To Ten or Not to Ten?

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.