Why Boeing Needs to Launch a New Airplane Program | Opinion

An abbreviated version as a “letter from our readers” was published in Aviation Week & Space Technology's August 17th issue. The abbreviated online version link is here: https://aviationweek.com/aerospace/letters-our-readers-aug-17-2020

For over 100 years, Boeing has been a pioneer in the aerospace industry. They have led in the research & development of advanced technologies in the areas of commercial aviation, defense aircraft, rockets, missiles and satellites. This culture of innovation has always applied to their core business, which is the production of very successful airplanes. Boeing understands that there is a long development life-cycle for new airplanes and they will soon need to initiate a new airplane program so that the new airplane is ready to enter service by the late 2020’s.

This will need to be done at a time when economic and business challenges presented by trade disagreements between the U.S. and China, the grounding of the 737 Max and the impact of the Covid-19 economic downturn has impacted Boeing and the entire commercial aviation industry. In response to these challenges, Boeing has proactively borrowing $25B to help them with the necessary cash flow for operations. Pair this debt raise with some recent International defense procurement wins, Boeing should have enough cash to support both operations and initiate the development of a new airplane that will fill the middle of the market and will fly medium length routes.

Boeing will need to first determine the size of the airplane to develop. Some in the industry suggest a new single aisle narrow body, which would replace the current 737 Max. This is not a good direction for Boeing to go. The demand for the 737 Max has been consistently strong with a backlog of orders at over 4,000 airplanes, which at a rate of 31 deliveries per month is over an eleven 11-year backlog. It does not make sense to replace a successful airplane that is in-demand and has strong customer commitment for shorter routes. Boeing should develop a smaller twin aisle airplane, which would be a replacement for the 757 that would fly medium length routes. Boeing will benefit from developing this type of airplane for three reasons. First, airlines can be presented with an airplane option that can fill a void with the correct size of airplane in an underserved market. Second, Boeing can take advantage of already developed technology by using composites and systems from the 787 airplane. Finally, Boeing will be able to enhance and re-balance their manufacturing strategy by minimizing their reliance on an extended supply chain.

Under-served Market

The airlines have not utilized the right airplanes to fly the medium length routes between 3,000 and 5,000 nautical miles, which ideally would carry between 225-275 passengers. The airplanes flying these routes have either been to big or to small. The airplanes that had filled the middle of the market in the past were the Boeing 757 and the Airbus A300 models. There are only a few of those airplanes left in service and those aircraft are no longer in production. Due to the impact of Covid-19 and the resulting diminished air travel, the few remaining 757 and A300 models are being retired or converted to freighter airplanes to satisfy emergent e-commerce growth. With the acceleration of retirements and freighter conversions, the Boeing 757 and the Airbus A300 models that used to fill the middle of the market will soon no longer be in passenger service. This leaves a gap for airlines in the middle of the market where there is no airplane that can fly medium length routes that have the right capacity levels and are cost efficient for those routes.

Currently, flying these routes are the Boeing 787 series and the Airbus A330 series. These airplanes are too large and have seat capacity that are in excess of what is needed for these medium length routes, as they were built to fly longer routes. These airplanes have heavier airframes and larger engines making them weigh more, which provides less fuel efficiency for these medium length routes. This is driving higher operating cost per mile for airlines flying medium length route segments such as New York to Sao Paulo, New York to Algiers or New York to Moscow. The shortest range of the airplanes in service flying these types of routes is the A330-300, which still has a range of over 6,000 nautical miles. These airplanes were built to fly longer distances, which leads to further higher operating costs, thus marginalizing the profit margin for airlines. 

The smaller airplanes that are used to fly the medium length routes do not have the desired seat capacity. Boeing’s 737 MAX models top out at 204 seats per aircraft in a two-class configuration. This creates an issue where the airplane is not able to meet airlines needs for larger capacity airplanes with the required number of seats for these medium length routes. Airbus is in a similar position with a slight advantage with its A321 NEO Models that seats 220 in a two-class configuration. Therefore, this airplane also does not reach the desired capacity and number of seats for a middle of the market aircraft. While the 737 and A321 models cannot carry the desired number of passengers for medium length routes, they also cannot fly the longer distances either. The A321 currently possesses the longest range of the single aisle narrow body to fly 4,000 nautical miles, which is still 1,000 nautical miles short of the desired distance. This means that both of these smaller airplanes, regardless of capacity, can only fly a portion of the middle market routes.

Airplane Design 

The proposed new shorter twin aisle airplane should be developed by Boeing with all composite technology in a next generation oval fuselage, which lessens the drag, thus increasing fuel efficiency. Airlines would improve operational profitability with this type of new small twin aisle airplane. This design would also lower the time of passenger loading and unloading of the aircraft, leading to a quicker gate turn and getting back into the air faster.

This next generation all composite fuselage could be implemented by leveraging already approved 787 systems. The 787 had a significant amount of new technology in the airplane including a full composite body structure, wings, advanced electric systems, controls and avionics. Typically, an airplane development program duration is about seven years. But the development timeline for the 787 was almost ten years, due to the new technology that was introduced, along with updated certification requirements at that time. Boeing can leverage these already approved 787 systems, which should decrease the amount of time in development and certification of their next new airplane program.

Furthermore, improved fiber, resin and sealants from the 787 being incorporated into the new airplane would lead to more efficiency and economies of scale in the supply chain. There could also be common uses of thermoplastics, aluminum alloys and consumables that could become shared components between the new airplane program and the 787. These common use components will reduce, both Boeing’s and the supply chain development costs. For other design synergies, the wing could be fabricated through an automated fiber placement technology, generating a large single piece surface composite wing skin just like the 777X program. All design factors combined would result in a lighter weight, all composite airplane that would allow airline operators to gain fuel efficiency, lower maintenance costs and improve corrosion resistance and airframe durability.

Manufacturing Strategy

Boeing can enhance their long-term manufacturing strategy and use this opportunity of a new airplane development program to re-establish a stronger insourcing plan. This would avoid having an extended supply chain, which would result in greater production control, reduced potential supply chain delays, reduced logistical and quality issues. It is not beneficial to move back to a fully vertical manufacturing model, but finding a better balance will be beneficial for Boeing. Bringing back critical manufacturing to North America will also be more efficient for the production process as there will be less section assembly and integration problems. There were multiple lessons learned from the 787-manufacturing strategy. One lesson was about the downsides of supply chain outsourcing, which was dramatically increased for larger sections of the airframe to supplier partners, versus the historic in-house manufacturing and assembly operations being performed at Boeing. With recent Geo-political tensions increasing risks to current production programs, there will be a nationalized effort to re-shore manufacturing. Boeing should complete more of the fuselage work internally at their factories with some support from key suppliers that are North American based. Boeing can also retain long term critical intellectual property, in contrast to how it was released during the 787 outsourcing efforts. By moving back towards more of an in-sourced aircraft program with key suppliers in North America, the new airplane program should be able to avoid many of the mistakes from the 787 program. That would result in a manufacturing strategy closer to that of the successful legacy 777 program. This could also provide Boeing with some opportunities with local and state governments on ‘Economic Development’ projects, grants and tax incentives. 

Conclusion

Launching a new airplane program in these current economic conditions will be very challenging. However, Boeing has a great opportunity to take the lead in the middle of the market on medium length routes with this new aircraft while avoiding the cannibalization of market share from their larger 787 widebody that fly longer routes. There will be many benefits for Boeing to create a new shorter twin aisle airplane utilizing proven and certified composite technology and existing 787 systems which should streamline certification and facilitate reduced production costs. This new airplane will be in a league of its own as there are no ideal competitors in that market segment. An industry colleague and a senior commercial aerospace analyst, Richard Aboulafia recently said to me that, “if Boeing leaves the Middle of the Market to airbus, it’s market share could drop from 50% to 40% by value. As history shows, it’s very hard for a jetliner prime to recovery from that kind of decline.” Innovation is the core of what Boeing does and this new airplane will ensure Boeing maintains a leadership role in the Commercial aerospace sector.

Alex Krutz is the Managing Director at Patriot Industrial Partners, an Aerospace and Defense advisory firm that elevates business performance by focusing on manufacturing strategy, value creation and business transformation.