The biggest news out of this year's Farnborough International Airshow has nothing to do with jet orders. Midway through the global gathering, Airbus had outscored Boeing, 223 orders to 121. But ritualistic order-upmanship at the aviation industry confab outside London is at best a narrow window on current market trends.
Far more telling are signs that Boeing is leaning toward developing a jet for a potentially lucrative market niche. In public comments before the air show, Boeing executives showed growing enthusiasm for a “middle of the market” plane to fill a gap between the company's workhorse 737 single-aisle jet and its smallest long-range 787 Dreamliner. “It is not easy; it is not impossible. We are not there yet,” Boeing aircraft development chief Mike Delaney told reporters, adding that a decision on whether to move forward is “coming faster than you think.”
Industry observers have wondered for some time whether the Chicago-based aircraft manufacturer would commit to a new jet. And while key financial and technical questions remain, it's increasingly clear that Boeing's appetite for a “clean sheet” design is returning after an arduous seven-year struggle to bring the 787 to market.
A new jet for routes of up to 5,000 miles might enable Boeing to dominate a new market segment, at least until Airbus develops a viable competing aircraft. Current single-aisle jets have limited range, and wide-bodies built for long-range flying are less efficient across middle distances.
According to a recent survey of airline executives by industry publication AviationWeek, more than 90 percent of respondents want a middle-market jet. Boeing's conversations with airline customers apparently reveal similar support.
True, any new plane is a gamble—developing a middle-market jet likely would cost Boeing $10 billion, and considerably more if it encounters production glitches like those that delayed the 787 by three years. It wouldn't hit the market until the mid-2020s.
DIVERGENCE
Misread demand for a new jet and you suffer, as Airbus has with its ill-fated A380 model. The European manufacturer aimed to leapfrog Boeing's 747 with a superjumbo jet capable of carrying 550 passengers. Launched in 2007, the A380 reflected a widely held belief that airlines would continue to focus on “hub-and-spoke” flying.
Boeing foresaw a different future, in which carriers would fly more “point-to-point” routes over longer distances. So it created the Dreamliner, a smaller long-range aircraft that burns less fuel and makes passengers more comfortable.
The Chicago company got it right. Since its 2011 commercial debut, the Dreamliner has expanded the market by enabling carriers to open new routes, such as London-to-Austin, Texas, and Denver-to-Tokyo. Earlier this week, United Continental Airlines announced new nonstop 787 service between San Francisco and Hangzhou, China.
Boeing has booked 1,155 orders for 787s since it began marketing the plane. Airbus, meanwhile, has less than half as many orders to show for its $28 billion investment in the A380. On July 12, the European company announced a production cut that some consider a death knell, though CEO Fabrice Bregier said the plane is “here to stay.”
Boeing took the bigger risk—and got the bigger payoff. Sure, the 787 cost far more and took far longer to develop than it anticipated. But the company's marketing judgment was spot on. As a result, it controls a new and growing market segment where Airbus can't really compete.
The ability to discern and influence long-term demand trends is a Boeing hallmark. The 787, 747 and 737 all were prescient bets on an evolving market. Will the middle-market jet be another? It looks like we're going to find out.
(culled from www.chicagobusiness.com)
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