By Ruchi Shroff
Despite a setback with its 787 programme, Boeing continues to offer new aircraft and outdeliver its rivals in the field
When an Ethiopian Airlines Boeing 787 caught fire at Heathrow Airport on July 12, the manufacturer’s shares took a tumble on the stock market. Fears arose that the battery fires that had grounded the entire fleet for three months earlier this year were back. Despite extensive tests and receiving approval to fly again from the Federal Aviation Administration of the United States, there is still some hesitation about Boeing’s Dreamliner. However, airlines confirmed their confidence in the wide-body jet despite the new problems, with no order cancellations since the incidents happened.
And through it all, the company has not lost its vision and ability to offer new jets. At the recent Paris Air Show, it recorded a large number of orders for all its jet models from customers around the world. And even as rival Airbus shopped its new wide-body A350, Boeing maintained its position as an aircraft manufacturer that is here to stay.
Large jets emerged as the winners at the Show, with the two rival airplane manufacturers, Airbus and Boeing, scoring big by the end. Although Airbus beat Boeing in the total number of orders at the Show, the US planemaker has beat its European rival in the number of deliveries made during the first half of the year. This comes despite the setback at the beginning of 2013 with the grounding of the superjumbo Dreamliner and the ensuing investigations in the US and Japan. While emerging from these issues, Boeing also surprised the industry by announcing the brand new version in the 787 family and recorded 102 commitments for the jet from a variety of customers. All in all, Boeing won firm and provisional orders for 442 aircraft valued at more than $66 billion at the Paris Air Show. Airbus, on the other hand, scored a total of 466 orders worth $69 billion at the show.
Another battleground at the Paris Air Show came over the market for large twin-engine airplanes at or above 350 sets, known as mini-jumbos. That is a profitable niche for Boeing, with its popular 365-seat 777-300ER. Airbus successfully carried out the first test flight of its 350-seat A350-1000, which aims to compete with the 777-300ER and is due to enter service in 2017. In response, Boeing has started marketing a revamped version with up to 406 seats, tentatively known as the 777X, which will enter service by the end of the decade. “Today the 777 is the best-selling twin engine, twin aisle airplane of all time,” says Randy Tinseth, vice president of marketing at Boeing Commercial Airplanes. “It has had a great run, but it is time to start looking at the next step. We have been working with our customers for the new 777X. It will be slightly larger with more room for passengers and retain its long-range abilities.” Boeing also added that the 777X is 20% more efficient per seat compared to the competition. The result of this competition will now be decided at the Dubai Air Show in November, where Emirates, one of the largest operators of the 777, is expected to be a major customer as it looks to replace up to 175 current 777s.
Boeing has thus far emerged the winner in terms of deliveries for the first six months of 2013. It delivered 306 planes in the first half, including 218 737NGs, 47 777s and 17 787s. The manufacturer is behind on deliveries of the Dreamliner, of which it only delivered one in the first quarter of 2013 due to battery problems. It expects to deliver 60 by the end of the year. Airbus delivered a total of 295 planes in the first six months of 2013, including 233 A320s. It delivered eight superjumbo A380s, but has not booked any new orders for the plane yet.
However, Airbus soared past Boeing in the number of orders. The European manufacturer reported 722 net orders (758 gross orders with 36 cancellations) in the first six months, compared to Boeing’s 692 orders reported through July 2. Airbus is planning to book 800 orders for the entire year and the half yearly total brings it close to this figure.
Despite this, Boeing still expects to remain the leader in the market in the long run. It projects a demand for more than 35,000 new airplanes over the next 20 years, valued at $4.8 trillion. Both passenger traffic and cargo traffic are expected to grow 5% annually over the period. “This forecast gives us confidence as we increase our production rates and invest in new products like the 777X and 787-10X,” says Tinseth. “Airlines are demanding more efficiency and that is exactly what we’ll be giving them.”
The single-aisle market, served by the Next-Generation 737 and the future 737 MAX, is the main driver of the forecast and continues to show strength. In this segment, 24,670 new airplanes will be needed due to the growth of low-cost carriers and airlines from emerging markets. Widebodies, such as Boeing’s 747-8, 777 and 787 Dreamliner, also make up a large part of the forecast. In this segment, 8,590 new airplanes will be needed, fueled in part by airlines replacing their older fleet with new, more fuel-efficient airplanes.
The market for new airplanes will continue to become more geographically balanced over the next two decades. Asia-Pacific, including China, will lead the way in total airplane deliveries with 12,820 aircraft. The Middle East is forecast to take deliveries of 2,610 aircraft during that period, valued at $550 billion at current prices. “The Middle East is a very important region for us,” Tinseth says. “Last year we delivered 48 airplanes in the region of the total 601 deliveries we made.”
After facing high and volatile fuel prices and a highly competitive environment, airlines have been forced to change the way they manage their business. “Our customers are focused on growing their networks, managing their capacity and investing in new fleets,” Tinseth adds. “These trends will shape market demand for airplanes that have highly efficiency, low operating costs, environmentally progressive technologies and a great passenger experience. The Gulf carriers are focusing on the population that is within the eight-hour range and they are interested in the models accordingly.” A lot of this demand will be driven by airlines wanting to replace its older fleet with more fuel efficient models as the cost of jet fuel keeps rising.
Competition is bound to increase in the airplane manufacturing sector as demand continues to rise, especially from the emerging markets. Experts have hinted that China will start manufacturing its own jets, just to be able to meet the domestic demand. Tinseth foresees a future where the current duopoly of Boeing and Airbus will be broken. “The situation is changing,” adds Tinseth. “We have been in a duopoly since the mid- to late-1990s and things are definitely changing now. We have new competition in the market from China, Russia, Brazil and Canada. More and more manufacturers want to move up from the regional jet market into where Boeing and Airbus have been. New competition makes us better at what we do with their ideas and technologies. We think we will be okay even with the new competition.” This was partially seen at the Paris Air Show as Embraer and Bombardier stepped up their game, offering their own narrow-body jets, at much cheaper prices. However, airplane manufacturing is a particularly tough industry, one which is not always economically-friendly.
The changing market scenarios affect the industry a lot, but there is a lot of investment in innovation currently, which will make flying a little more environmentally friendly over the years. “There is a balance we have to find in the marketplace in terms of the size and ability of jets in the future,” Tinseth concludes. “The number one focus of our customers today is efficiency, followed by the optimum range for the distance they are flying regularly.” With its investments in new programmes, Boeing is bound to have some new offerings for the industry soon. And despite the recent setbacks, Boeing has proven that it is a true industry player and will be around for a long time to come.
A closer look at the new Boeing 787-10
At the 2013 Paris Air Show Boeing launched the newest variant of the Dreamliner, the 787-10. It is the third member of the 787 family and despite the battery issues with the predecessor, received commitments for 102 airplanes from five customers across Europe, Asia and North America, which will provide the foundation for developing the new aircraft further.
The new 787-10 will fly up to 7,000 nautical miles (12,964 km) — covering more than 90% of the world’s twin-aisle routes — with seating for 300-330 passengers, depending on an airline’s configuration choices. The second member of the family, the 787-9, is in final assembly in Everett, Wash., and is set to make its first flight later this year.
“The 787-10 Dreamliner will be the most-efficient jetliner in history. The airplane’s operating economics are unmatched and it has all the incredible passenger-pleasing features that set the 787 family apart as truly special,” said Boeing commercial airplanes president and CEO Ray Conner. “The 787-10 is 25% more efficient than airplanes of its size today and more than 10 percent better than anything being offered by the competition for the future.”
Design of the 787-10 has already started at Boeing, and international partners will be involved in detailed design in the months ahead. Final assembly and flight test of the 787-10 are set to begin in 2017, with first delivery targeted for 2018.
“Our ongoing investment in the 787 family is well-founded,” said Conner. “With the 787-10, we’ve designed an exceptional airplane supported by an efficient and integrated production system that can meet increasing demands and create new opportunities for us. Our team and our customers are excited about growing the product line and expanding our presence with this family of airplanes.”
The 787 family’s interior offers passengers a variety of technologies, including large, dimmable windows; cleaner air; higher humidity; lower cabin altitude; bigger stowage bins; soothing LED lighting and a smoother ride. The 787-10 will share a common type rating not only with the 787-8 and 787-9 but also with the popular Boeing 777, giving airlines additional flexibility in scheduling and training flight crews.