As Airbus Group NV (AIR) rings up sales by fitting new engines onto aging aircraft, Boeing Co. (BA) risks being outflanked in a niche popularized by the 757 jet that the U.S. planemaker stopped making a decade ago.
On the first two days of the Farnborough Air Show, Airbus sold 65 A321neos, the biggest model in its single-aisle lineup. The planemaker also disclosed deals for 105 of the wide-body A330neo introduced this week, eclipsing the order haul by Boeing at the bi-annual event south of London.
The 757’s long absence from production means Boeing can’t copy Airbus’s re-engining strategy. That forces Boeing to decide between standing pat -- ceding some of the market to Airbus -- or jumping into a multibillion-dollar investment to build a new plane while already enmeshed in upgrading other models. For now, Chicago-based Boeing says it’s not ready to act.
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“Launching the A330neo is fundamentally a defensive maneuver” that gives Airbus a new mid-sized aircraft, said Richard Aboulafia, an aerospace analyst with Fairfax, Virginia-based consultant Teal Group. Even if Airbus’s Farnborough success isn’t a catalyst, “Would Boeing be wise to take an offensive position and prepare a 757 replacement? Sure.”
Boeing’s tally of orders, options and sales agreements at the air show through yesterday was about $17 billion, according to data compiled by Bloomberg. That trailed the $59 billion for Toulouse, France-based Airbus.
A 757 replacement would help fill a gap in Boeing’s new-jet lineup between the biggest 737 Max, set to debut late this decade, and the smallest 787 Dreamliner. Airbus has been gaining sales in the transcontinental-U.S. segment with its A321 and made more headway with its A330neo, which became an instant hit on the first two days of the air show.
“While it’s a complicated dynamic, how you analyze it is pretty straightforward,” Scott Fancher, Boeing’s chief of commercial aircraft development, said when asked about a successor the 757. “Does the cash warrant it? Right now we just don’t see that.”
By putting new engines on the A330 -- a reprise of the approach taken with the A320 -- Airbus is opting for a cheaper alternative to building an all-new plane, as Boeing did with the Dreamliner as a replacement for the 767. That may give Airbus more room to negotiate with airlines on price. Buyers routinely get discounts.
“In Boeing’s defense, the A330neo is still an old-ish aircraft and a pretty understandable offering in a competitive sense,” Carter Copeland, a Barclays Plc analyst based in New York, said in a note to clients. “But in Airbus’s defense it seems foolish for Boeing to think that the offering won’t have a negative impact of some sort” on the Dreamliner, the Boeing jet that’s closest in size.
Boeing delivered the last single-aisle 757 in 2005. The jet remains popular with carriers such as Atlanta-based Delta Air Lines Inc. for a range that’s unmatched by any narrow-body now in production.
Airlines crisscrossing the U.S. aren’t the only buyers for big single-aisle jets. Finnair Oyj (FIA1S) was the first customer for a range-extending version of the existing A321 model equipped with upturned wingtips, dubbed sharklets, to eke out extra mileage. It received the last of five aircraft in April to replace a fleet of four 757s.
With a range of more than 5,700 kilometers (3,500 miles), the A321s fly long leisure routes that are beyond the reach of Finnair’s other narrow-body models but don’t justify the use of a twin-aisle plane, such as Helsinki to the Canary Islands.
While emphasizing no immediate need to produce a model with capabilities similar to the 757, Chief Executive Officer Jim McNerney said in May that Boeing was contemplating such an offering, and dropped hints about the company’s thinking.
The design would meld features from the single-aisle 737 Max, which seats as many as 192 people, and the twin-aisle 787-8, with a capacity for 242 travelers, McNerney said. Boeing used a similar approach when it developed the 757 jointly with the larger 767 in the 1980s.
Whenever Boeing does decide to return to a 757-type plane, Kazakhstan’s state-controlled Air Astana is poised to buy. President Peter Foster said in an interview last month that the planemaker signaled in talks with the airline this year that an announcement isn’t far off. “That, for us, is very interesting,” he said.