Split widebody order by United casts new light on 777 replacement

Washington DC
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United Airlines' decision to split its long-awaited widebody order evenly between the Airbus A350 XWB and the Boeing 787 has intensified pressure on the US airframer to get on with plans for either a refresh of the 777 or a new clean-sheet design.

Early on, Boeing attempted to offer United the 747-8I and the 777-300ER, says Scott Hamilton, an aviation industry consultant with Seattle-based Leeham. But United characterised the 777 as "old technology", he adds.

That is an ironic comment from the launch customer of the 777, who as FTN Equity Capital analyst Michael Derchin points out, has traditionally been a Boeing widebody customer. "Airbus's A350 order is a coup for them, and may suggest that Boeing will speed up its 777NG development plans to be competitive with Airbus in the market segment," he says.

united airlines 777-200 tim de groot/airteamimages.com
 © Tim de Groot/AirTeamImages.com

If the deal does trigger Boeing to hasten a decision on the 777, United appears to have leeway to consider a new product offering from Boeing.

"This order is for 50 firm aircraft," says United chief financial officer Kathryn Mikells. "Our entire international widebody fleet is in excess of 90 aircraft. If a new aircraft type becomes available in our widebody replacement programme, there is nothing that prevents us from looking at that at the time it becomes available. We have a lot of flexibility through this order to manage the widebody replacement throughout that longer cycle."

One sale alone is not likely to have a material impact on Boeing's 777 plans, says Bank of America/Merrill Lynch analyst Ron Epstein, who highlights his company's long-held belief that Boeing would focus on a 777 revamp before considering future narrowbody developments.

Still, if Airbus succeeds in delivering its promised operating specifications for the A350, Epstein says the manufacturer would ultimately offer a better aircraft than the 777, and "Boeing would have to do something".

One benefit of the current down cycle to Boeing is it allows the manufacturer some breathing space on further widebody developments. Epstein does not forecast a large amount of widebody activity in 2010, and in one to two years, Boeing should have a better feel for 787 technology and customer behaviour, says Epstein.

Boeing does not currently appear to have a definitive timeframe for any 777 decision, with the airframer saying: "No commitments have been made at this time." It adds: "Between now and the end of the next decade, there are many attractive near- and long-term options for continuous improvement."

Boeing says those options include drag and maintenance improvements, new engines, a new wing or an all-new aircraft. As the airframer studies its options, "on a long-term basis, a 15%-20% improvement is in the ballpark of what Boeing would seek".