Saturday, November 25, 2006

What Boeing Needs To Do (Part 1)

I had planned this post after Airbus announced the launch of the A350XWB program. But Airbus, ever dysfunctional, has stalled its decision as it deals with consortium politics.

Assuming Airbus does launch the A350XWB, what should Boeing's next step be?

Boeing currently has a two-prong strategy: Update existing airplanes (737 and 747) with new technology to keep them competitive, and create breakthrough technologies on new airplanes (the 777 and now the 787). With the first 787 now under construction, the question for Boeing is "What comes next?"

A good resource on Boeing's future commercial airplane plans can be found here.

The Boeing Y2 project became the 7E7, which eventually became the 787. Like every Boeing commercial airplane in the last 25 years, the 787 outgrew its original target as a 757 and 767 replacement. Now the smallest 787s (the 787-3 and 787-8) are on par with the 767-300, and the stretched 787-9 has a seating capacity greater than the largest 767, the 767-400ER. At the same time, Boeing has pushed the 737 to near 757 capacity with the latest 737-900.

Most expect Boeing to next launch the Y1, a 737 replacement using composite technology pioneered on the 787. But instead of a 100-200 seat direct 737 replacement, Boeing needs to look instead at follow-on to the 757-200, 757-300, and 767-200 aircraft. For simplicity, I will refer to this market as the 200-250 seat market. This would fill the gap between the 737-900 and the 787. It should also offer the option of a mainline 180-230 seat version to target the 757 market, as well as a smaller, 150-180 seat version to target the upper portion of the 737 market. There should also be an option of a later stretch to 250-280 seats to target the 757-300 and 767-200 markets.

While a U.S. domestic capable aircraft would seem obvious, airlines are increasingly using the 757-200 as a transatlantic aircraft. Continental Airlines currently uses 757-200s in transatlantic service, and Delta will start 757 transatlantic services in 2007. This means a long-range option (transatlantic, at least) is required for a 757 follow-on.

Another factor affecting the 757 replacement market is increasing demand for 757s in charter and cargo service. FedEx plans to acquire 90 757s on the second-hand market. A vibrant second-hand market makes it easier to replace aircraft. These trends, along with airlines retiring 767-200s and redeploying other 767s and some 757s to international service could put pressure on Boeing to bring a 200-250 passenger aircraft to market sooner.

What should a new Boeing 200-250 seat aircraft look like? I'll cover that in my next post.

Part 2 | Part 3 | Part 4

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