Three Way Power Play - 777, 787, A350

February 13th, 2008

Working at a fast a pace as is possible, Airbus progresses towards initial design freeze of the A350-900 variant scheduled for October 2008.

In doing so, the strategic shift of the A350-1000 model has started to evolve - something addressed as recently as December 2007 in that the said model is now no longer a direct rival or substitute for Boeing’s highly successful 777-300ER.

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In an entry posted here, the A350-1000 has been quietly moved to target the soon to grow replacement market for the 777-200ER market with a slight increase in capacity in various tri-class seating configurations.

While Airbus markets the airplane as a 350 seater, Emirates has candidly revealed to my colleague Geoff Thomas that it will not be configuring its A350-1000’s anywhere the capacity of its existing 777-300ER’s, of which it has a substantial number remaining on order.

Emirates has 10-across in economy and the 777-300ER in the airline’s Ultra Long Long Range tri-class configuration accommodates 354, while the A350-1000, which is about the same length, in the same ULR configuration will seat 317, according to Emirates vice-president route and fleet planning Richard Jewsbury.

“Based on Emirates’ mission rules, the A350-1000 will burn 21per cent less trip fuel, and on a seat basis 11 per cent less than the 777-300ER,” Jewsbury says.

However, he adds that the 777-300ER can carry another 6000kg of structural payload in the Emirates configuration.

The bulk of Emirates A350 orders is for the -900 model, which will eventually displace the airlines existing 777-200 and 777-200ER models. The A350-1000 therefore, plugs the gap between the -900 model and the large 777-300ER.

However, the Airbus jet still falls considerably short on range against the 777-300ER as well as freight capability.

British Airways, along with Qantas are both examining the A350-1000 for their eventual 747-400 fleet replacements - BA is concerned that in the absence of a dedicated freighter fleet, the A350-1000 does not go far enough either volumetrically or in uplift capability to offset the performance gains and cost savings by switching to that model.

BA has relied on underfloor belly space for the majority of its freight operations and fears that Airbus’ -1000 model will have to sacrifice seats for range or that increased freight will mean that lucrative routes such as Hong Kong and Singapore may invariably end up carrying fewer fare paying passengers.

The dilemma that Boeing faces aside from executing the revised test program, is whether press forward with incremental improvements to the 777-300ER or instead focus on an all new 777 replacement.

As mentioned before, the proposed 787-10 has yet to be defined. Speaking at the recent 29th Annual Aerospace/Defense Conference hosted by Cowen & Company in New York, Boeing Commercial Airplanes President & CEO Scott Carson said of the proposed 787-10 as being a “good product against the (777)-200, -200ER class airplane“.

This ties in well with the initial guidance given that the 787-10 will eventually materialise as a possible 320-seat, tri-class airplane, replacing the older 777 models mentioned by Carson and in discussions I have held with four existing 787 customers, two of whom are European airlines.

In effect, what we’ve seen with Boeing and Airbus’ two new composite families is the 787 cornering the A300/A310/767/A330 market while the A350 has emerged as the A340/early 777 model replacement.

So where does this leave the newer 777-200LR and 777-300ER models?

At the recent Cowen & Company conference, Carson went on to state that “a major replacement for that [777-300ER] product is likely to be an all-composite aircraft” but that it will not be available until “the end of the next decade.“

Campaigns such as replacing the huge 747-400 fleet at British Airways has forced both Boeing and engine make GE to examine updating the 777-300ER as an interim solution - however, there are worries that while the 787 sucks in financial resources during its delay will mean that the company will end up offering second best alternatives to the A350-1000. One European airline I have spoken to has made no secret that it wants a completely new 777 replacement to counter the A350-1000.

For a while during the 1990’s, Boeing was labelled with the “derivatives-r-us” moniker until the 787 was launched in 2004 - almost ten years after the last all new airplane, the 777, entered service.

Investing in a high gross weight, longer ranged 787-10 model will almost certainly require a major rework of the existing 787 wing. Engines, systems and undercarriage added into the mix will invariably push the bill up by a few billion dollars - money that could equally be used to update the far wider 777-300ER.

There is no question, that left unaltered, today’s 777-300ER will not be as efficient as the A350-1000 due to enter service mid next decade. Having watched Airbus procrastinate over the A330-derived A350 proposals prior to accepting an all new design, Boeing can ill afford to venture down the same route.

With Carson confident that a 737 replacement will enter service around 2015, timing of a 777 update or replacement will be of paramount importance.

In an industry where airplanes can be in service for 25 years or more, it is ironic then that the widebody competition between Airbus and Boeing is showing the 777-300ER, which entered service in 2004 being replaced by the end of next decade. The shift in materials usage and integration of new technology usually dictates a longer service life and it may well be viewed that today’s traditional aluminium airplanes are just not what the marketplace now seeks, much less a mid-life makeover.

Where the 787 is not yet without its risks and a revised delivery target not yet announced until Boeing’s earnings call in April, the A350 has managed to push the 777-300ER into a strategic review. Whatever the outcome of that review, the one certainty is that the existing model cannot continue in its current form.

Farther out, while Carson is optimistic about the 747-8 Intercontinental sales prospects during 2008, the 777-300ER was by and large born out of the 777-300 model, which itself sought to supplant older 747 variants - any major update to the 777-300ER will have a direct impact upon the 747.

An interim upgrade to the 777-300ER will make selling a quad jet all the more harder while oil prices show little sign of dropping below $80 per barrel in the near term, despite benefiting from the new 787 derived GEnx engines. Furthermore, the strategy employed by Boeing over the last quarter of a century pioneering ETOPS flights will likely force customers to push the US plane maker into continuing the trend for large airplanes powered by just two engines.

That strategy has been successful and indeed, instrumental in Airbus designing its new A350XWB family into an arena is had previously argued could only safely be done with quad jets - largely to promote the lowly sales achieved on the over-budget A380.

While the 787 has arguably won the key section of the marketplace it was designed for, the real tussle lies between what Airbus does to the A350 and Boeing’s response with the 777.

In the battle for market supremacy in the 300+ seats segment, this three-way power play will hinge largely on which model(s) provide the most value for customers.

Right now, the 777-300ER certainly has the upper hand.

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