Boeing and Airbus, this week, downplayed the potential near-term launch of new next-generation narrowbody models at an industry conference in Prague. Boeing’s head of marketing, Darren Hulst, was quick to point out that a Boeing 737 successor model is many years away. The manufacturer highlighted that its principal objectives at this time include certifying two more Boeing 737 MAX family variants, the Boeing 777X passenger family, and the Boeing 777XF next-generation freighter. These moves will help stabilize a company that has been saddled with around $50 billion in debt.
Bloomberg analysis indicates that Boeing 777X certification may slip as far back as 2027, although some industry analysts think that even this timeline could be ambitious. A Wall Street Journal-run meeting between Boeing’s CEO and engine maker Rolls-Royce continues to reflect Boeing’s long-term interest in exploring more next-generation technology. However, it appears that this is not related to any real aircraft type announcement. Airbus Asset Management Director François Collet said that any new model must deliver at least a 25% improvement in efficiency, according to statements published by Reuters.
A Brief Overview Of What Was Said
At the ISTAT Prague conference, leaders at both Boeing and Airbus made waves by indicating that next-generation models are likely far off. Boeing’s marketing chief, Darren Hulst, said that a Boeing 737 successor is “some way off” and argued that Boeing is not even close to launching a new model. He defined launch as the process of starting aircraft development and seeking out initial customers, both processes that he sees as years away.
Boeing certainly has a lot of fish to fry at this moment in time, making it somewhat unsurprising that the manufacturer would not want to pursue any ambitious high-risk projects. Airbus appears to be roughly in the same spot, and it also has a reason to lack interest in producing any new narrowbody aircraft. Such a model must deliver a significant efficiency gain to be worth its development costs, and it is unclear to Airbus whether such capabilities actually exist, given today’s technology.
A Brief Look At What This Means For The Industry?
The process of delaying clean-sheet narrowbodies currently freezes the competitive landscape of the commercial aviation industry. Both Boeing and Airbus are planning on selling Airbus A320neo and Boeing 737 MAX derivatives well into the 2030s. This will continue to extend the models’ backlog scarcity and support higher pricing and leasing rates.
Airlines are currently planning incremental efficiency gains, introducing small derivative models as opposed to offering a gigantic one-step improvement in efficiency that a clean-sheet widebody could provide. However, this slows decarbonization timelines and keeps fuel at a larger overall cost share. Lessors are set to benefit as residual values for in-service and near-term deliveries remained strong, and overall placements remained fairly easy. Engine makers continued to prioritize reliability and maintenance economics over risky new architectures, lifting aftermarket revenue generation potential significantly.
Aircraft capacity growth is mostly constrained by large supply chains and certification queues, which support improved yields. From a strategic perspective, the Airbus A321 family preserves the type’s range and gauge edge. Boeing, on the other hand, can buy time to stabilize its Boeing 737 MAX and Boeing 777X narrative. Across the board, aircraft values are expected to increase, and incremental technological advancements will drive innovation.
So What Is The Bottom Line?
At the end of the day, the commercial aircraft market is still a few years away from rapid widespread change. The technology to support next-generation clean-sheet models remains at least a decade away, and manufacturers are not particularly interested in pursuing these projects right now.
Ultimately, commercial aircraft demand drives how airlines choose to allocate capital towards investments in these kinds of development programs. Aircraft development is undeniably a high-risk, high-reward process, and manufacturers that fail to effectively manage their assets and liabilities will struggle.
Nonetheless, there will eventually come a time when both Boeing and Airbus elect to invest in this kind of development. What is unclear to us at this specific moment in time is exactly when that will be.
