Printed headline: Middleweight Division
When the Boeing 787 entered service in 2011, passenger variants of the aircraft it was designed to replace, the 767, were still in production. Yet 14 years after the last 757 rolled off Boeing’s Renton, Washington, line, a final decision about its successor still is pending.
Direct comparisons are somewhat unfair since the 757 was not as crucial to airline fleet strategies as were the 767 and its successor. Nonetheless, three years after Boeing ruled out a reengined 757, it still has not signed off on the only alternative program: a clean-sheet design termed the new midsize airplane (NMA).
The NMA is intended to plug a capacity gap in the 220-270-seat bracket across the Boeing and Airbus product lines. This gap sits roughly between the capacities of the manufacturers’ largest narrowbodies, the Boeing 737-10 and Airbus A321neo, and their smallest widebodies: the 787-8 and A330-800. Intended range for the new aircraft is about 5,000 nm.
Boeing predicts a demand for 4,000 aircraft in this size and range bracket, and would expect to claim at least half the market following the NMA’s entry into service in 2025 or 2026. Those numbers would add up to twice the sales of the 757, but Boeing so far seems unable to reconcile challenges surrounding the NMA’s configuration and pricing.
One of Boeing’s proposed designs is a widebody aircraft with an unusual elliptical fuselage. This would support the company’s ambition of offering a widebody aircraft with narrowbody economics but would dampen the NMA’s appeal to Asian operators due to the shape’s reduced belly cargo capacity.
Boeing’s preference for a widebody NMA has surprised many within the industry, given the popularity of the single-aisle 757 and challenge of widebody production costs. “For me, a single-aisle up to 230-250 seats is all they need, and then they get the pricing right,” says Phil Seymour, CEO of consultancy IBA.
Product differentiation is probably a key factor in Boeing’s reasoning, with the OEM perhaps questioning whether an all-new narrowbody could offer enough improvement on the 737-10 or A321neo. Airbus already has orders for almost 2,000 of the latter, for which it is touting a high-density configuration of 244 seats. That is well within the NMA size bracket, and Airbus is thought to have the capability to launch larger and longer-range variants of the A321 in the future.
The amount of composite material in the NMA is another question. More carbon fiber means better operating economics but higher production costs, and analysts expect airlines will pay only up to $75 million for the new aircraft.
“They’re building a twin-aisle and giving it twin-aisle capabilities yet trying to capture some of the single-aisle market—that’s an enormous challenge in terms of operating economics and production economics,” says Richard Aboulafia, vice president for analysis at the Teal Group.
Resolving production costs with acceptable pricing is such a challenge that Aboulafia believes Boeing will not confirm the NMA until 2019. If so, the aftermarket might provide a route out of its pricing dilemma by allowing the company to accept lower margins on aircraft sales in return for greater support sales over the life of each aircraft.
Fitch Ratings backed this strategy in a May 2018 research note, stating: “Potentially greater services revenues through the life of a program could make some proposed programs more economically viable than if evaluated only on an original equipment basis.”
Given that Boeing intends to increase its services revenue to $50 billion within a decade from $15 billion in 2017, Fitch’s assessment seems fair. However, Boeing’s previous efforts to capture maintenance sales have had mixed results, says Seymour.
“If you were going to get an honest answer from Boeing, they would probably say [sales] of GoldCare [now called Global Fleet Care] for the 787 were disappointing,” he says.
While the complexity of the 787 should have encouraged airlines to outsource maintenance, Boeing struggled to achieve the right price point for a full-service maintenance package, notes Seymour. It might do better with an NMA that incorporates more aluminum than the 787, but that extra simplicity might encourage large airlines to keep maintenance in-house. This creates a dilemma, since airlines with large fleets and, usually, internal MRO capabilities, are likely to be the NMA’s primary market.
“No one will design their future international growth around the NMA so you’re probably looking at the bigger airlines that can optimize their fleets because they are so large,” says Aboulafia.
Apart from airframe configuration, the other big unknown about the NMA is engine choice—or lack thereof. The thrust requirement for the engine is in the quirky 45,000-lb. range: above the capability of new narrowbody engines like the CFM Leap or Pratt & Whitney PW1000 but below larger turbofans such as the Rolls-Royce Trent family or General Electric GEnx.
Boeing is targeting a 30% unit cost improvement for the NMA over the 757 and 767. Most of that gain will come from the engines, which are therefore expected to need a bypass ratio of more than 10:1 and an overall pressure ratio of at least 50:1 at top of climb.
Such envelope-pushing requirements probably mean the NMA engine will be a new design rather than a simple scale-up or scale-down of existing models. Although all three engine manufacturers are interested in the platform, such a massive investment means the viable outcome will be only two engine choices—or maybe just one. Even then, there are questions about which OEM is in the right position to develop a new engine: Rolls-Royce has had problems with its Trent 1000 program and is embarking on a major restructuring; GE Aviation is somewhat at the mercy of the travails of its parent company; and Pratt & Whitney is straining to keep up with Airbus production ramp-ups following the problematic introduction of its PW1100G on the A320neo.
“None of the three guys [is] going to be able to a launch an engine soon, so you’re looking at more of a 2026-27 entry into service, and that’s a big issue,” explains Aboulafia.
One obvious solution is to develop an engine as part of an alliance, and while GE-Safran venture CFM may do just that, it is difficult to see Pratt and Rolls reprising their IAE joint venture, especially following Pratt’s threats of legal action over its former partner’s use of geared technology in its developmental UltraFan engine.
“Airlines generally like to see a choice of engines,” comments Paul Lyons, strategy director at IBA, adding: “The investor community prefers one choice because it makes it more simple with residual values, while if they go do a deal with one manufacturer it makes pricing much simpler.”
Rolls-Royce and CFM are both reported to be considering geared architecture for any NMA engine, with the former saying it is responding to the trend for higher bypass and pressure ratios.
“The company could see a point, at around a bypass ratio of 15:1, where the low-pressure (LP) turbine system driving the fan gets disproportionately large and heavy, and weight and drag become an issue,” says Rolls-Royce spokesman Bill O’Sullivan.
To resolve this, Rolls-Royce has eliminated the LP turbine and introduced an enhanced intermediate-pressure (IP) turbine. And to stop the IP turbine running too fast in relation to a low-speed fan, it is introducing a power gearbox between the fan and IP compressor. The Rolls UltraFan is designed to be 25% more efficient than early Trent engines and has a scalable thrust rating of 25,000-100,000 lb., which covers the NMA requirement.
Timing and the Market
The NMA is targeted at long, thin routes such as minor transatlantic city-pairs and many new intra-Asian routes. As stated, this makes it an ideal aircraft to optimize the fleets of large carriers with big networks, but it also could be a good candidate for the growing low-cost, long-haul sector.
In its forecast for 4,000 aircraft in the midsize bracket, Boeing accounts for replacement and new-aircraft demand. Yet even if its outlook is correct, many wonder if NMA sales will cannibalize orders from the 737-10 and 787.
“Are people buying the 787 for 4,000 nm? Absolutely—so it would hit that,” says Aboulafia.
In Boeing’s defense, the smallest 787 variant, the -8, has sold poorly, while Airbus’ smallest widebody, the A330-800, has done even worse. This appears to leave the market open for a smaller, optimized widebody like the NMA, but Boeing cannot wait too long.
“If they can’t get it to market by 2026, they start to miss the replacement opportunity for 757s and 767s because the stuff they are trying to replace will already be too old and will have been replaced by something else,” notes Lyons.
According to the Aviation Week Fleet & MRO Forecasts, the combined 757 and 767 fleet will have decreased to 989 aircraft in 2022 from 1,253 in 2018. Retirements will accelerate only toward 2026, when the youngest 757 will be 22 years old.
Boeing also is aware that as its replacement window narrows, Airbus will take an increasing share of the midsize market with the A321neo and any further iterations. The A321neo has almost seven times as many orders as the 737-10, and Aviation Week forecasts there will be almost 1,000 in service by 2022.
“It’s worth taking that speculative risk on a widebody because no one is there, but Boeing has to be mindful that, meanwhile, Airbus is killing it with the A321neo in the single-aisle market,” says Aboulafia.
This situation creates yet another dilemma for Boeing decision-makers.