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Summary

  • Delta's CEO Richard Anderson thinks it's a mistake not to build a 757NG.
  • The new 737MAX does not offer a comparable seating capacity to the 757-200.
  • Both Embraer and Bombardier seem to shift their focus to medium-haul airplanes.
  • As soon as one manufacturer announces a 757-like airplane, Boeing will have to react immediately to not lose customers.

It seems that talking about Boeing (NYSE:BA) is not possible without mentioning Airbus (OTCPK:EADSY). This might be the case because Boeing as the biggest airplane manufacturer in the U.S. and Airbus as the biggest airplane manufacturer in Europe seem to forget that they are not the only companies of this industry in the world. When Airbus announced its new flagship plane, the A380, Boeing came up with a new 747-edition. And of course it works vice-versa. When Boeing's B 787 became a huge commercial success, Airbus started the XWB-program, which was later to be called the A 350. The announcements of new products, the introduction of a new generation airplane, the public orders on air shows can all be perceived as a game between the two major companies called "action and reaction". But despite this rival game both Boeing and Airbus operate successfully, while Boeing seems to be at an all-time high.

However, I was shocked to learn in a recent article in the German magazine AERO INTERNATIONAL how many airlines wish for a new B 757 that was discontinued in 2004. Delta's CEO Richard Anderson even called Boeing's decision not to build a 757NG a "mistake". Delta has one of the biggest 757-fleet and uses this airplane for various routes. Delta's 757s can be spotted flying from coast to coast, from one of the airline's hubs to a major city or even transatlantic to Europe. In Europe many charter airlines use the 757 for medium-haul flights from northern Europe to the Canary Islands or to Africa. So I asked myself: When an exclusive Boeing customer like Delta (Delta had no Airbus in their fleet before the merger with Northwest) longs for a modernized 757 and calls it a mistake that Boeing refuses to start such a program, what was so great about the 757 then?

The 757-200 was designed as a medium-haul airplane with a seating capacity of 243 in a two-class layout. The range of 3,900 nmi (7,222 km) made even shorter long-haul flights such as transatlantic flights possible. This made the 757 a perfect match for medium- and long-haul routes with a modest demand. Some airlines even replaced their 767s on certain routes with two 757s in order to offer their customers increased frequency. In the late 1990s Boeing developed the 757-300 for the European charter airlines who wished to add more passengers sacrificing some 500 nmi in range.

Boeing responds to the airlines' demand that the new B 737-900 offers the same range as the 757. This might be the case, but on the other hand even the largest 737 does not offer the same seating capacity as the 757. And when we look what Airbus has to offer we intuitively start to compare the A 321 to the 757. But the A 321 is basically nothing more than a stretched A 320 with a seating capacity of 185 in a two-class layout and a range below 3,000 nmi ( 5,500 km), whereas the 737-900 offers an even lower seating capacity of 177 in a two-class layout. Furthermore, the A 321 was primarily designed for the European market. Major European airlines use it as a "people mover" flying from one major European city to another major European city. Clearly they have their focus on seating capacity rather than on range.

So, neither does Boeing's portfolio offer the 757 customers a new replacement nor does Airbus'. Right now things are good for Boeing. Everything seems to be a smooth operation. But what would happen if one of the smaller airplane manufacturers like Embraer (NYSE:ERJ) or Bombardier (OTC:BOMBF) announced a 757-like airplane? On the very same day of such an announcement Boeing would have to react immediately! Then, everything would have to go pretty fast not to fall behind. The questions to many investors is: Is this likely to happen?

It is not as unlikely as you may think. Contemplate the last ten years. The Brazilian company Embraer has emerged as a strong and successful manufacturer of regional airplanes and in the recent years they shifted the focus to short- and medium-haul airplanes. From their new product line called "E2" a 757-airplane is just a small step ahead when we read such specifications like a seating capacity of 160 and a range that is almost the same as that of an A 321.

Admittedly, Bombardier did not really have a good start with their CSeries. With a seating capacity of 130 passengers in a two-class layout and a range of 2,950 nmi (5,463 km) it comes not even close to the 757. But even Bombardier could decide to build a possible "DSeries" responding to the medium-haul market, if the CSeries eventually turned out to be a success.

In other words both companies, Bombardier and Embraer, could benefit from Boeing's and Airbus' reluctance in building a 757NG/757-like airplane. But why is this so? The two rival companies Boeing and Airbus seem to focus on long-haul airliners, since there are higher margins to be earned and oftentimes a lot of prestige (cf. A 380-800 or the B 747-8). But prestige alone does not guarantee a bright future: The 747-8 is not what you would call a best seller, neither is the A 380. Yes, both of them are very prestigious airplanes, but they are simply too big and too expensive to generate an overwhelming demand among the airline industry. Airplanes like the 757 do.

In which way could this "mistake", as Anderson put it, influence Boeing's business? In the next few month, yes, even in the next year it probably won't influence the company's business at all. But as soon as one manufacturer - and it does not have to be Airbus as I pointed out - announces a new medium-haul airplane with 757-like specifications, it definitely will. From this future day on Boeing will have a hard time to persuade these airlines that their own 757NG-program will not only be realized in no time but also be even more efficient that the one of manufacturer X. Realizing such a program could cost the company $5 - 8 billion.

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Source: Unexpected Rivals Could Benefit From Boeing's 'Mistake' Not To Build A 757NG