Boeing 787-10 And Its Primary Competitors

| About: The Boeing (BA)

Summary

The 787-10 is the newest and largest 787 model.

It appears to be a "natural" 777-200ER replacement.

But the market is competitive when comparing competing models from Airbus.

The Boeing (NYSE: BA) 787-10 was recently rolled out and favorably reviewed by trade media. It is the newest and largest of the three member 787 family. The -10 will seat up to 330 in a two-class cabin, have a range of 6,430 nautical miles and also carry 6,722 cubic feet of cargo. The closet Boeing model to this would be the Boeing 777-200ER, which seats 313 in a two-class cabin, flies 7,065 nautical miles and carries 5,330 cubic feet of cargo. Boeing sold 442 of the 777-200ERs, so this should provide a good foundation for the 787-10 to replace.

However, airlines are by nature "bottom feeders", and relentlessly seek the best deal. Long term airfare values are declining in real terms. Each new generation of aircraft must deliver double digit economic improvement. The 787 does that, with 20% improvement.

Airlines considering the replacements of their 777-200ERs are offered compelling choice. Boeing's 787-10 is an excellent alternative. But Airbus is also in the market and it offers two options.

The 787 is touted as the state of art commercial aircraft with best in class engine efficiency and a lightweight fuselage, together providing superb economics. The challenge though is that this is a high-tech aircraft and not every airline either wants, or can handle, its demands.

All through the 787 development process, with numerous delays, Airbus (OTCPK:EADSY, OTCPK:EADSF) points out its lower tech A330 sold very well. This, Airbus suggests, demonstrates that high tech is not a panacea.

Airbus subsequently updated its A330 with new wings, state of the art engines and other tweaks, to deliver 14% improved economics. The new aircraft also has a much updated cabin. This is Airbus' lower tech (but by no means low tech) offering, the A330-900. Airbus also offers a state of the art, high tech, solution in the A350-900. This aircraft has the latest in materials and technology. It is a technology equivalent of the 787.

The following table illustrates how the Boeing 777-200ER and 787-10 compare with the A330-300, A330-900 and A350-900. The 777-200ER and A330-300 were fierce competitors. While the 777-200ER is no longer ordered, the A330-300 still is. The most recent 777-200ER order came from All Nippon on December 21, 2009. The most A330-300 order was December 16 2016.

The last row, with order numbers to date, illustrates the compelling threat Airbus has become. The 787-10 is essentially bracketed by the A330-900 below and the A350-900 above.

Airlines seeking a ~320 seat aircraft can choose between three compelling offerings. The next table uses the 787-10 as the base and compares the Airbus models against it. The first row compares current market values (sourced from Collateral Verifications) with the list prices for each aircraft.

The 787-10 trades at a higher discount than the A350-900 but at a lower discount than the A330-900. The other data points show that both Airbus aircraft offer the 787-10 tough competition.

In our final table we translate the market values into some data guidelines to further demonstrate how close the competition is.

For an airline seeking an aircraft in this seat segment with similar payload/range capabilities, the tradeoffs are really close. Boeing faces strong competition. With a market of about 1,000 aircraft Airbus and Boeing have to battle for every order. Boeing has one option and approach, while Airbus has two.

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