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Summary

  • The 777 concept seems to be favorable over the 747 concept.
  • 777X concept also eats away potential orders for the Boeing 747-8I.
  • Boeing seems to come up with a successful model every 15 years.

The Airbus (OTCPK:EADSF) A380 entered commercial service in late 2007, breaking Boeing's (NYSE:BA) dominance in the jumbo (long haul, 400-plus passengers) market segment. To counter the A380, Boeing came up with the Boeing 747-8I. Both the Airbus A380 and Boeing 747-8I have had their problems, and taking into account the development costs and order numbers, one can question whether these airplanes can be called a success at all.

Both Airbus and Boeing came up with their mini-jumbos to battle each other in the lower segment of the (ultra-) long range market. Airbus came up with the Airbus A350-1000, while Boeing came up with the Boeing 777X.

The battle in the jumbo market could have an unexpected winner: The Boeing 777-9X.

This article deals with the long range aircraft that carry 350 passengers (in a 3-class configuration) (excluding the Airbus A340, Boeing 777-300 and Boeing 747-300).

In order to make a good comparison, it is important to see how the various airplanes are positioned in the range vs. payload diagram:

Figure 1: Payload vs. Range Diagram long haul market (Source: Dhierin-Perkash Bechai)

First of all when looking at the diagram one should take into account:

  1. Bigger is not necessarily better (counts for Airbus)
  2. More is not necessarily better (counts for Boeing)

As can be seen (while looking at the number of different models), Boeing has most models on the market.

The Boeing 747-400 entered service in 1989 and was the successor of the Boeing 747-300. The 747-400 ruled the skies for almost two decades. The redesigned wing was bigger, lighter and capped by winglets which increased the in-cruise range and the take-off performance. The cockpit was upgraded, making use of glass cockpit instruments. The increased range capability and modern flight deck (reducing the cockpit crew by one person) seemed to be a good improvement. The Boeing 747-400(M) gathered 503 orders with the last delivery in 2005. Boeing came up with the Boeing 747-400ER which would be able to fly either further (placing the ER more to the left on the diagram) or increasing the cargo capacity (thereby increasing profits from cargo transportation). But the 747-400ER never was a success and only got 6 orders. Since the launch in 1985 the 747-400(ER) gathered 509 orders worth of $119 billion, which is not bad for an airplane concept that goes all the way back to 1960.

The 747 was able to lead the market for quite a long time, but due to low order inflow in the beginning of the 2000s and the unsuccessful 747-400ER, there was a need for Boeing to come up with an airplane that could somehow "replace" the Boeing 747-400. The airplane that would be this replacement turned out to be the Boeing 777-300ER. The Boeing 777-300ER is capable of transporting 386 passengers (30 less than the Boeing 747-400), but has a range of 14,690 km (1240 km more than the Boeing 747-400). This places the 777-300ER more to the right on the diagram, but a little bit lower.

The Boeing 777-300ER has a 20% better fuel burn and lower operational costs compared to the 747-400, making it an extremely suitable replacement for the 747-400. The 777-300ER entered service in 2004, at that time the 777 concept was already 15 years old, also 15 years after the service entry of the 747-400. Until now, the Boeing 777-300ER has gathered 721 orders with a value of $230 billion.

Boeing lost its position as manufacturer of the biggest commercial aircraft to the Airbus A380. Boeing, not giving up on the 747 concept, brought the 747-8I to the market to compete with the Airbus A380. During flight testing, Boeing encountered several problems. A few of those problems were chance on flutter (which could be counteracted by deactivating the horizontal stabilizer fuel tank, thereby reducing the range of the aircraft), a defect in a stringer and turbulence caused by the landing gear doors. In December 2011, the 747-8I received its type certification. Compared to the 747-400, the 747-8I is 16% more fuel efficient and has 13% lower seat-mile costs. Although the 747-8I has quite good performance figures, it seems that at the moment there is no big market for 400/450+ passenger aircraft, which means airlines favor the Boeing 777-300ER. The Boeing 747-8I gathered 55 orders valued at $19.6 billion. With almost no order inflow, high developments costs and decreased production rate, there seems to be no future for the 747-8I.

The Boeing 777-9X will enter service in 2020, 16 years after the service entry of the Boeing 777-300ER and will have a 10% better specific fuel consumption than the engines on the Boeing 777-300ER, while having a better aerodynamic performance. With 259 orders and commitments worth nearly $100 billion, the 777X became the most successful launch for a commercial jet. At the launch, the 777X already gained about half of the order value of the successful Boeing 777-300ER, which needed little over 10 years to accumulate a total of 721 orders worth $230 billion. It is needless to say that with the 777X Boeing adds another successful model to the 777 family and strengthens its position on the long haul market.

In my previous article you can read what's new on the Boeing 777X.

Conclusion for Boeing aircraft:

  1. The 777 concept seems to be favorable over the 747 concept.
  2. Market demand for the 747 concept is low.
  3. 777X concept also eats away potential orders for the Boeing 747-8I
  4. Boeing seems to come up with a successful model every 15 years.
  5. Boeing does not seem to nail it with its first model and has to bring up follow up models for success.
  6. So far on the long-range market Boeing has developed the concepts of the 747 and the 777 into new models, thereby reducing the developments costs for the new airplane.

Figure 2: Orders for the different Boeing models. (Source: Dhierin-Perkash Bechai)

While Boeing has been active in the long-haul market for decades and has 6 models to gather orders, Airbus is relatively new to the market and has only 2 airplanes of which one still has to enter service.

Airbus came up with the Airbus A380 concept in 1994, and the airplane entered service in 2007. The Airbus A380 can carry up to 555 passengers and has a range of 15700km, placing the airplane at a sole spot in the diagram. The A380 project always has been more of a prestige project than a money-making project, but it did acquire significant order numbers.

Just like the Boeing 747-8I the Airbus A380 had its problems that caused delays, and a few of those problems are software problems, and the Airbus A380 saw cracks in fittings of the wing after service entry. Altogether these delays have increased the costs for the program significantly, making it questionable whether the A380 program will ever break even.

Airbus acquired 324 orders valued at $134 billion for the A380. Since high discounts are negotiated it is again questionable whether the A380 ever will hit its break-even point. With the Airbus A380, Airbus seems to be targeting operators from Asia and the Middle East and it sees demand for 1,711 jets. The demand for VLJs is strongly dependent on the global economy. Emirates (the biggest operator of the Airbus A380) stated that once the economy got back to normal levels there certainly would be a market for 500-plus seat aircraft. In that prospect, the future looks bright for Airbus, since Boeing probably won't be able to stretch the 747 concept and the Boeing 747-8I has not been quite a success yet. That will give the Airbus A380 the lead.

The other Airbus airplane that will enter the long haul market in 2017 is the Airbus A350-1000, which should replace the Airbus A340-600. The A350-1000 can carry up to 315 passengers in a 3-class configuration and has a range of 15,360 km. Airbus claims the A350-1000 burns 25% less fuel than the Boeing 777-300ER. But given that Boeing already presented the successor of the 777-300ER, one can question what the 25% figure is worth, since Airbus brought a competitor to the market that competes with a model that will be replaced soon. On the other hand, the A350-1000 is lighter than the 777-9X and claims to have even lower fuel burns than the 777X. But the numbers for the 777X aircraft account for 10 seats abreast, while chances are big airlines will choose for the 3-4-3 (10 seats abreast) configuration, which reduces the per-seat costs with respect to a 3-3-3 configuration.

The A350-1000 gathered 189 orders valued at $64.4 billion.

(click to enlarge)

Figure 3: Fuel burns for upcoming mini-jumbos (Source: aspireaviation.com)

Looking at the current long haul market the following numbers are available.

Current long haul market and conclusion

Looking at the current long haul market and the orders for future and current long haul aircraft, it can be seen that the market is still being dominated by Boeing.

  1. The Boeing 747 and A380 have similar order numbers, while the Airbus can expect orders for the A380 to grow further
  2. The Boeing 747-8I does not do very well in the passenger market, and this might be the end of the 747 as a passenger airplane.
  3. The Boeing 777-300ER is a very successful aircraft and has kept Boeing's orders up for the last decade.
  4. The 777X gathered significant order numbers, showing great potential for the 777 concept.

Boeing 747-400

Boeing 747-8I

Boeing 777-300ER

Boeing 777-8X

Boeing 777-9X

Airbus A350-1000

Airbus A380-800

In Service

329

20

501

0

0

128

Backlog

0

31

278

259

186

196

Total

329

51

779

259

186

324

Total per manufacturer

1418

510

Looking at the order numbers and airplane characteristics, I think that the 777X will win the battle of the Jumbos, while the only role that the Boeing 747 plays is that the 329 airplanes have to be replaced, which might increase the orders numbers for the Boeing 777X. The A350-1000 can expect orders to grow as well (airlines ordering from both Boeing and Airbus to benefit from the duopoly). The Airbus A380 can expect orders to grow since there almost is no competition in its market segment (500-plus passengers), but order numbers won't grow as fast.

Boeing and Airbus stock

Boeing and Airbus shares have climbed between 20% and 35% in the last year. With growing order numbers and increasing demand for airplanes (due to recovery of the global economy) stocks might fly even higher, but one should take into account that Boeing and Airbus are battling on another field as well, maybe an even more important market: the narrow body market.

Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Source: Boeing And Airbus: The Battle Of The Jumbos, With An Unexpected Winner?