Big decision at Boeing: launch a new plane or not?

In 2011, Boeing made a crucial decision: closely followed by its rival, Airbus, the Seattle aircraft manufacturer abandoned the development of a new aircraft and decided to hastily modernize the 737, its most popular aircraft.

That effort culminated with the 737 Max, which was involved in two fatal crashes in 2018 and 2019. It got bad press again six months ago when a plane lost a panel mid-flight. Those problems have caused Boeing to fall behind Airbus in the global market for single-aisle planes, which it once dominated.

Now Boeing, expected to appoint a new CEO by the end of 2024, must make another crucial choice: When should it develop its next plane?

If it makes a mistake, Boeing could spend billions while losing market share to Airbus of Toulouse, France. The two aircraft manufacturers must also keep an eye on possible Chinese competition and the need to reduce greenhouse gas emissions.

“This will be one of the most important decisions of the new CEO,” said Ken Herbert, aerospace and defense analyst at RBC Capital Markets. We will judge his mandate based on this decision, he adds.

Boeing declined to comment on the matter.

Evolving requirements

There are two main categories of commercial aircraft. Narrow-body (single-aisle) planes like the 737 carry 100 to 200 passengers on continental flights. Wide-body planes (twin-aisle) have more seats and can reach distant destinations like London or Tokyo.

Boeing and Airbus are selling many more single-aisle aircraft, but carriers are demanding increasingly larger versions of those planes because of limited airport capacity and growing numbers of travelers.

The Max was designed to compete with Airbus’ A320neo family of aircraft. The experts’ verdict is clear: Boeing lost.

Carriers around the world have ordered many more Airbus planes, especially the largest, the A321neo. The European lead was consolidated after the Max accidents – which experts attribute to design and engineering flaws – followed by the decision to ground all Maxes; the flight ban lasted 20 months.

In 2019, for the first time, there were more passenger Airbuses in operation than Boeings, according to Cirium, an aviation data provider.

The Max remains popular, particularly among U.S. carriers, which have a long relationship with Boeing. The aircraft manufacturer has some 4,300 Max orders, a backlog worth several hundred billion. But Airbus has sold far more of the A320neo family, with more than 7,100 orders in progress for all three variants of the plane.

Airbus dominance

When it comes to large twin-aisle aircraft, Boeing remains in the lead, but Airbus’ dominance in the lucrative single-aisle market is a virtuous circle, experts say: rising sales allow Airbus to invest more in R&D. And more planes in the air mean more parts and service sales.

Boeing squeezed the lemon as much as possible with the 737, launched in 1968. By developing the Max, the company pushed the structure of this plane to its limits. The successor will likely be designed from a blank slate, experts say.

It’s unclear what it will look like or when it will launch.

Not before the mid-2030s

According to current CEO Dave Calhoun, Boeing won’t launch a new plane until the mid-2030s, in part because such a monumental effort will only be worth it when engine makers General Electric, Rolls-Royce and Pratt & Whitney offer more efficient engines.

But a new Boeing plane would fill a significant gap in the narrow-body widebody market, some experts say.

Airbus’ most popular plane by far is the A321neo, which has the most seats and can travel the furthest of the three neo models. Boeing’s answer to that plane, the 737 Max 10, doesn’t fly as far and has not yet been approved by regulators.

According to Ron Epstein, an aerospace and defense analyst at Bank of America, Boeing could sell 6,500 longer single-aisle jets, mainly to replace smaller narrow-body planes. It would be an investment of 20 billion over seven to eight years, bringing Boeing gross profits at least five times higher, he said in 2023.

Analysts expect Airbus to launch a new plane around 2035, on the same horizon as Boeing. Should Airbus take the lead or let Boeing open its game? Analysts disagree on this subject, but they believe that the European manufacturer is well positioned in both cases.

Developing a new aircraft is a huge undertaking. Unlike wide-body aircraft, single-aisle aircraft are sold in large numbers and must be produced quickly; Boeing and Airbus want to produce dozens per month. To maintain this pace, Boeing will have to develop a complex production system and prepare its suppliers. Carriers will also have to train their pilots for this new aircraft, which is expensive and time-consuming.

Finally, any new plane will have to last decades, Mr. Calhoun told the trade magazine in 2023 Aviation Week.

According to experts, the announcement of a new plane could restore Boeing’s image after its setbacks.

“It would make them easier to love; I think they would find a lot of interest in a new and improved Boeing,” said Rob Stallard, an analyst who covers Boeing and Airbus at Vertical Research Partners.

This article was published in the New York Times.

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