The Next Boeing Clean-Sheet Will Probably Be a 757 Replacement

By Vinay Bhaskara / Published February 11, 2014

For Boeing, 2013 was by all accounts a banner year. The manufacturer delivered a record 648 airplanes, and booked 1,531 gross orders. It would have won more firm orders than rival Airbus had the Emirates order for 150 Boeing 777X jets been firmly booked in 2013. Boeing also launched the largest 787 variant (the 787-10), and the re-engine of its cashcow 777 program, the 777X (-8, and -9).

While the year started poorly with the grounding of the Boeing 787 fleet worldwide due to issues with its lithium batteries, the beleaguered 787 program has made tentative progress towards improved reliability. And the combination of three 787 variants, and the two 777X variants (including the 777-9X, which meets the traditional 400 seat threshold for classification as a very large aircraft [VLA]) has secured Boeing’s competitive lineup in the 240-400 seat widebody sector that is the most profitable for manufacturers. But it is in the narrowbody sphere that Boeing faces a challenge.

icelandair 757 JDLThis market was once dominated by Boeing’s venerable 757 twinjet.  A total of 1,050 airframes were produced from 1981 to 2004, with the last aircraft delivered to Shanghai Airlines in November of 2005. The secondary market for the 757 has shown considerable strength, especially amongst cargo operators thanks to the aircraft’s capabilities. But passenger operators have steadily replaced the type with the Boeing 737-900ER and Airbus A321.

RELATED: Airbus’ A321 Receives an Awakening in the US

Airchive has already provided extensive coverage of the Airbus A321’s resurgence in the American market, but the broader story is that of a worldwide shift in market dominance from Boeing to Airbus in the large narrowbody sector. The table below shows orders, deliveries, and aircraft currently in operation for every model in the Boeing 757, Boeing 737-900/ER, and Airbus A321 families.

Aircraft

Ordered

Delivered

Backlog

Number in Operation

Boeing 757-200

994

994

0

757

Boeing 757-300

55

55

0

53

Boeing 737-900

52

52

0

52

Boeing 737-900ER

524

217

307

217

Boeing 737-9

413

0

413

0

Airbus A321

1424

877

547

873

Airbus A321neo

553

0

553

0

As the table details, more than 3,049 current generation 757, 737-900/ERs, and A321s have been ordered, with only 996 Boeing 737- 9 and Airbus A321neo ordered as replacements. Isolating to the 737-900 and Airbus A321 families, the Airbus A321 (ceo and neo) have outsold the 737-900ER (NG and MAX) two to one (66.6% to 33.3%).

This is not an accident. The A321 and the A321neo have lower operating costs than the 737-900ER and 737-9 respectively, for the same reason that the Boeing 737-800 and MAX 8 have an operating cost (cost per available seat mile – or CASM) advantage over the A320ceo/neo; larger seating capacity. The A321 seats about 7-10% more passengers than the 737-900ER, and this drives a 7-9% operating cost advantage for the A321 that has held to the neo and MAX. Consequently the A321neo will outsell the Boeing 737-9 for the foreseeable future, especially given that the availability advantage for the MAX will continue to subside.

The following chart compares large narrowbody costs for US carriers combining Department of Transportation (DOT) Form 41 data for the year 2012 and Airchive.com operating cost modelling.

Source: US DOT Form 41 Data

Source: US DOT Form 41 Data

Source: US DOT Form 41 Data

Source: US DOT Form 41 Data

The charts illustrate the operating cost disadvantage for Boeing in the market segment. The figures are partially skewed by average stage length, fleet age, labor cost differences, and economies of scale. For example, US Airways’ A321 fleet is younger and larger than the 737-900/ER fleet of United. Its A321 fleet tends to operate shorter routes (a function of the network being skewed towards the East Coast), and US Airways has lower labor costs than United in this dataset. But even with these caveats, the data is useful in analyzing the relative costs.

This creates a strategic problem for Boeing. The history of narrowbody jets has been a never-ending stream of up-gauging the base model. The initial base narrowbody model in the 1970s was the 737-200 and DC-9 sized aircraft, around 120 seats. In the 1980s, that was up-gauged to the roughly 140 seat MD-80s and 737-300s, which extended to the A319 and 737-700 in the early 1990s. From the mid-1990s to the present, the base model has been the A320/737-800. And the natural extension into the next decade is the large 200-220 seat narrowbody. While this model is an oversimplification, the overarching trend holds, especially thanks to the steady rise in fuel costs and aging in workforces (larger aircraft allow you to spread labor costs over more seats).

However, the one thing that works in Boeing’s favor is that neither the A321neo nor the 737 MAX 9 are *true* 757 replacements. As the following chart illustrates, neither aircraft can match the range of the 757-200 (map centered on Chicago O’Hare), nor its payload capabilities. Our analysis estimates that the A321neo can replace 80-90% of current 757-200 missions (75-85% for the 737-9). Neither, however, can replace the 757′s trans-Atlantic flights, flights to deep South America from the US, flights into so called “hot and high” markets (markets with high temperatures at a high altitude), and airports with short runways where the 757’s superior takeoff performance is needed.

Indeed, airlines such as Hawaiian Airlines have made plans to use the A321neo in a similar manner as the 757. Still, given the growth in Asian and Latin American aviation and especially the massive projected growth in Africa’s aviation market (African aviation is punctuated by long flight distances between major airports and tough operating conditions), a true 757 replacement in terms of both cost and performance would likely be an attractive seller.

Maps generated by the  Great Circle Mapper -  copyright © Karl L. Swartz.

Maps generated by the Great Circle Mapper - copyright © Karl L. Swartz.

So how does Boeing deal with this problem? We believe that the next Boeing clean sheet development project will be a Boeing 757 sized narrowbody family seating between 200-240 passengers (two variants) with entry into service (EIS) in the middle of the next decade (roughly 2025). The target range for this aircraft would be between 4300-4500 nautical miles, a total targeted at Asian carriers (as it would allow narrowbody operations between almost all of Asia and almost all of Europe). In particular, the aircraft would be an excellent tool for the Middle Eastern Big Three (plus Turkish Airlines) and South Asian carriers, as the following range map centered on Mumbai indicates.

Maps generated by the  Great Circle Mapper -  copyright © Karl L. Swartz.

Maps generated by the Great Circle Mapper - copyright © Karl L. Swartz.

The 757R (our moniker, not the official Boeing one) would be a clean-sheet design with a fuselage and wing that make heavy use of lighter materials such as carbon fiber reinforced polymer (CFRP) composites and Aluminum-Lithium (Al-Li) alloys. The aircraft would be sized similarly to the present day 757-200 and 757-300 with a 10-15 seat bump for each variant to improve CASM performance, and would take advantage of advances in engine technology. While some are speculating this could be a twin aisle aircraft as was originally proposed for the Y-1, project Yellowstone 737 clean sheet replacement, we believe that the more probable outcome is a highly efficient single aisle aircraft.

The 757R fits nicely into Boeing’s product development cycle and lineup. By the early 2020s, Boeing would have completed development of the 777X, 737MAX, and 787 product lines, freeing it up to focus engineering and R&D resources on the 757R in the early part of that decade (with a steady stream of MAX, 777X, and 787 deliveries funding that process).

Separately, within the Boeing product lineup, the MAX would cover the market sector up to 190 seats, while the 787 and 777X would cover the market from 250 seats up to 400+. This creates a gap of around 60 seats into which the 757R fits nicely (also doubling as a replacement for medium-haul 787-8s delivered in 2011-2015). Following the 757R, Boeing would shift into developing a new small airplane (NSA) replacement for the 737, and then its next generation of widebody development.

This is not solely conjecture on our part. Other analysts such as Leeham Co. have corroborated these reports, as have our sources within the industry. The aviation industry is certainly an ever-changing business. But we do believe that if nothing significant changes, Boeing will launch a clean-sheet 757 replacement program at some point in the next decade.

EXTRA: 757 Launch Brochure  /  Eastern Airlines 757 Launch  /   Boeing Renton Factory – Part One

Contact the author at vinay.bhaskara@airchive.com

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