decade to 15 years from now, and the key may be the evolution of engine technology, which more than any other factor, drives airline economics.

Pratt & Whitney is salivating over the potential for a 40,000-45,000 lb thrust GTF, which because of scalability in design, would not be a difficult task, given that they already have six different variants in design.  Rolls-Royce will be looking for an application for its Advance engine, and CFM/GE will be pushing the frontiers with the LEAP.

This segment is likely to be the launching pad, and optimal design point, for the next narrow-body aircraft families.  The question is who will be first to market.

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