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Feb 19, 2016

Boeing jumps a few sharks threatening the airline game

Boeing's Commercial Airplanes vice president of marketing Randy Tinseth jumped several sharks threatening the airline game today when he presented its 20 year rolling forecast for s


Randy Tinseth's forecast renders smaller jets much larger performers
Randy Tinseth’s forecast renders smaller jets much larger performers

Boeing’s Commercial Airplanes vice president of marketing Randy Tinseth jumped several sharks threatening the airline game today when he presented its 20 year rolling forecast for sales in Australia, New Zealand and adjacent Pacific states.

Shark No 1 could be described as widespread concern that airports would fail to keep pace with the predicted growth in air travel, which in Oceania alone would amount to 950 new jets with a catalogue value of $US 140 billion over 20 yers.

Mr Tinseth said Boeing assumed that overt time the airlines and airport owners would sort out and remove the bottleneck problems, pointing out that despite dire predictions in the past, this had always proven to be the case.

Shark No 2 was the problem of framing future jet demand in terms of existing airframes, just as speculation, often driven by Boeing, of an all new Middle of the Market (MoM) jet stirs up concepts of a design that would take over the upper capacity range of the new 737 MAX family and its Airbus A320 NEO competition.

“Our assumptions always take into account new developments in airliner technology,” he said.

Mr Tinseth said Boeing’s Commercial Market Outlook assumptions also included a 20 percent improvement in overall airline operating efficiencies (in part no doubt driven by action to ease bottlenecks in terminal capacity through everything from improved passenger handling to the construction of additional runways.)

Some of the predictions in the latest CMO for Oceania seemed odd at first. Boeing has started forecasting demand for regional jets smaller than its entry level 737 MAX family even though it has officially vacated that contest.

How Boeing sees us after another 20 years
How Boeing sees us after another 20 years

In the case of Oceania, it forecast only 10 such new buys in the coming 20 years, in an area with around 40 such airframes, some already approaching the end of their commercially useful lives.

“We predict that many of those regional jets will be replaced by larger single aisle jets like the MAX series because of growth,” Mr Tinseth said.

His presentation took that underlying theme further. Boeing is now ranking its 737 MAX 200 jet (with 198 seats) as larger or higher ranking than its 737 MAX 9 airliner, which is physically the largest MAX and the natural competitor (at least until today) to the corresponding A321 NEO, which has been rearranged to pack in as many as 240 passengers or more.

By redefining the single aisle sector as all but capped at 200 passengers, Boeing is making more space for a new higher capacity MoM or middle of the market jet, a space where the competitor’s NEOs have been much more successful than the MAX range.

Boeing could  thus be seen as redrawing the map of the battle ground to better suit its view about where higher efficiency technology can take airliners with a very broad target market.

In their current versions, the Airbus A321 and the Boeing 737-900 compete for orders from airlines using them to seat 215-220 passengers.

The comparatively greater success of the A321 NEO versus the 737 MAX 9 and this relegation of emphasis in the Boeing CMO for the latter might just be the first hard indication that Boeing will develop an all new Middle of the Market aircraft for between 250-300 seats, to regain the territory Airbus has invaded and Boeing previously withdrew from in 2004 when it ceased making the 757 series.

Not that Mr Tinseth confirmed this, or even entertained it. But the graphic shown at the briefing would support this widespread speculation of an all new medium sized jet, with Boeing itself recently nominating the end of this year for a go/ no go call.

An interesting additional question of scale arose from the briefing. Mr Tinseth pointed out that airlines are not just working their newer jets harder by flying them for more hours a day than before, but doing it with more seats.

He referred to once medium sized jets doing the work with 400 seat plus configurations that was a raison d’etre  for the Airbus A380, even saying the giant Airbus was struggling because smaller jets were being made to do the work it was built for.

(Although Boeing regards the 777-9 to be a 408 seat jet, some customers are talking up 440-450 seat configurations when it comes into service from 2020.)

An obvious interpretation of the newly released Boeing CMO (whether you read the Global version or just the Oceanic section) is that what were once medium sized wide bodies are being made to do what the now all but dead 747-8I passenger jet and the larger longer ranged A380s can do.

Whether the passengers will cop it as the human frame keeps getting bigger is another matter not discussed at the briefing.

But today what were envisaged as 240-250 seat 787-8s ten years ago are flying with 335 passengers, and on the record to date, doing so with exceptional reliability and frugality.

There are now 436 seat A330s, and 777s with more than 400 seats, in service over intercontinental ranges.

Which means the underlying direction of the Boeing CMO may be right on the money, even if it is a major pain in the posterior, kneecaps and neck for passengers who can’t pay for a premium seat.

Mr Tinseth saw this as good for air travel, in that the more the full service and low cost carriers tried new things, they stimulated rather than harmed the market, and of course, continued to buy more jets.

On large jets he said,  “Five years ago we thought that there was frankly a larger market for big airplanes, but that market has been rapidly evaporating.

“What we have seen is that airline market places where big airplanes make sense, have mostly been addressed….“We are seeing that there is a clear preference for something a little bit smaller, with a little bit more flexibly, and a little bit more capable.”

Boeing’s forecasting of demand in the next 20 years in Oceania is prefaced with the experience of the last six years, where below trend overall average annual economic growth of 1.5 percent nevertheless coincide with long haul annualised traffic growth of around 5 percent.

Mr Tinseth’s presentation sought to delink a reduction in China’s industrial activity for example, from rising consumer spending on services and travel. It was perhaps a reminder that although national economies may rise and fall by some measures the discretionary spending power of a new class of consumers with a taste for air travel can buck such trends.

That, for Australian tourism, and other high value exporters, could be good news for more than Boeing, or Airbus.


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12 thoughts on “Boeing jumps a few sharks threatening the airline game

  1. ghostwhowalksnz

    For Boeing, the numbers they predict are for new builds, the Australian regional/Fifo market has a tendency to bring in used aircraft. We can see with Virgin the upshift with them letting go E-jets and Qantas link would be expected to do the same.
    Of course the Boeing ‘predictions’ are mostly for their internal consumption, I remember reading recently some comments from “javier” who had plotted Boeings forecasts over a longer period.While there was changes in numbers over time, there were other very rapid changes in a short time period which dont follow market outlooks. Javier said it was a need for Boeing to push the idea of the 787 and then the 777X!

    of course Boeing and Airbus deliberately make sure they are not compared like for like and market forecast are no different.
    The recently released certified numbers for the GTF and Leap for the A320, show GE and P&W ( IAE) are the same boat.
    PW1100G is 2857kg dry 24,000- 33,000lbsf thrust
    LEAP1A/1C is 2990 kg (incl fluids) 32158lbsf max thrust
    Other details are carefully obscured so direct comparisons are much harder

  2. Dan Dair

    Your analysis seems to imply that Boeing are re-framing their own report to tie-in with their existing product range (notwithstanding including airframes smaller than the B737 this time).?

    I don’t remember this being the case previously.?
    Separately, is anyone working on a system which will allow the use of the starboard side forward doors at airports.

    Most contributors talk of the turn-around problems of the B757, because it’s such a very large single-aisle aircraft.
    The A321 is approaching that kind of length & might yet reach it in future.?
    One would imagine that if Boeing were to actually re-wing the B737 it may also get longer still.?

    I can’t see much point in developing future twin-aisle designs to overcome the length problem, if they’re going to be restricted by the same one-door bottleneck.?

  3. Ben Sandilands

    Dan Dair,

    I don’t claim to have done any analysis. All I did was look closely at the presentation, pick up on material differences, such as re-ranking the 787 MAX 9 out of harm’s way, listen to what Boeing had already said officially and prior unofficially, and connected after dots, after asking Randy some questions which allowed me to make sure my understanding was at least on the right path.

    Analysis in my book is number crunching, after considering what numbers to crunch, and making independent studies of trends and statements and balance sheets and market research, and a whole heap of things that serious analysis services do with a team of experts.

    That analysis is always proprietary, and serves the interests of circles of investors or fund managers. It rarely gets reported in full or accurately in the media, which relies of hand out summaries.

    This is why I’m taking a hard line with my own profession. It has become totally under resourced, and is merely a conduit for predigested, self interested messaging management.

    The only place left to go for people like myself, with a lifetime of contacts, and lots of scar tissue, is to try and keep the liars part of the way honest.

  4. George Glass

    Shark number 1.Airport capacity.Sydney.Hopeless.Curfew.Hourly movement limit.Crossing runways.One runway for heavy departures,the other too close and too short for simultaneous approaches.A displaced threshold on 16L.PRM approaches as a dumb-a#rsed fix!It is difficult to convey to the non-professional aviator how rubbish Sydney is.The fact is in Australia we just get away with it.Build Badgery Creek now.Just do it.

  5. George Glass

    Oh,and I forgot noise abatement.

  6. Dan Dair

    My apologies, perhaps I should have said précis instead of analysis.?

    Additionally, I’m nonplussed that Boeing bring regional jetliners into their analysis & then only have a potential sales figure of 40 for the next 15 years.
    Australia alone must have more than that (at least, last year) operating on FIFO work.? When the volumes on that work pick-up again, all those aircraft will need to be replaced over the next 15 years or so.?
    These operators won’t want to upsize their aircraft because essentially, their passenger loads will remain static.

    Or are Boeing only talking about scheduled airline work & not charter companies.?

  7. ghostwhowalksnz

    Dan, FIFO isnt part of its market outlook(for new planes) for the very good reason they dont buy new. I doubt that will change as the passengers dont buy the tickets and are treated as ‘freight’
    Cobhams newest BAE 146 in its fleet arived last year but has been flying since 96. Same goes for the Fokkers around, most arrived in Australia well used and the same will happen for their replacements

  8. Dan Dair

    I can see that, but I can’t see where the pre-owned ‘feeder’ jetliners are going to come from to replace those currently in service.

    BA146’s, F27’s & MD11’s just aren’t in production anymore.
    Will the replacements be Embareaers,? they seem a bit low to the ground for that kind of work.?

    If not them, then what will fill that 80 to 120 seat role, not just for FIFO, but for all airlines currently operating similar sized aircraft.?

  9. comet

    If the FiFo market is so cheap, and they don’t care what aircraft they buy as the passengers don’t choose their own tickets, then maybe they’ll buy something crazy.

    How about some very cheap Comac 919s?

  10. ghostwhowalksnz

    When 20 yr old planes are the best option I think the price point is in the 100,000s level which is not anywhere near what a Comac would go for.
    12 year A320s are being scrapped for their parts, a well used 777 goes for $10 mill (+ engine overhaul).
    Boeing may keep tabs on the price and market for their planes after the 7-8 yr point which is about when LCC replace their fleets, but at the 20 yr point which suits the Fifo market, its only the scrap dealers who set the market price and the favoured few have some years left on the airframe and engines stick about a bit longer

  11. derrida derider

    ghost is right – there remains a market for really old planes and FIFO’s one of them. Most go the scrapheap, the lowest mileage examples are picked up by this niche. After all there are still Dash 7s and even DC3s flying into bush airstrips around the world.

  12. ghostwhowalksnz

    Old is now considered around 12-15 years nowadays, but looking at the actual age of the major aircraft the Fokker F70/100 we can see how old
    Alliance 22 Fokkers , youngest built 96 oldest 89
    Network 14 Fokkers ,youngest 94 oldest 90
    Cobham 12 Bae 146, youngest 99 oldest 91
    Cobham also has 20 B717s ( inc last built) but they run mostly regular line services for Qantas Link

    What stands out is not only are the planes often over 20 years old but they come from defunct manufacturers, usually a sign they are the cheapest of the cheap.
    Perhaps the replacements are the middle aged B717s, certainly not anything new or near new from the majors. I doubt if the Comac 919 would work either as its too big but the former DC9 just now being delivered as the Comac ARJ21 may have a future in 15 + years


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