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Airlines Want a Middle-Market Aircraft

February 5, 2016

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Airlines are eager to see a new middle-of-the-market aircraft developed, according to a new survey.

Nearly 90% of 507 airlines and air cargo operators responding to an Aviation Week/Bank of America Merrill Lynch survey confirmed they would be interested in buying a new middle-market jet, and most of those say they would want it before 2023. Boeing is considering the possibility, and studies have assumed a service entry of 2024-25.

“There really is demand for this airplane,” Merrill Lynch senior US aerospace analyst Ronald Epstein said. The message to Boeing, he said, is “get moving.”

The survey responses provide clues to what Boeing is hearing as it talks with customers about an optimal design for a middle-market airliner. On the question of narrowbody versus widebody, 60% of respondents said they would consider a twin-aisle widebody—which would allow faster boarding and unloading of passengers—as long as it is compatible with existing airport infrastructure. About half of respondents would prefer an aircraft sized at 150-199 seats, with another 25% favoring 200-249 seats.

Respondents were more divided on the range they would like to see in the aircraft, with 23% favoring 4,000-5,000 nm, 25% 3,000-4,000 nm and 24% 2,000-3,000 nm. That varying interest “suggests to us that perhaps a multi-product family could be a possible solution,” Epstein and his team wrote in a July 8 research note to clients.

Not surprisingly, 69% of respondents would prefer a composite carbon fiber fuselage over aluminum, and 74% want composite wings and empennage. But there is also a limit to how much they are willing to spend: 62% of airlines say they would not pay more than $72 million for the jet. Epstein estimates that translates into a list price of $140-$150 million. “For this kind of airplane, that seems about right,” he said.

Epstein says the need to keep costs under control—particularly if Boeing opts for a widebody, which would have higher per-seat costs—might require a mix of old and new technologies, such as an aluminum fuselage paired with carbon fiber wings. “They’re going to have to make tradeoffs,” he said. “If you can’t do it affordably, what’s the point?”

Teal Group analyst Richard Aboulafia, who was not involved in the survey but reviewed its results, said the level of interest in a middle-market aircraft was impressive but questioned whether it had an expiration date.

“A lot of the enthusiasm comes from people who really want a 757/767 replacement,” he said. “But we’ve looked at the issue closely and Boeing really can’t get this kind of thing to market much before 2025. It’s still worth doing, but some of this enthusiasm might diminish by then.”

Among other survey results:
•83% of respondents said they would remain interested in a middle-market aircraft even if oil prices stayed below $70 a barrel.
•About three-quarters express a need for cargo capacity similar to the Boeing 757.
•More than 80% said having a dual-sourced engine with a power by the hour program was very important or somewhat important.
•15% would use a middle-market aircraft for domestic flights, 30% for international flights and 55% for a mix of both.

Questions for the survey were developed jointly by Bank of America Merrill Lynch and Aviation Week, an ATW sister publication. Penton Research, the research arm of Aviation Week’s parent company, conducted the online survey of members of the Aviation Week database from June 9-30. The raw data was then independently scrutinized by Bank of American Merrill Lynch analysts.

Boeing officials have indicated they would decide by the first part of 2017 whether to move forward with development of a middle-market aircraft.

Epstein cautioned that if the company dithers, Airbus—which will see its R&D expenses tail off as the A350 program matures—could pounce.

“As the A350 starts wrapping up, Airbus doesn’t have anything else in the pipeline,” he said. “If there’s a real market out there, why not? They make airplanes too.”

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