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ANALYSIS: NMA decision time looms for Boeing

Boeing has some big decisions to make soon with regard to its future strategy, and these will have far-reaching ramifications for many decades to come.

Seattle has to present a solid business plan to the Boeing board in order to move its proposed New Mid-market Airplane (NMA) on to the authority-to-offer stage. Clearing that hurdle will require some fairly firm commitments over the likely cost of production and sales forecast for the 220-280-seat twinjet.

And every day that passes, the Airbus sales team is flat out trying to ratchet up the orderbook for Toulouse's own self-stated "NMA" – the A321LR.

The big questions that Boeing must answer relate to the potential new model's likely long-term demand, how it will be built, and what the most appropriate engine technology should be to deliver the optimum balance of efficiency, cost and reliability. Part of that latter conundrum will be whether to offer a choice of ­engine suppliers.

One of the challenges Boeing faces is that the NMA is not seen as a direct replacement for any current aircraft. This makes ­nailing down a reliable market forecast even harder.

Four decades ago, the US ­manufacturer created a bit of an airliner phenomenon with its 757 twinjet. This was an all-new ­narrowbody that was as comfortable operating very short legs – such as London-Manchester – as it was on much longer sectors, including transatlantic routes.

While the NMA is often touted as a 757 replacement, it must be much more than that. Boeing sold 1,049 aircraft before 757 ­production ended in 2005, by which time its market position had been eroded by the new generation of single-aisles, which could deliver better economics on shorter routes, if not that ­legendary range flexibility.

Boeing Commercial Airplanes marketing vice-president Randy Tinseth sees the NMA capturing at least four times the 757's level of orders. He puts NMA demand at in excess of 4,000 units, but concedes that identifying the precise market is still a work in progress.

STIMULATIVE EFFECT

"The NMA is probably going to have a bit of a stimulative effect to the market like any new airplane does, so we have to understand what that is," he says.

Flight Ascend Consultancy's long-term market forecast indicates that building a viable business case for the NMA "could be challenging", says global head Rob Morris. However, he adds that "a demand scenario can be painted which could deliver a programme with sales that exceed a couple of thousand aircraft over the production life".

Boeing is sketchy on the thorny issue of whether there will be a choice of engines. This will depend on a number of factors, including the expected size of the entire market and the commercial terms negotiated between Boeing and the engine OEMs.

Seattle has received proposals from all the big-three engine manufacturers, says Tinseth, and they are all proposing something slightly different. He is vague about the levels of efficiency the various proposed offerings would bring, saying only that when Boeing talks to customers about the NMA "we have an assumption about what the engines can perform, and the kind of performance we show is based on that".

With the exception of the 787, all of Boeing's recent programmes have been structured around a sole-source engine supply. While this is great for the engine and airframe OEMs, it is an arrangement that can leave the latter exposed if significant technical issues arise with the chosen powerplant.

But it is not popular from the airlines' perspective, says Qantas group chief executive Alan Joyce. "What's good is: we do a competition for the airframes, and then we do a competition for the engines. We think we get better outcomes.”

While Boeing is tight-lipped on the sole-source debate, Morris is not convinced that the expected volume of sales could justify all-new engine programmes at more than one OEM. But any competitive response from Toulouse could change the market dynamics, both from an airframe perspective and for the powerplants.

"Airbus could have a number of potential options to respond – A321neo developments, A330neo developments or an all new middle-of-the-market aircraft," says Morris. "Airbus would have the luxury of responding to whatever Boeing launches and thus would be relatively well positioned."

When asked at the Singapore air show if Airbus could see any requirement on its product-development horizon for a new 50,000lb-thrust (222kN) engine being planned for the NMA, its new chief salesman Eric Schulz replied: "Potentially maybe."

NEW PRODUCT

If Airbus does decide to respond to the NMA with its own new product – like it eventually did with the A350 XWB to counter the 787 – then that could use the same engines, perhaps enhancing the business case for more than one engine option, says Morris. "But that depends on the size of the market, which itself could be enhanced by the design, performance and economics."

But this is all conjecture right now. Boeing must still construct a business case that convinces its board to commit the $10 billion or more needed to transform the NMA from paper to product.

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