Towards the 797

“The fact is last year, this year and probably next year as well we’re going to see a world economy that’s growing below long-term trend, which concerns us. We have issues with the European debt crisis, slow growth in the US and the whole issue of fuel prices,” Tinseth said.

Amidst all the economic turmoil facing global markets and its effects on business, Tinseth is remarkably upbeat. What surprises this industry veteran most, though, is just how resilient airlines have been in the face of the perfect storm of suppressed demand, rising fuel prices and uncertainty.

“As we look at this market, however, the way the economy isn’t growing as we’d like to see it, I guess we’re a little bit amazed with how resilient traffic has been. In fact passenger traffic is growing at about 5. 5% and in 2013 we’re expecting to see about 5% growth again.

“Airlines have managed their capacity well, so load factors in general are at historically high levels,” he added, noting non-fuel costs are down while yields and revenues have been up.

I guess we’re a little bit amazed with how resilient traffic has been. RANDY TINSETH

Who would have thought: with the world economy performing poorly, oil prices at $110 a barrel – and the world’s airlines are making money! “A great example is the US market. It hasn’t seen growth now for 10 years. We went through 9/11, recession, airlines have gone through bankruptcy and consolidation – but today, domestically in the US, we have just about the same number of ASMs (air seat miles) being flown as there were 10 years ago.

“The fact is, the profitability of US airlines will be up this year over last year. Our customers as a whole have been profitable. They’ve learned from the tough times and have become leaner and stronger,” said Tinseth.

Resolve

But it is the stubborn resolve of airlines around the world that gives hope to Boeing that its future strategies for aircraft are sound. The manufacturer has a raft of new aircraft in delivery and in the offing.

The backlog of Boeing commercial planes is impressive at around 4,200 aircraft in total, even though it is persistently dogged by its European competitor in a tiring struggle between them to achieve top position on the annual sales list. In the 10 months to the beginning of November 2012, Boeing had logged just over 1,000 orders, signalling its intention to reclaim top position.

“It’s been a very good year. The demand is being driven by what we see happening in the emerging and developing economies where we continue to see LCCs (low cost carriers) grow and we continue to see a high demand for replacement airplanes,” Tinseth explained, adding much of this demand is coming from the 737 MAX, a model yet to fly but on which Boeing is pinning its single-aisle future for the next two to three decades.

The MAX generated the vast majority of Boeing’s sales in 2012. Total orders for the aircraft stood at 938 at the beginning of November just as the company firmed up concept of the aircraft.

Tinseth remarked about the 737 family: “I’m just amazed what we’ve been able to do with that airplane,” referring not only to the continual evolution of the model since its launch in 1967, but to the gains realised even since 1997 when the Next Generation 737s entered the market.

“The improvements incorporated in the MAX will deliver another 13 per cent fuel efficiency improvement. So now we’re talking about an airplane that will be 19 per cent more fuel efficient than an airplane we delivered in 1997,” Tinseth said, adding the MAX is also expected to be around 40 per cent quieter than current 737s.

The 787, meanwhile, with 838 orders, is stepping up after a long gestation.

“The 787 is being used exactly as we anticipated,” Tinseth said in reply to a question about whether he has been surprised by the comparatively slow uptake by airlines to use the aircraft for its original design purpose – long, thin routes.

Launch customer ANA initially put the 787 on domestic routes, but has since progressively committed the aircraft to long-haul routes such as Tokyo to Seattle and Frankfurt.

“The 787 performs from an efficiency point of view just as well short-range as it does long-range,” explained Tinseth.

“Each airline is different. JAL immediately took the 787 and flew into long-range markets. Ethiopian Airlines flew the aircraft everywhere, but in general you see a pattern like United is doing – they’re going through their proving runs domestically first and then they’ll slowly but consistently start to roll it out long-range. ” New destinations for the 787 in the coming few months will see the aircraft expand its operational horizons to Los Angeles, Bangalore, San Jose, Shanghai, Lima and Madrid. Jetstar will launch 787 operations in Australia during the second half of 2013.

Boeing hasn’t given guidance on 787 deliveries for 2013 yet, but consolidating and upscaling its production will help push deliveries to eager customers.

“Our focus has to be on production – getting those airplanes out the door. ” Orders for the 787 see production line commitments through to 2019/2020.

Mid-century jets

No sooner has Boeing started full production of the 787 with it rolling off the line at an uprated five a month and set to go to 10 a month later this year, the further derivative of the manufacturer’s newest airframe is under serious consideration.

“With the MAX I think it’s pretty clear our single-aisle strategy is set. In terms of widebody development our focus today is on the development of the 787-9. ” The longer 787-9 with accommodation for 280 passengers (40 more than the 787-8) has begun assembly towards initial roll-out in mid-2013 for delivery to Air New Zealand in early 2014.

However, Tinseth said the company is earnestly looking at a further stretch of the 787 – under the current working title -10X – that would see the airframe length increased by around six metres to bring capacity up to around 320 passengers.

“It’s going to be a simple stretch – same engines, same wings and a range of about 6,800 to 7,000nm. We recognise it offers less range, but it would be the world’s most efficient airplane.

“We’re targeting entry into service towards the end of the decade,” Tinseth projected, but recognises getting the existing stable of 787s to customers remains the priority.

“That’s our number one priority – making sure the things we’ve committed to get done. The challenge (with the -10X) is making sure the production system’s ready to accommodate that airplane. ” What comes next could well see the emergence of the 797, which together with the 787 and 737MAX will take Boeing towards mid-century.

“We have a team looking at where should we take the 777,” Tinseth admitted, with an air of excitement that comes only a few times in a career when a manufacturer develops new concepts.

“The 777 is selling really well and we don’t want to take anything away from it, but we do recognise the airplane will now be in service close to 20 years and it has new competition on the horizon with the A350-1000, so we have to think about where we’re going to take it.

“We’ve been very engaged with our customers [on the project] in figuring out what the configuration of the airplane will look like from a technology perspective, and we’re working to close the business case,” he said, adding Boeing is currently looking at size/range/payload options for a variety of customer requirements.

“Right now we’re looking at a family of airplanes that would be a bit larger than today’s 777 and would likely have a composite wing and new engines. Our baseline right now is a bigger, composite, more efficient wing and going to the next generation of engines from our partners. ” The 777X is currently projected to be around seven metres longer than the current 777-300ER.

“I think what we’d do is take those technologies that have been really well proven on the 787 and apply them to the new model. ” What will determine whether this new model becomes a further variant of the popular 777 or a new model will be the extent of changes around the current 777 airframe, wings and engines as customers work with Boeing to define future requirements.

When asked whether it’s likely to be a 777X or a 797, Tinseth said: “You’ll have to ask the FAA!”. But when looking at the fact the manufacturer is considering such profound changes to dimension, capability and powerplants, to see it as anything other than a 797 from a certification perspective would be to sell short Boeing’s foresight to maintaining its competitive position in the market.

Like the 787-10X, Boeing is targeting late this decade for certification and entry into service of the new aircraft.

“In combination we think it would provide greater value than our competition. I’m confident we’ll launch that airplane,” Tinseth said.

Asia Pacific central to success

Oceania and Asia are considered by Boeing as fertile hunting grounds.

Boeing’s Long-term Forecast (LTF) sees Australia growing at around five per cent as a result of increased competition arising from liberalisation internationally and domestically. This, the company predicts, will result in the need for 870 new aircraft over the next 20 years.

Tinseth sees the robust economy and positive outlook for Australia being a positive in terms of projecting the future requirements for aircraft, most of which will be in the single-aisle category. Virgin Australia’s order for 23 737 MAX 8s is seen as a good entrée to the market for the type and Boeing hopes it can build on this base. Opportunities outside Virgin Australia, however, could be lean, with Jetstar committed to the A320 and Qantas still taking delivery of 737-800s.

While offering a silent disappointment the 777 hasn’t received greater prominence in the Australian market, Tinseth is content that Virgin Australia is finding success with the aircraft. He also feels the large numbers of the type operated into Australia by overseas airlines more than ably speaks to the aircraft’s suitability to the local market.

Tinseth sees a natural limit to the number of large aircraft operated by local airlines given the nature and scale of the Australian and New Zealand markets.

The 777 and 787, therefore, although important to Boeing’s prospects in the region, are recognised as being limited in number, especially when, as Tinseth noted: “Qantas has pushed those things off. ” Whether the 797 finds local favour as a replacement for what will by then be ageing A330s will be revealed in time. There is no doubt, though, the success of Asian and Middle Eastern carriers’ interest in large twin-jet widebodies will fuel Boeing’s prospects both for future 787 sales and the possibilities for a 797-type aircraft.

As Tinseth explained: “If you were to go back 10 or 15 years the centre of aviation was the US and Europe. Today about 35% of all traffic touches Asia and 20 years from now that will be closer to 50 per cent.

“So this is where the market is.

“I look at all the traffic patterns we’ve seen over the last few years and where it’s going, and I look at the Asia market and there’s a lot of excitement out there. ” His final comment on the challenges faced by Boeing can be taken as a positive and a negative, and in fact both would be correct interpretations: “It’s certainly an interesting market out there.

” We have a team looking at where we should take the 777. RANDY TINSETH