Opinion: Boeing’s Project Means Work For Airbus Strategists

Conventional wisdom had it that Boeing’s recent woes would keep it from being able to afford developing an all-new aircraft in the foreseeable future, even if it were strikingly necessary. But, as Aviation Week has reported, Boeing has begun talks with suppliers about a project built on its previous work for a new midmarket airplane, currently available technologies and an aggressive timetable (AW&ST Feb. 8-21, p. 12). This raises the very real prospect that the company may actually launch an aircraft in the not-too-distant future in spite of all the constraints.

It is worth looking at the long-term, strategic consequences of such a move—in other words, the game theory behind it. To start with the obvious: Boeing would not seriously pursue this if it did not deem it absolutely necessary to contain the already worrying loss of market share in the large-narrowbody segment, where the Airbus A321XLR is vastly outselling the 737-9 and 737-10. The project would also further lock in Boeing on its path toward continued use of current technologies in combination with sustainable aviation fuels, rather than the more radical approach Airbus is proposing. Boeing has to be convinced it can sell a conventional aircraft for many years as the industry pursues its environmental transformation.

Given what has transpired, Boeing appears to be planning an aircraft that is 10-20% larger than the A321XLR and has more range at 5,000 nm. In terms of range and size, it would be a modern replacement of the 757—production of which began in 1983 and ended in 2004 after 1,050 units had been built. With the proposed aircraft, Boeing is anticipating resumption of the trend toward fragmentation of long-haul routes, which accelerated before the novel coronavirus pandemic. This would come after a relatively brief refocus on hubs, as many airlines have retrenched from direct services during the crisis. Airbus has to have the same hopes for its A321XLR. Both can take comfort in the fact that those routes are not new: Continental Airlines famously deployed a large fleet of 757s on secondary North Atlantic markets when others focused on higher-demand routes and larger aircraft. 

Significantly, and unlike the 757, Boeing’s new aircraft is almost certainly going to be a widebody.

Game theory states that strategic moves should be targeted against an opponent’s weak spot. Obviously, the A321XLR is one of Airbus’ greatest strengths in terms of sales and positioning. Whether a new conventional widebody can really be much more efficient than a stretched narrowbody with state-of-the-art engines remains to be seen. Airbus can also probably look at further upgrades in due course, should they be needed.

Airbus’ biggest weakness is the A330neo. The aircraft is conceptually very similar to the first iteration of the A350 that Airbus pitched in the mid-2000s, after Boeing launched the 787. The concept was dropped quickly after negative customer feedback, but several years later the idea of a relatively cheap upgrade of the A330 resurfaced and morphed into the A330neo.

The A330neo is not selling well for several reasons. Many young and very cheap A330s are in service—Airbus probably produced too many in the boom years. Airlines that want more capacity in that category therefore have a big pool of used aircraft available that compete with the A330neo. Blue-chip carriers, with the exception of Delta Air Lines, have never really been interested in the aircraft. Airbus tried to place it with Emirates as part of the A380 order termination talks, but the airline unsurprisingly preferred the A350. Airbus is currently building the A330neo at a rate of around two aircraft per month.

With widebody demand likely to remain low for longer, the prospects are poor. And when demand is likely to pick up again, around 2025, Boeing may well be in the market with a cheaper, slightly smaller—and probably more efficient—widebody that will target routes for which the A330neo is too big and also compete directly with it on some others.

In that scenario, Airbus would have to take a hard look again at the lower end of its widebody portfolio—just as it has to define its path toward more sustainable aircraft in the narrowbody segment, where it is pitching the introduction of a small hydrogen-powered aircraft by 2035. Assuming that will still be the plan a few years from now, how will it combine with modernizing larger narrowbodies, for which hydrogen is not an option yet, not to mention tackling the renewed emerging competition from Boeing in the widebody field?

Airbus is in a comfortable position right now vis-a-vis Boeing, mainly because of the A320neo family and the A350. The company can take its time to decide next steps. But sooner or later it could be forced to solve a rather complex puzzle that is complicated by the upcoming technology transition. Whatever Airbus does will have to work in the long term.