Boeing (NYSE: BA) had a winner in the 757. Although only delivered 1,049, the program achieved a second life after Boeing stopped making them. Today there are about 892 still flying.
The 757's second life came from two things: its great range and then the additional range winglets provided. The 757 has a very good wing (a Boeing specialty) that enabled the aircraft to easily fly coast to coast in the US. This meant the aircraft could fly from the US east coast to Ireland. Adding winglets allowed the aircraft to reach central Europe.
For an aircraft with 200 seats, airlines were able to develop new routes using the 757. As the routes grew, airlines could up-gauge to a 767. The 757 also meant being able to fly from secondary cities to main hubs: like American (NASDAQ:AAL) does from Boston to Heathrow.
Much of this activity occurred after Boeing stopped making the 757. Boeing focused on making larger version of the 737, the 737-900ER, to get as close to 757 performance at much lower cost. It was a bet that has plainly failed. Compare the Boeing aircraft with the competitor from Airbus (OTCPK:EADSF).
As we can see, when the 757 fleet started to decline, the 737-900ER did not replace them. But the A321 fleet kept growing strongly.
Boeing argues that the number of 757s flying across the north Atlantic are no more than 60. They dismiss this as a niche market not worthy of attention. They also claim that airlines want something bigger than the 757. These are fair claims to make. But Boeing did have a 757-300 that seats 213 in service today.
As I have argued before, Boeing is 100 years old. This underscores that the company has done many smart things that allowed it to see off numerous competitors. Don't underestimate Boeing. The 787 debacle did throw them off plans to replace the 757 when they wanted to.
The 757 replacement issue is real. Boeing has a gap between the 737 and 787. The 737-900ER now, and the forthcoming 737 MAX9 do not close that gap enough. Boeing must, and will react.
Perhaps the next chart will serve as a good guide to explain how airlines and leasing firms have made their selections in favor of the A321. Comparing the next versions of the A321 (A321neo) and the next version of the 737-900 (737 MAX9) we can see how the Boeing falls behind.
Even as we consider the advantages of the A321neo, bear in mind that Airbus has another version of the A321 coming, called the A321LR. This will have even greater range. The A321LR has attracted attention from Norwegian (STO: NASO) and JetBlue (NASDAQ:JBLU). Both these airlines are interested in the expansion the A321LR provides to existing operations.
Neither of these airlines operates a 757. So the Boeing argument about only 60 757s across the Atlantic is not entirely correct. These two airlines intend to operate the A321LR across the Atlantic. This will, therefore, expand that market.
The A321LR will allow Norwegian to serve secondary markets in the US from its bases in Europe. For its part, JetBlue could use the A321LR to go from its JFK base and serve secondary cities in Europe.
Both airlines will therefore disrupt hubs on one side of the market. Hub busting is a 757 specialty. This hub busting power is also evident with the 787. So its not something new to Boeing.
Consequently we should expect to see Boeing react to close the gap that Airbus has exploited. But Boeing had better move soon, because airline customers will not wait.
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