Maxed Out?

The 747-8 program, where which if Boeing is lucky it will see another fifty deliveries, is being squeezed by both the 747-400BCF converted cargo freighter, the prospect of converted 777-300ERs coming onto the cargo market, and the more efficient 777F.

The 787 Dreamliner’s manufacturing rate is being cut to twelve aircraft per month in 2020, and many in-service aircraft remain grounded by engine issues.

The 777X generation of aircraft has seen ongoing delays, and the first deliveries have now been delayed to 2021 at the earliest.

And so to the 767, presently available as the 767-300F or the 767-200-sized KC-46A military tanker. The latter has been experiencing major quality and programme problems, to the extent that the US Air Force has identified four major ‘category 1’ problems and withheld hundreds of millions of dollars from Boeing. The airframer removed the commercial airliner version, alongside its slightly younger contemporary the 757, so as not to cannibalise the market for its 787 Dreamliner.

But rumours are swirling that it might return, as part of a reshuffling of priorities around when and how Boeing can design, build, test, certify and sell new aircraft.

Over the past two decades, these tasks have repeatedly proven problematic for the US airframer during its most recent commercial aircraft programmes, the 787 Dreamliner and the 737 MAX, and indeed with the forthcoming 777X.

Enter an updated 767 — let’s call it the 767X — as a quick fix for the market the NMA is supposed to serve’
In disrupting the generational approach, Boeing created the MOM of all problems for itself

The trend for most modern jet aircraft has been to produce an initial version, produce a subsequent version driven by improvements in engines and materials perhaps a decade later, potentially produce a third version with a second round of improvements after that, and then move onto the next model.

This has certainly been the case with the 777. Consider the mid-1990s’ initial set of models in the -200, -200ER and -300, the mid-2000s’ set of -200LR and -300ER, and the now-delayed late 2010s’ and early 2020s’ 777-8 and -9.

Airbus has done something similar with the A330, which arguably started with the A300, but the recent uptick in success of the mid-to-late 1990s’ A330 and the mid-to-late 2010s’ A330neo shows this aircraft following a similar production model.

Boeing disrupted this approach when it declined to further upgrade the 757 and 767 in favour of the 737 and the Dreamliner.

The generational approach is perhaps most pronounced in the 737 programme: the 1960s’ 737s turned into the 1980s’ Classics, which turned into the 1990s’ NGs, which have now turned into the 2010s’ MAXes.

Prior to the disaster that is the MAX — and Australian Aviation’s sister publication World of Aviation’s next issue will be dedicated entirely to that aircraft’s travails — the next programme was going to be a middle-of-the-market aircraft.

That’s the much-discussed NMA, which stands variously for “New Market Airplane”, “New Midmarket Aircraft”, and so on. It would replace the 757 and smaller versions of the 767, compete with the A321neo (particularly the A321LR and A321XLR versions of that family), and grow the middle of the market (MOM) in overall size terms.

Boeing’s initial plan was to have the MAX extend the life of its fifty-plus-year-old 737 airframe, itself partly based on the 1950s’ 707, and create its replacement later. But if the 737 MAX’s replacement needs to come earlier, it must surely be Boeing’s priority: the narrowbody segment covering short- to medium-haul is an exponentially larger market than the MOM.

But Boeing doesn’t have the capacity to design both the 737’s replacement (nicknamed the FSA, on which more later) and the NMA.

Enter an updated 767 — let’s call it the 767X — as a quick fix for the market the NMA is supposed to serve.

Boeing, at a historical nadir, has a parallel development problem

Fundamentally, Boeing has decided that it needs to develop new aircraft in three key categories, which its early-2000s development matrix referred to as Y1, Y2 and Y3. The Y comes from this wider development concept, Project Yellowstone, which as a whole refers to new technologies driving a new generation of efficiency and performance.

Y1 is, in essence, the replacement for the Boeing 737, and is currently being referred to as “FSA”, which — in the same way that “NMA” stands for a variety of things — is called the Future Shorthaul Aircraft, Future Small Airplane, and so on. This is probably a single-aisle aircraft that starts slightly larger than the Airbus A320neo family, and quite a bit larger than the 737 family, including the MAX. Let’s call it somewhere between 180 and 250 seats, depending on the variant chosen and the number of seats an airline chooses. One option for Boeing, here, of course, could be to pull an Airbus and punch upwards at the middle of the market with a larger model of the FSA earlier in the game. This option looks more attractive the longer the MAX is grounded.

Y2 already exists: the Boeing 787 Dreamliner. This is not just a replacement for the 1980s’ Boeing 767-300ER and the 1990s’ 767-400ER: it also replaces the smaller Boeing 777-200 and -200ER aircraft in Boeing’s lineup, as indeed it is doing for Air New Zealand. Given the decline in the order book and production rate of the 787, it is becoming increasingly clear that Boeing needs to plan a mid-life set of engine and aircraft upgrades into this programme.

Y3, meanwhile, is whatever the replacement aircraft ends up being for the larger variants of the 777, namely the -300, -300ER, -8 and -9, at the upper end of the market. This is probably the least vital task on Boeing’s to-do list, despite delays to the 777X programme.

The obvious gap in the Y-numbers — and part of the strategic problem with creating a product line with sequential numbering — is the NMA, the middle-of-the-market aircraft carrying some 220-270 passengers.

The NMA is supposed to replace the Boeing 757 and smaller models of the 767, but also stimulate the market into substantial growth via new performance. The problem is that the size of this market cannot adequately be estimated because a modern aircraft serving it does not currently exist. The popularity of the A321neo, particularly the longer range versions, suggests it is promising, with core (yet sometimes conflicting) demand from the United States and China in particular. Questions remain, though, about the size, shape and regional demand focus of Boeing’s NMA, and how it is optimised for passengers versus cargo operations.

Even more crucially, over the last year the question of sequencing the NMA’s development has become more problematic.

It would be fair to say that Boeing — and indeed Airbus, for that matter — does not have the engineering, design and project management capacity to produce more than one new aircraft at a time.

(Given the débacles that were the production of the 787, the disasters with the 737 MAX, and the ongoing delays with the 777X, it would not be wholly uncharitable to suggest that it barely has the capacity to produce one new aircraft properly.)

Cue Embraer, or rather “Boeing Brasil – Commercial”, the airliner manufacturing part of the Brazilian aerospace conglomerate Embraer, and of which Boeing holds the majority stake. Boeing’s effective acquisition of the E-Jet small airliner programme is not simply to offer a competing aircraft underneath the size of the 737 MAX: it is also an acqui-hire of the engineering development expertise that Embraer has developed, the history of which dates back to the McDonnell Douglas MD-11 and beyond.

Let us, therefore, assume that with Embraer’s assistance Boeing has the ability to design, prototype, test and put into production one new aircraft and one re-engined aircraft at a time.

Now consider the product strategy a few years ago, before the MAX crashes, the 777X delays and the dwindling demand for the 787.

As a first step in the Y1 segment, the MAX programme seemed to be to re-engine the 737 to give Boeing the ability to kick the development of the Y1 replacement into the mid to late 2020s, when engines would have outgrown the 737 airframe and further materials, manufacturing and other improvements would also have arrived.

Second, Boeing looked like running the 787 programme into its mature product phase as Y2: growing to the 787-10, undertaking the usual in-service improvements, increases in maximum takeoff weight and perhaps range extensions like the Air New Zealand models have received.

Third, the 777-300ER transition into the 777X generation was another relatively low-risk re-engining effort, which would also push the need for a fully new large aircraft into the late 2020s.

‘Boeing does not have the engineering, design and project management capacity to produce more than one new aircraft at a time’

That freed up Boeing to look at a fourth Y-market: a sort of Y1.5 between the future 737 and the future 787.

The sequence of the design and engineering demand would thus have been something like:
– early 2020s: Y1.5 (NMA) development, 777X production
– late 2020s: Y1 development and Y2 (787) mid-life upgrades
– early 2030s: Y1 production and Y3 development

The problem is that both of the activities that Boeing would have hoped could wait until the late 2020s are looking like they may need to be programmed earlier, as a result of the MAX débacle and the cooling demand for the 787, which faces competition from the Airbus A350 and A330neo.

The answer being mooted as a result is that an updated 767 could slot into the MOM as an interim move. In its -300ER version the 767 is a little larger than some of the MOM target markets, and in the -400ER a bit larger still, but the 767 is a tried and tested airplane, with an active assembly line and supplier base, which would be relatively low-risk and potentially low-cost in terms of design, certification and production. And it could fit right into the middle of the market.

‘The 767 is a tried and tested airplane, with an active assembly line and supplier base’

The middle of the market may be what feels the squeeze
Innumerable words have been written about the middle of the market, but basically it is around flying something like 200-250 passengers something like 4,000-5,000 nautical miles. Traditionally, this was between the US and Europe on routes that could not sustain the demand to fill a medium-sized widebody like a 767-300ER/400ER, 787-8/9, or Airbus A330-200/300.

Today, this sort of market could include routes length like Sydney to Chengdu (for which the Great Circle route distance is 4,695 nm), Delhi to Perth (4,243 nm), Beijing to Madrid (4,982 nm), London to Bangalore (4,348 nm), or Dubai to Tokyo (4,292 nm).

The reason there is a gap in Boeing’s product line covering this market is that the airframer never permitted the 757 (and to an only slightly lesser extent the 767) to enter into a second generation of re-engining and aerodynamic improvements. The airframer instead put its middle-market eggs in two baskets: the larger models of the 737 MAX, and the smaller models of the 787 Dreamliner.

The problem with this strategy is twofold. As regular readers will know, the 737 MAX’s engines are critically constrained by the fact that the original 737 aircraft was designed very low to the ground for ease of ground servicing in the 1960s, in terms of cargo, maintenance and passenger movement. This means that the aircraft’s performance, particularly maximum takeoff weight and runway requirements, are significantly limited when looking at larger models like the NG-generation 737-900 and the 737 MAX 9 and MAX 10. This is, essentially, a “not enough airplane” problem.

By contrast, the 787 is “too much airplane”. The Dreamliner family was initially conceived to include a 787-3, a shorter range model, but this fell by the production wayside as Boeing built the 787-8 and -9. The problem is that the Dreamliner is optimised for long-and-thin long-haul missions, not for short-and-fat short-haul and mid-haul operations.

The gap in the middle of the market also exists in pricing terms. Boeing’s list prices at the time of writing are US$134.9 million for a 737 MAX 10 and $248.3 million for a 787-8. It should be noted that list prices are routinely discounted by up to half for a large order or one that is politically or commercially advantageous to airframers, and even more in extremis (as is widely speculated around the massive order for 737 MAX aircraft by IAG, parent company to British Airways, Iberia, Aer Lingus, Vueling and LEVEL). But the fact that a 787-8 is nearly double the size of the next smallest aircraft is inescapable.

Airbus, which stopped publishing list prices after 2018, had a slightly smaller gap between the A321neo ($129.5 million) and the A330-200 ($238.5 million), but this is without taking account of the slightly more expensive A321LR and A321XLR versions of the narrowbody neo family, and should probably include the A330-800neo ($259.9 million).

The list pricing for the A321neos with long- and extra-long range are a bit murky, but airline conglomerate IAG noted that “the A321XLR list price is approximately US$142 million in 2018 prices” when it announced the purchase of the extra-long-range version for Iberia and Aer Lingus in June at the Paris Air Show at Le Bourget.

Depending on what Boeing chooses to upgrade, an updated 767 could fit neatly into the pricing gap between the 737 MAX 10 and the 787-8. And it’s almost certainly the right size.

Both the upgraded 767-300ER and -400ER could serve the MOM well
Crucial to Boeing’s decisions will be getting the size of any 767X right.

The passenger variants of Boeing’s 767 essentially came in five models, split across three lengths: the 48.5 m-metre -200 and -200ER variant, the 54.9 -metre -300 and -300ER models, and the 61.4- metre 400ER aircraft. For comparison, the 787-8 is 56.7 m long and the 787-9 measures 62.8 m.

The range performance of all the ER versions exceeds the 4,000-5,000 nm requirements, and in terms of the passenger capacity most conceptions of the middle of the market today and in the near future would require, that 200-250 passenger sweet spot seems to suggest that both the 767-300ER and -400ER sizes would be eligible.

At present, the largest passenger 767 operators are US carriers Delta Air Lines and United Airlines, and their MOM aspirations for US-Europe flying are well-established, so the downward evolution of the seating numbers of their currently operated 767-300, -300ER and -400ER aircraft are significant.

Delta’s 767-300ER aircraft currently come in three variants. One seats 26 in business class flat beds (the Thompson Vantage staggered product), 29 in extra-legroom economy, and 171 in regular economy for a total of 226 passengers. Another has 36 in business, 32 in extra-legroom economy, and 143 in economy, totalling 211 seats. The third seats 36 up front, 29 extra-legroom economy seats, and 132 in economy, and thus holds 208 total.

Its higher density, shorter range 767-300 seats 30 in US domestic first class recliners, 35 in extra-legroom economy, and 196 in regular economy for a total of 261 seats.

United’s 767-300ER, meanwhile, also comes in three versions. First there’s the old Continental layout with three decade-old Collins Diamond flatbeds in business, 49 extra-legroom economy seats and 135 in regular economy for a total of 214 passengers. The second version has the same total number of passengers, but with 30 new Safran Optima seats up front, 46 extra-legroom economy seats and 138 in regular economy. The third is the newest and most interesting: a high-premium layout seating just 167 passengers, with 46 of the new Optima seats, 22 in premium economy, 47 in extra-legroom economy and only 52 regular economy seats.

The longer 767-400ER comes in two flavours at Delta: 40 fully flat beds, 28 extra-legroom seats and 178 in regular economy for a total of 246, or 34 up front, 20 premium economy, 28 extra-legroom economy and 156 down the back for a total of 238.

United’s ex-Continental 767-400ER, meanwhile, seats 240: 39 of the older Collins Diamond flatbeds in business, 70 extra-legroom economy seats, and 131 in regular economy down the back.

So: today, the -300ER-sized aircraft seats anywhere from 167 to 261 passengers, while the larger -400ER is 240-246. That sounds rather close to the middle of the market.

In context, too, the growth of premium economy and more spacious business class seating, both of which reduce total seat count, are crucial to take into account when it comes to airline economics.

In sizing terms, therefore, Boeing has a choice: the simplest and easiest option would be to keep the -300ER- and -400ER-sized models, but in terms of ideal sizing perhaps a smaller model slightly longer than the -300ER and a larger model slightly bigger than the -400ER might hit a sweeter spot if the airframer wants to get ambitious with its improvements.

‘Boeing may well be in a position of decision paralysis’

Boeing would need to balance technology advances, cost and development capacity
So what kind of improvements might the 767X include?

New engines are the fundamental upgrade, and fortunately for Boeing the roughly similar size of the 787 Dreamliner means that there are two on option: the General Electric GEnx and the much-maligned, still-problematic Rolls-Royce Trent 1000. Given the performance of the Trent 1000s, it would seem to behoove Boeing to pick GE here, but there may well also be some customers who still prefer the Rolls powerplants, not least because Rolls might owe them a substantial discount as part of a compensation package for the problems with the Dreamliner engines.

A new wing and new aerodynamics are also strong possibilities, as they were with the 747-8 generation of the Queen of the Skies. New flaps, new wingtips, and new design geometries resulting from modern techniques like computational fluid dynamics could dramatically increase the aircraft’s efficiency.

Next up: materials. A lot has changed in aviation engineering, materials and design in the four decades since the 767 was designed, particularly around the use of lighter weight alloys and composite materials. While at first thought one might imagine that the more new materials the better, this needs to be balanced between the certification challenges that arise, supply chain, and the likely increased focus on regulators when it comes to certification of derivative aircraft family members. This certification has been and continues to be a key part of the ongoing furore around the 737 MAX, and its impact is likely to be large but could be paradigm-shifting.

Upgraded flight control systems are necessary but, in the context of the 737 MAX and its infamous Maneuvering Characteristics Augmentation System (MCAS), these are likely to be both controversial and well-scrutinised. The technology capacity of the supplier base here is strong, however, and commonality with later models of the Boeing family — something that has been lacking compared with the Airbus competition — would be not only possible but very sensible.

Indeed, the extent to which Boeing is prepared to lean on its supplier base here will be noteworthy. The new generation of supersuppliers like United Technologies-Raytheon or Safran and its CFM International partner GE Aviation are themselves supplying more of the nose-to-tail aircraft, and there may be a new industrial model of supplier and production management emerging as a result.

All in all, though, further improvements to the 767 are also available, but the crucial line to be walked between aircraft improvements (and therefore cost in terms of programme management, timing, certification, expertise, and eventual list price) and speed to market — while not cannibalising the 787-8 — is a key constraint.

Indeed, a possibility is that Boeing instead focusses on creating a MOM version of the 787-8, the member of the Dreamliner family with less commonality than the later 787-9 and -10 models. At last count there were some sixty-odd 787-8 jets remaining to be delivered, so injecting some vitality into this model, and especially improving the commonality between it and its larger siblings, could be very smart.

Could an early re-engining and re-engineering of the smallest Dreamliner result in two sub-types: one substantially de-rated, lower maximum takeoff weight version for the upper end of the middle of the market, and an improved ultra -long-haul version for those very, very long and very, very thin routes?

Uncertainty at Boeing, in aviation and in geopolitics drive simpler solutions… so thus the 767X?

The wider global context is not one conducive to a stable and secure aviation sector. A changing climate, the instability that generates, the growth in criticism of air travel, and increasing calls on governments to take action means that once-solid demand is no longer as certain. Even more so than many other industries, airlines require certainty and predictability to make decisions on major capital investments like aircraft.

The United States, where Boeing is the largest exporter, is picking trade fights with key Boeing markets. China in particular is a substantial part of the NMA market, and a crucial piece of the puzzle in the question of returning the 737 MAX to service.

Ongoing trade disputes and tariff posturing result in a separate conflict with the US and Boeing on one side and the European Union and Airbus on the other. As a result, the US is increasingly isolated both to the east and the west, while relations between southern neighbours in Latin America and the White House are, understandably, terse.

Boeing’s course, too, is anything but clear at the moment. Changes at the top of the company are extensive, following the departure of Kevin McAllister as head of the Commercial Airplanes division and his replacement by Stan Deal. In addition, Boeing separated the roles of chief executive officer and chairman of the board, with Dennis Muilenburg keeping only the CEO role and the chairman job going to David Calhoun, who is also widely pegged as a potential chief executive replacement for Muilenburg if the 737 MAX reckoning demands his exit.

All of these factors combine to create an environment that induces Boeing — and the rest of the industry — to be risk-averse. If it can take a half-step such as upgrading the 767, that is much less of a leap of faith than designing an entirely new aircraft for a market the size of which is unknown, and a substantial part of which is currently affected by trade tensions.

Boeing may well be in a position of decision paralysis: does it make the leap of faith with the NMA? Take a smaller step with the 767X? Spin on its heel and look at a single or multiple options with the 787-8? Jump straight to the FSA and use its larger models as the stop-gap?

The way that the company decides to jump will shape the future of aviation for decades.