ANALYSIS: Boeing to mimic 737 Max strategy with 777X transition

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Boeing is confident it can manage the transition from the current production 777 family to the new 777X models at the end of the decade by adopting a similar strategy to that used for the 737 Max. However, some analysts expect the manufacturer will have to incentivise customers with significant pricing discounts on the last of the current 777s.

The backlog of Boeing’s in-production 777 variants – the 777/200LR/300ER and 777 Freighter – stands at approximately 300 aircraft, representing around three years of production at current rates. This means it still has a way to go in sales to bridge to the introduction of the 777X in 2020.

Boeing has “a plan” for when production will transition from the -300ER to the 777X “but we’ve not shared that”, says Boeing’s marketing vice-president Randy Tinseth.

“We can take a similar approach from when we went from the 737NG to the Max – that was a successful strategy and we can do many of the same things,” he says. “When we went to our customers with the Max, we coupled those with NGs to help with their transition as well as with ours. We’re going to take that same mentality into our 777 campaigns.”

The 777F could also come into play, says Tinseth. “Our competition doesn’t have a freighter, so if the cargo market turns around as we expect it will, we have the 777F to help with the transition.”

Rob Morris, head of advisory at Flightglobal’s consultancy arm Ascend, believes the plan to adopt the 737 Max transition for the 777X may not be quite as straightforward as Boeing anticipates.

“When said quickly, it sounds easy to run the same transition plan. However, the 777 customer base is a little different, with less operators and more concentration. So I wonder how big fleet operators will react to the prospect of having to take some last-off-the-line 777-300ERs whilst they wait for their 777Xs,” he says.

Morris also thinks that there could be issues around residual values: “777-300ERs will typically be on 12-year finance terms (or operating leases), so how will Boeing incentivise operators to keep those last-off-the-line -300ERs for 12 years in the face of their fuel-burn penalty over 777Xs?

“I guess that will depend on where fuel prices are in the 2020s, but it seems likely that some deep discounts will be required to place -300ERs rolling off the line through the transition phase.”