We’ve talked before about how 90% of the widebody passenger airplanes in our 20-year delivery forecast are in the 200 to 400 seat market.
And when you look at this segment of the market, one might say “timing is everything.”
This is where airline-growth strategy and product-timing strategy become extremely important, because an airline that does not have the right size airplane with the right kind of range at the right time is going to be disadvantaged in the marketplace.
Over the next 10 years, the market will need about 1,600 airplanes in the 200-400 seat market, in addition to those already on order. If you look at the 787 vs. the A350, the Airbus offering is at least five years later – and doesn’t appear to have any added technology. And the 777 is delivering now, 8 years sooner than the competing Airbus product.
Let’s talk about this market in two segments, the 300- to 400-seat market first, and then the 200- to 300-seat market.
In terms of timing in the 300- to 400-seat market, there are about 2,800 airplanes to be delivered over the next 20 years. But only 24% of those are for replacement, and the bulk of the demand for these replacement airplanes comes in the second half of the 20-year forecast (post-2015).
The most immediate and strategic opportunity is today, for growth airplanes. In the next several years, fleets will be set in this fast-growing market segment – long before the A350 is expected to enter service.
The 777 is available now - 8 years sooner than the proposed competing A350 model. Strategically, can airlines really afford to wait?
So today, airlines are setting the foundations of the fleets for the future by ordering and taking delivery of 777-300ERs and 777-200ERs/LRs for strategic growth opportunities (230 777s were ordered in 2005 - 2006).
When you look at the 200- to 300- seat market, it’s a little different. We forecast demand for about 3,000 airplanes of this size over the next 20 years. 40% of those deliveries will be for replacement of older A300s, A310s, and 767s. In this category, Boeing’s product strategy is timed for replacement, but also, more importantly, for the 60% of the market which is strategic growth – and it’s happening now.
I would venture to say that most of the 43 customers (514 orders) who have purchased the 787 Dreamliner did so for strategic growth. The additional 1,500 to 2,000 miles of range over the capability of today’s similar-sized airplanes opens up these new market opportunities for airlines.
Without the 787, airlines are going to be at a disadvantage in these growth markets. And by the way, the 787 is also timed to catch the first wave of replacement airplanes that are 230 seats and smaller.
There’s a question as to whether even the smallest A350 is sized too big for that market. And as it will not be available until the second wave of replacement, it also misses out on the current strategic growth opportunity.
So, need I say it again? “Timing is everything.”
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Comments (18)
Spot on Randy. The A350 offers virtually nothing over the 777 family, much less the 787.
The market has spoken with the orders they have placed, and as much as Leahy and Airbus rant about it, the A350 will struggle to find its feet.
Posted on April 11, 2007 09:56
While I am a strong supporter of Boeing and its future predictions (which have been proven to be much more accurate than the Airbus ones), I am somewhat concerned with the 777. While the A350 is about 8 years away, I think that once the A350 comes out, it will wipe out the 777. It's economics will be better, it will be built with much more advanced technology, and by then, the 777 will be an "old" design (being about 20 years old!).
I hope that Boeing can come up with a new design, taking advantage of the knowledge gained with the 787, and target the A350 with a better and more advanced product. If you couple that with a new single aisle short-haul composite jet, Boeing will be set to be the leading airliner manufacturer for decades to come!
Posted on April 11, 2007 18:43
It seems the A350 is actually competing against the B777, not the Dreamliner as has been purported, and it is at a disadvantage in this by its smaller cabin width and late arrival date.
Effectively, the B787 has no competition, even considering the A330, a pale rival.
The A350 will primarily appeal to airline customers who'd prefer the Boeing product, but are swayed by Airbus' lower pricing terms.
Posted on April 11, 2007 23:07
With the 787 booked until 2013, doesn't the A350XWB's lateness become less of an issue because new orders won't be delivered until the XWB can be. At some stage, the large Boeing backlog will mean that operators will not have to consider the timing of delivery as much as price and performance, right?
Posted on April 11, 2007 23:23
The 400 plus seat market is just as important to timing as well. When the ultra-efficient, phenomenally capable 747-8I enters service in 2010, the oldest –400 will be 19 years old. This is the perfect ripe age to begin replacing the once ‘ageless’ –400 with a 747-8I, should an airline require a lower risk, higher reward, added capacity approach to its point-to-point routes.
Moreover, by 2015, no doubt there will be a 777-200LRx and 777-300ERx to continue the 777s market leading role, as well as obliterate any 310 seat plus A350XWB offerings, whilst the 787 Dreamliner is perfectly suited for its role. Boeing builds the airplanes for today and the future, as well as the finest, most efficient, advanced and passenger pleasing commercial airplanes. The 787 especially will be leaps and bounds ahead of whatever the A350XWB emerges as!!
Separately, Airbus’s COO is quoted at saying that the new 747 needs more than new engines hung on it to make it a viable airplane. Well, once again, I feel these comments are amusing and childish. Considering the 747-8 has the world's most advanced and fuel-efficient 5th generation engines, already puts it ahead of the A380’s powerplants. Moreover, the aerodynamically all-new super-critical wing with its advanced optimised airfoil improvements, a 9% to 12% lighter operating empty weight per seat than the A380, a more efficient fuselage structure, a better interior design and being more fuel efficient puts the 747-8I well ahead of the A380!
Further, considering that some one third of –400s purchased were for their range capability and not size, the market is not where Airbus predicts it. It is where Boeing predicts it. The 747-8 is the pinnacle of airborne elegance and is the shape of the future! Period.
Posted on April 12, 2007 02:37
The A350 actually offers a lot more than the current 777 family but its very late entry into service does give Boeing a HUGE chance to start piecing together a 777NG or perhaps an even newer plane altogether.
Personally i dont believe there is any such thing as a wave of replacement, airlines can hold out to buy the Airbus too depending on their situations, especially if, ala Airbus, a few A330s are thrown in for free.
If Boeing just sits out and watched things happen Airbus will retaliate in the same way Boeing did with the 787 and the 747-8
Posted on April 12, 2007 04:07
You comment about 777 is available now, 8 years sooner than the "competing Airbus product". Are you talking about current generation A-330/A-340 aircrafts or future generation aircraft A-350? One would assume that A-350 would be much more advanced then either 777 serious or A-330/A-340 aircrafts?
Posted on April 12, 2007 07:08
As a person with a marketing degree, it is difficult to imagine how Airbus continues to miss the mark in selecting the wrong plane and it is always completed later than the Boeing models.
Posted on April 12, 2007 07:38
Definitely, A350 is mainly focus on 777, not 787. As you can see that A350-900(XWB) is competeting with 20-years old 777, 777 will definitely go to a bad place.
Only if 777 make significant changes or improvements such as change to composite fuselage + wing and advanced engenies, it will definitely being out of market once A350 EIS.
Posted on April 12, 2007 09:10
While the 777 today offers unmatched performence and has been accepted better over the A340 series, I doubt Airbus will take it easy in their A350 series. We really never know what does Airbus have to offer. They must have learnt a lesson due to the delays in the A380s. So Airbus might deliver its promises and maybe better than that. And as it is the 777 becomes 'technologically older' compared to the A350.
So its Boeing's duty to come out with an new series in the 777 that will give an impression of a 'new technology' and yet not compete with your own 787s. Or else Boeing entirely shifts its focus on the 787s and lets the 777 fade away, which I am sure NOBODY would want.
Posted on April 12, 2007 09:34
Looking at the future some see a huge growth potential for 12 to 18 hour nonstop flights.
My question is what kind of miles per gallon does an airplane get on an 18 hour trip versus two nine hour legs with a refueling stop. On the nonstop, isn't a large part of the payload the fuel for the second half of the trip?
The A-345 and B-777LR are beautiful aircraft, but from an environmental point of view I see them as giant flying gas tanks. Will fuel be cheaper in 2015, who knows.
Also, there might be a physiological threshold of how long the average person wants to sit in the average seat for, and I would guess it is closer to 12 hours than 18.
Posted on April 12, 2007 10:34
The A350 is a dead end and risky technology. No one has ever done a CFRP panel on Aluminum frame. How do you seal the seams, and how to you avoid the interaction with the AL?
All future aircraft will be all CFGP. Airbus actually loses on advancing their technology, as it will take money to develop this dead end concept, never to be used again. The money is thrown away (or they give up and go to all CFRP anyway, which puts them further down the time line for aircraft entry.
Also to be kept in mind, there will be a very limited number available for the first two years of production.
The 2013 entry date is iffy, and even if in the unlikely even it holds, its 2015 before they begin to make any quantity. No slots really available for 3 years (at those rates), so both the 787 and 777 are available.
There is plenty of time for the 777 to evolve or be replaced. Its still wider than the A350, its in service and its not a questionable technology.
My opinion is that they will go to an all CFRP fuselage, as this gets them only short term PR, at a longer term loss.
The airlines applaud it as it gives the appearance of a competitive aircraft for bidding purposes.
Posted on April 12, 2007 21:21
I find many of your blog postings are good tutorials on strategic thinking of businesses other than aviation. It is the reason why I am sad we miss you. So much of valuable advice. You are giving away free.
This post on timing has demonstrated a clear and valuable perspective. Please focus the 747-8 within this perspective, so that we will have a complete treatment of the entire Boeing product line.
Posted on April 13, 2007 02:48
With so many delays and uncertainty over funding, I have for a while said that the earliest time the A350 will make it to town is 2017.
Ive not seen one iota of evidence to suggest that it will be on time, much less, even meet its performance targets.
Classic case of "too little too late" in the A350's case.
Perhaps Airbus was better off sticking to the A330-derived A350, which probably would have been in service 3 or 4 years after the 787.
Posted on April 15, 2007 01:42
I work on B777 and I believe it will be in production for the next 40 years. It will follow on the footsteps of the venerable B747 and B737 series.
Stick it out with B777 and you have a secure job in the next 4 decades.
Posted on April 15, 2007 05:33
Does anyone know how the current relative valuation of the Dollar versus the Euro will affect sales of the 747-8 versus the A380? Right now, the Dollar is trading at $1.3574 per Euro. This would seem likely to eliminate any pricing advantage that Airbus would be able to offer.
Posted on April 17, 2007 08:16
Airbus operates on nationalistic principales. As some countries did in '70s and '80s, they are willing to do anything at any cost just to bring down some US firms, before they start invading US. Thus the relative valuation of the Dollar versus the Euro, in that sense, is not an issue.
Posted on April 19, 2007 10:17
The developments of the A350 since its conception have been rather amusing to the aviation world, as the airplane has virtually copied every design aspect of the super-efficient 787, proving one thing that Airbus in fact does not have the know-how nor technology to better the 787 design let alone be on par with it! The 787 Dreamliner is the optimised, super-efficient and phenomenal airplane in the 210 to 330-seat segment. Further, eight years from now gives Boeing ample time to radically modify the already formidable 777 longer-range airplanes, allowing the 777 to continue in its market preferred dominance. Also, the Boeing 777 and 787 cover the 200 to 400 seat market far more effectively and efficiently than the competition, allowing airlines to have more flexibility, greater profits, and ultimately adapt their fleets for a better-optimised point-to-point route structure. Boeing products give the higher reward, lower risk, and customer focused solution. Period.
Posted on April 21, 2007 11:25
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