Yesterday reports (FlightGlobal) from the PNAA conference highlighted a comment from Boeing’s VP Marketing, Randy Tinseth. The item of significant interest was the perennial 757 question. Then came something many of us have been waiting for. So the MOM from Boeing is now “on”.
How big is this market? The following chart gives an idea of how the big duopoly orders look. We think a typical breakdown could be at the 70% rate – 30% twin aisle and 70% single aisle. Boeing looks a tad better off by being stronger in the twin aisle segment, where the profits are much greater.
But that’s only one aspect to evaluate. Breaking up the single aisle segment into models we see the next chart. As we have shown before, both Airbus and Boeing’s customers have moved away from the sub-150 seat part of this market. Despite what the OEMs say.
Airbus has essentially two models; A320 and A321. Boeing also essentially has two models; 737-800 and 737-900. Boeing does not breakdown its MAX orders but we believe ~85-90% are for the MAX8.
The Boeing chart is busier not least because of the 757. To rub the salt in, the MAX9 is being outsold by the Airbus A321neo by more than a five to one. Boeing’s hand was forced on MAX, after realizing they could lose the entire 2011 American Airlines order. Boeing’s response was the best play they had. It worked, but the 737 cannot be modified like the A320 – particularly the A321. Consequently the 737-900 and now the 737-9 is being outsold by the A321.
The Airbus chart shows how compelling the A321neo is – it is taking a lot more share of Airbus’ orders than anytime since 2000. The MAX9 does not offer the A321neo serious competition. Boeing’s CEO apparently said as much on Monday’s employee webcast.
Airbus developed the A321 to compete with the 757 and it was woefully short of the mark. But Airbus kept at it and with the A321neo, and the A321neoLR, they seem to have achieved what they set out to do. Meanwhile Boeing repeatedly said they did not see a viable market in replacing the 757. Well it turns out there is a market.
Ray Conner, Boeing’s CEO, is said to have stated on the webcast: “because Boeing cannot compete with Airbus right now on prices.” This is perhaps further evidence that Airbus’ strategy of growing A321 capabilities was the lowest risk/highest return option. The 737, to match the A321, may require a lot of redesign. Such development could push the aircraft beyond its grandfathered design – something Boeing might be loath to do and has been so successful at staying within so far. It would seem a A321 response from Boeing could require a clean sheet design. But this is something many have not been expecting since former CEO Jim McNerney’s moonshot comment. So no easy, low cost/low risk options for Boeing.
Boeing might be forced to come up with a new family seating 180-250. It would be expensive and take time. But it would checkmate the entire current Airbus single aisle family. That alone has to be very attractive.
The New Single Aisle program is really the MoM program given that the whole segment seems to have upguaged.
Boeing answer would most likely be a 757 in size with technology/ architecture derived from the 787 program. My detailed crystal ball gazing : https://www.linkedin.com/pulse/who-build-new-single-aisle-satyajit-ravindra?trk=prof-post
On the surface, going forward with an all-new single aisle airliner seems like a simple decision. But I believe that when one really gets into to details, it’s much harder to get the business case to close than one would first expect. One of the problems is that the market for a 5000nm 250-seater is really quite small. The value of the Airbus A321LR is that it increases the versatility of the A320 family, and will thus make some airlines choose to operate an A320 fleet instead of a 737 fleet. At the end of the day, the vast plurality of single aisle services are 1-2h flights, some are 3-4h, and a quite small number of single aisle services, relatively speaking, are 5h flights. But most airlines prefer to operate only one family of single aisle aircraft, and then relatively marginal considerations can impact their preferences. And furthermore its not terribly easy to beat the 737MAX on fuel burn, let alone maintenance and purchase price. A streched derivative seems like a prudent way forward, that allows for greater fan diameters and possibly full FBW, yet retaining commonality for airlines and suppliers. Another prudent way forward, honestly, is to sit pat.