August 1, 2007

To Ten or Not to Ten?

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Dominic Gates penned a spot-on piece in yesterday's Seattle Times. He examined the battle brewing between the Boeing and Airbus on the future of the 350 seat market.

First off, it's worth noting that the fact that these strategic decisions are being made on both sides ultimately validates the two-engine point-to-point strategy. However, Boeing cannot rest on its laurels and current success. Complacency will win them no orders. Boeing owns the 787-8 market (531 orders to date) because a comparison to the A350-800 just doesn't hold up under scrutiny. Its competitor is the -9, not the -8.

Where Airbus actually goes right in their direction is to attack the 777/A340 market. The A350-900 and -1000 are going to go head to head with the 777-200ER and -300ER. The 777 has only been in service for twelve years and the -300ER only flew for the first time in February of 2003. However, this creates a distinctly awkward situation for both plane makers. Airlines currently flying the 777 variants aren't looking to replace them; the market for Airbus here might not be as large as they think. They've made no secret of the fact that the 350 seat market is their target with new customers in Emirates and Qantas. The reason the 787 struck gold was because it hit the market at exactly the right moment to replace aging 767 fleets.

The is extremely awkward for Boeing as well. Boeing is hesitant to commit on the 787-10 for good reasons. First, an early retirement of the -300ER to find a suitable 350 seat replacement doesn't make sense. It's a hugely successful airplane and making a successful hot-selling product (the -300ER) obsolete at this stage by one's own design might not be the best decision. Second, the 787-10 is more in response to the A350-900 than the -1000. A 787-10 would eat into their own 777-200ER market more than the -300ER. It is undoubtedly better to make your own product (-200ER) obsolete than have your competitor do it for you. Most importantly, Boeing isn't sure that an ultra-stretched 787 to 350 seats would produce the same level of efficiency as the shorter models.

Airbus is looking to introduce the three A350 variants one year apart from one another. The -900 is expected to enter service in 2013, followed by the -800 in 2014 and the -1000 the following year. According to Boeing, 787-10 would debut in 2013 a full year before the A350-1000. Boeing does have time to make a decision here, especially based on the fact that both the -900 has to be on time before the -800 or -1000 ever see the light of day. (Remember, the likelihood of seeing an A380-900 is extremely slim.) This is Airbus' chance to redeem themselves after the A380 delays. If they rise to the challenge, and I believe they will out of an existential need, Airbus will have succeeded in eating into the 777 market midway through its life. They did this successfully with the A330 against the 767.

Upgrades and advances in the 777-300ER might be the wisest option ultimately. Increased use of lightweight composites along with engine advances might stave off the threat of the A350-1000 until a full 777 family replacement can come to fruition around 2020. The -10 is the right choice for Boeing, but not for the 350 seat market.

7 comments:

Anonymous said...

"A 787-10 would eat into their own 777-200ER market more than the -300ER." This was the part which stood out for me - what 777-200ER market will there be by then?

Secondly, all that input from Geoff Dixon. Thanks awfully, Geoff, for sharing your wisdom on the 777!

Anonymous said...

"It's a hugely successful airplane and making a successful hot-selling product obsolete by one's own design might not be the best decision ... It is undoubtedly better to make your own product obsolete and have your competitor do it for you."

Well, which is it?

Jon said...

"Well, which is it?"

Making the 300ER obsolete by 2013 isn't a good choice. That's a life of only 10 years since first flight.

Let the 200ER pass on. It will be 17 years since first flight. Let it be replaced by the 787-10 at 300 seats.

Anonymous said...

I have heard there will be an announcement at Dubai regarding the 10.
Numbers that are being tossed about may reach 300 orders from some big carriers.

Boeing is not stupid if they can sell tens, they will, they invented the problem they now face, and I am sure have made the necessary financial considerations, and there is still freighter customers.

Anonymous said...

" "It's a hugely successful airplane and making a successful hot-selling product obsolete by one's own design might not be the best decision ... It is undoubtedly better to make your own product obsolete and have your competitor do it for you."

Well, which is it? "


Maybe he meant to have: "It is undoubtedly better to make your own product obsolete than have your competitor do it for you"

??

Anonymous said...

Most of the posts left here and on A.Net would leave one with the impression that the folks at Boeing are stupid and don't understand theie market, their customers, or their product offering. Forget the positioning of Emirates or Qantas. Boeing got the 787 right. You can make the same argument with the 777. Airbus is late to the game with an answer to either, and just when they are basking in the success of the A350XWB's EIS, Boeing will trump them yet again with the development of Y3.

Anonymous said...

I just noticed today that the Airbust A350 looks almost identical to the 787.... Dose this remind anyone of the cold war days COPY CATS.....