By Max Kingsley-Jones
With an order backlog in excess of 800 aircraft, the success enjoyed by Boeing's 787 sales team has been in stark contrast to the turmoil of its development programme.
The rate of orders broke all records, with the Dreamliner becoming the fastest-selling airliner since launch, racking up some 677 sales from 47 customers worth $110 billion by the time of its roll-out in July 2007.
At that time, of course, the maiden flight was due to follow straight after and first deliveries within a year. So while in gross terms Boeing has accumulated nigh on 1,000 orders in the seven years since launch, the backlog has suffered in the wake of the delivery delays to the tune of around 150 cancellations.
Order intake has slowed dramatically in recent times for a combination of reasons. The endless reschedulings since the roll-out have affected slot availability, with the multiyear lead time for batches of new aircraft having effectively been in limbo since the original slip four years ago of the planned May 2008 first delivery. There has probably also been an element of "wait and see" by some existing and potential new customers in the wake of the development troubles and delays.
If the 787's rapid order rate was a surprise to Boeing, it was even more of a shock to Airbus. But if the European airframer was caught off-guard by the Dreamliner's early sales success, it has moved fast to close the gap in recent years.
Initially Toulouse did not have a competitive response in the market place, and as it tried to regroup the door was left wide open for Seattle to romp home in a series of campaigns. There followed a series of strategic U-turns by Airbus as it dithered about what its new A350 twinjet should be, giving Boeing several years' head start in both sales and development time.
"Everyone was writing that we redesigned the A350 six or seven times. We didn't. We redesigned it three times, and that was enough," joked Airbus's chief operating officer customers, John Leahy, back in 2007 after the A350 had finally crystallised as the XWB.
Back then, Leahy admitted to having been "caught napping" by the success of the Dreamliner, but defended that initial lack of response by pointing to the failed Sonic Cruiser programme, which led to doubts that Boeing would be able to deliver its initial 787 specifications: "Our first reaction was that they were exaggerating what they could do," he said.
Although history now recounts that Airbus's cynicism about the 787 claims may have been partially justified, the reality is that customers were queuing up to sign orders for Boeing's "plastic fantastic" and Airbus had to up the ante with its response. But by the time Airbus finally launched the XWB in December 2006, Boeing had used its three-year lead to rack up 450 orders.
Five years on, and Boeing still has a significant market lead against the XWB with 821 orders against 567. But while the 787 and A350 are the new-generation twinjet offerings from Seattle and Toulouse, the size offerings of the two families mean that they overlap rather than compete directly, which is why the 250-300-seat A330 models are an important part of the Airbus armoury. And Boeing would counter that the larger A350 variants compete as much with the 777, which is also enjoying strong sales.
Sales of the 20-year-old A330 have resurged - partially thanks to the ongoing doubts over near-term 787 availability - and when combined with A350 sales give Toulouse a two percentage point lead over its rival in overall market share.
"The A350 is the main competition, which is sized slightly larger at 270-350 seats versus 787's 242-320 seats in a three-class layout - although with many moving to four classes the seat counts will be lower," says Chris Seymour, who is head of market analysis at Flightglobal's data and consultancy arm, Ascend.
"Both programmes have cutting-edge technology and carbonfibre structures, albeit differing in the fuselage manufacture process," Seymour adds. "Both have sold well to date; indeed, 10 airlines have ordered both - suggesting some complementary usage, especially with the smaller 787-8 and the A350-900."
Richard Aboulafia, who is vice president of analysis at Teal Group, believes that in the longer term, Airbus's decision to size the A350 family to overlap the top end of the 787's category and the 777's too means Boeing will have a niche to itself. "Since there's really no Airbus opposition - the A350-800 is kind of a bad joke at this point - the 787 will do as well as the 767 and 777 would have in a much larger market and with no competition," he says.
Airbus and Boeing both agree that the market in which its two all-new products compete will account for around a fifth of all airliner deliveries over the next 20 years in unit terms, and just over 40% in value terms. However, because their overall delivery forecasts are different (Airbus, for example, excludes aircraft with less than 100 seats and also sees more demand for ultra-large airliners), the number of units also differs. Boeing's latest 20-year forecast for widebody twinjet deliveries (passenger and freighter aircraft) is 7,330 units worth $1.8 trillion, whereas Airbus says the market will account for 6,240 deliveries worth around $1.3 trillion.
Ascend's 'AGA' global aircraft forecast predicts that some 4,600 passenger twinjets will be delivered during the next 20 years in the size categories (250-300 seats) covered by the 787 models (with 2,300 in larger seat sizes). "Eighty percent of deliveries are expected to be in the sizes covered by 787-9 and '-10X' stretch, so it really is at the core of the widebody market demand," says Seymour.
Ascend analysts believe that the 787 is well placed to hold on to at least 50% of the market in the near term (over the next 10 years) when its main threat will come from the A330 and A350. "Longer term it will be competing with the A350, any new competitor - from China perhaps - and whatever Boeing develops in the widebody arena to replace the 777-200ER - be it a 777 derivative or the 787-10X," says Seymour.
Boeing views the 787/A350 category as "the fastest-growing segment of the market" and believes that the availability of these new aircraft has driven "the resurgent demand for twin-aisle airplanes" as the new offerings will bring a significant improvement in efficiency over their predecessors. It also expects that the two new types will "spur airlines to trade up" from the 767/A330-size category as they roll over their fleets.
"High fuel costs are compelling airlines to accelerate replacement of older airplanes," it says. "In addition, the increased capabilities of the latest twin-aisles create opportunities for operators to take advantage of the ongoing liberalisation of air transport markets to open new non-stop routes."
The Asia-Pacific region dominates both aircraft manufacturers' long-term forecasts, so it is no surprise that they expect it will account for the largest proportion of their new widebody twinjets. Boeing expects Asia-Pacific carriers will account for 40% of twin-aisle deliveries, while Airbus puts demand even higher, at 43% of the total.
"Over the next 20 years the Asia-Pacific region will become the number-one market for aircraft and air travel in the world," says Leahy. "Right now it's about 27% [of total airliner deliveries], which is similar to the North American or European market. But in 20 years it will account for 33% of world demand, while North America will have slipped down to about 20%."
Teal's Aboulafia sees no reason - assuming Boeing makes the right call on specifications - why the 787 cannot emulate the success of its big sister: "The 777 has ultimately been operated by every single important international carrier except Qantas, and that was one of Qantas's mistakes," he says. That means several thousand 787 sales, and individual fleets well above 100.
"In terms of route development, flexibility and airline strategies, the 787 is exactly what the international market wants. It's also a very appealing asset from a financial perspective, which is extremely important these days."
Seymour concurs that the 787 fleets of some major operators are likely to run into three figures over time. "There are some already with 50 or more 787s on order; although currently there are just 10 airlines that have a fleet of a passenger widebody type that is in excess of 100 units," he adds.
Air France-KLM, which is currently ominous by its absence from either the 787 or A350 order book, is seen as one of the prime candidates to next place an order for one or both types, says Seymour. "Looking at other large widebody operators, Delta [with 159 widebodies in service] is another obvious candidate in the longer term. It deferred the Northwest 787 order inherited with the merger, and looks to be concentrating on its narrowbody replacement first; American's 787 deal is still a letter of intent pending industrial negotiations with its pilots; Lufthansa is yet to order anything, as are Malaysia Airlines and Turkish Airlines."
787 sales are currently split roughly 70:30 in favour of the smaller variant, but ultimately the order trend is expected to follow the usual pattern of the stretched derivatives becoming the most abundant among the family members. "We expect that the larger -9/10X variants will be the most popular over the long term and the orders upsizing seems to be showing that too - especially with more customers adopting four-class layouts, the extra cabin space is needed," says Seymour.
Although the 787's pioneering structural design has been at the root of some of the development problems, the longevity that its carbonfibre construction promises over conventional aluminium aircraft is reflected in its residual value performance. "We expect the 787 to perform more like a narrowbody in residual value terms than a traditional widebody, as it is expected to last for longer," says Seymour.
Widebodies traditionally exhibited shorter useful economic lives than narrowbodies in their primary role - for example 20-25 years rather than 25-plus years - meaning their values depreciate at a faster rate. But with the 787's structure being effectively corrosion resistant compared with airliners built from traditional materials, and because maintenance costs will be lower over time, the aircraft should be more economical for longer, says Seymour. "It's for the 787 to now prove that those assumptions are valid."
A potential negative aspect of the carbonfibre design for values is the risk that sometimes comes with innovation. Boeing admits that it is on a steep learning curve with the carbonfibre technology, and this could lead to the introduction of frequent block changes with improved build standards as it expands its understanding of the structure and identifies weight savings.
While it is not uncommon for the early airframes in a new programme to be superseded by ones with better payload/range capability, it is only a factor when there is a small fleet with many sub-variants with different upgradeability, for example the Lockheed TriStar, says Seymour. "It's still early days on the 787 as to how many identifiable blocks of aircraft there may be; in the end the market will decide on what value-penalty there may be for less-capable or non-upgradeable aircraft."