Revamped 777X may limit sales prospects of Boeing jumbo

There is little doubt that a possible order bonanza for the re-engined narrowbody offering from Chicago-based Boeing, the 737 MAX, at next week’s Farnborough Air Show in the United Kingdom (UK) is going to be under the media spotlight. However, as the world’s second-largest aircraft manufacturer mulls an upgrade to its highly popular long-haul twin-jet with a 787-styled composite wing, a lighter airframe with advanced aluminium-lithium (Al-Li) material and a more fuel efficient engine, the sales prospect of Boeing’s 467-seat 747-8I Intercontinental may be undercut by its smaller sibling.

Boeing currently plans to launch a revamped 777 derivative family consisting of 353-seat 777-8X and 407-seat 777-9X variants by late 2012 or early 2013, succeeding the 777-200ER and -300ER, respectively, albeit outgoing Boeing Commercial Airplanes (BCA) chief executive Jim Albaugh recently commented that the development of a double-stretched 323-seat 787-10X was at a more advanced stage of development.

According to Aspire Aviation‘s multiple sources at Boeing, the larger, more fuel efficient 777X will roll out at the end of fourth-quarter 2017 and then go through a 9-month flight testing programme that will last until end of third-quarter 2018, followed by an entry into service (EIS) in mid-2019 (“Boeing develops 777X to challenge Airbus A350“, 9th Feb, 12).

The stretched 777-9X will be encroaching into the 747 category and become a true one-to-one replacement to the 416-seat 747-400, a task already assigned to the 747-8I and is featured in the revamped jumbo’s marketing campaign.

“It’s a cat-and-mouse game. There’s a lot of overlap, and I think that’s one of the things Boeing’s thinking about. By stretching the 777-300ER and adding additional seats, it kind of goes into 747 territory,” Air Lease Corporation (ALC) chief executive Steven Udvar-Hazy commented.

Image Courtesy of Emirates

Service entry helps marketing pitch
The entry into service (EIS) of the 747-8I Intercontinental with launch customer Lufthansa on 1st June on the Frankfurt-Washington Dulles route, coupled with the nearly 9 months of operations of the -8F freighter variant, have largely eliminated the risk of hiccups usually encountered during EISs for potential buyers.

“When people see this entry into service being successful, there will be more demand for the 747-8,” Lufthansa Passenger Airlines chief executive Carsten Spohr said.

Boeing is equally bullish on the sales prospects of the 747-8I Intercontinental, with Boeing officials repeatedly hinting at future orders.

“In the last 30 days, we have put out 25 proposals for aircraft [to a number of airlines]. We’re having conversations about where the -8 may fit in. [Boeing] feels the 747-8I is a viable aircraft for all long-haul decisions,” Boeing 747 programme manager Elizabeth Lund revealed.

“These will come in two versions: we hope to get confirmation of some of the MoUs [memoranda of understanding] and I believe we will see additional sales as well,” Lund was quoted as saying in a flightglobal report.

With the 747-8 production line at Everett running at a 2 units per month rate, the upcoming Farnborough Air Show and the months that follow are crucial in garnering new firm orders for the passenger variant such as Turkish Airlines’ pending order for 15 very large airplanes (VLAs), in order to beef up its combined family backlog of 86 as of May 31st, which equates to roughly 3.58 years worth of backlog.

Similar to other aircraft programmes such as the Airbus A380 which was overweight by 5-6 tonnes at service entry in 2007 and the 787 Dreamliner of which line number LN66, the first clean airplane requiring no post-production rework, was still around 2 tonnes overweight versus the targeted manufacturer’s empty weight (MEW), according to Aspire Aviation‘s sources at Boeing, the early-built 747-8 examples are also plagued by performance shortfalls.

“It’s within the limits which we took into our calculation, but it’s not quite as good as Boeing and we were hoping. This is due to weight – resulting in higher fuel burn – and the engine, which can be further improved,” Lufthansa Passenger Airlines chief executive Carsten Spohr elaborated.

According to Aspire Aviation‘s multiple sources at the Chicago-based airframer, the early-built 747-8I Intercontinental examples are 2.3 tonnes to 2.7 tonnes (5,000-6,000lbs) overweight, with the overall block fuel burn of the aircraft being “at least 3%” higher than specifications.

The block fuel burn shortfall on the -8I passenger variant is nevertheless better than the fuel burn miss on the early-built 747-8F freighters delivered to Cargolux and Atlas Air, the same sources say, which put the overall block fuel burn as “6%-8% higher than 2006 specifications”.

This, coupled with overweight of the freighter, leads customers such as Cathay Pacific Cargo being not able to fully utilise the -8F’s advertised 134 tonnes of payload, despite a 6 tonnes (13,228lbs) increase in the aircraft’s maximum take-off weight (MTOW) to 448 tonnes from April onwards which Boeing says does not affect the freighter’s payload capability. Cathay Pacific director of cargo Nick Rhodes told flightglobal that typical transpacific flights are able to carry 124 tonnes of payload, versus the promised 133 tonnes, which is only achieved on shorter missions.

To claw back to its 2006 specifications following the redesigned wing and strengthening in fuselage from the original 2005 design, the 747-8I Intercontinental and -8F will feature an improved General Electric GEnx-2B engine, whose 2.7% shortfall in engine specific fuel consumption (SFC) was one of the contributors to the performance misses.

“The GEnx-2B only has one PIP [Performance improvement package] and we just call it the GEnx-2B PIP (no 1 after it). The GEnx-2B PIP combines the learnings from both GEnx-1B PIPs – so the improvements are focused on the high pressure compressor, combustor, high pressure turbine and the low pressure turbine. We anticipate ~1.6% improvement in SFC with the GEnx-2B PIP,” General Electric (GE) spokeswoman Deborah Case told Aspire Aviation.

“At this time, GE is focused on certifying PIP 2 on the GEnx-1B and the PIP on the GEnx-2B and has no plans for additional enhancements,” Case revealed.

Furthermore, Boeing is planning to implement a weight improvement package containing numerous items worth 2.7 tonnes to 3.6 tonnes (6,000lbs-8,000lbs), completely negating the 5,000-6,000lbs overweight, which along with the GEnx-2B PIP will bring the 747-8′s block fuel burn back to the 2006 specification from 2014 onwards.

“I expect from aircraft 11 to have improvements. This delivery depends on whether we stretch delivery times, but we’re talking 2014 on today’s schedule,” Lufthansa Passenger Airlines chief executive Carsten Spohr said.

“At this point, the committed block point improvements get us very, very close to where we committed to be at the start [of the 747-8I Intercontinental programme], but not beyond it. But it’s beyond guarantees back to where the original 2006 brochure fuel burn and operating cost levels were. The GEnx PIP [performance improvement package] will be big. We’re upgrading the FMC [Flight Management Computer] and some of the other flight control software systems and we are continuing to take weight out of the airplane, so we’re looking at the latest generation structural designs that will continue to improve the performance. We’re also looking at new IFE [in-flight entertainment] systems and other new interior features,” Boeing 747 programme manager Elizabeth Lund said.

“This was the second generation of the FMC, and we’re going to introduce a third – block point three – which will add more functionality. The first generation could do virtually everything the 747-400s could do and a little more, and we keep adding steps. Block point three will have the latest RNP [required navigation performance] capability, some climb and direct route capability that allow you to maximise efficiency,” Lund told flightglobal.

The 747-8I Intercontinental’s tail fuel tank may be reinstated in 2014 pending further flight testing in 2013, Aspire Aviation‘s sources at Boeing said.

Image Courtesy of Dan King

VLA niche
The market for the very large airplane (VLA) has been a niche one, with the Airbus A380 superjumbo being sold 253 aircraft after more than 10 years on sale since December 2000 and the 747-8I Intercontinental logging 36 sales since its launch in November 2005. In stark contrast to VLA’s sluggish sales, the mid-size long-haul Boeing 787 Dreamliner and the A350 XWB (Extra Wide Body) have sold 854 and 548 examples since their respective launches in 2004 and 2006.

Airbus argues that the number of cities with more than 10,000 daily long-haul passengers will rise from 39 in 2010 to 90 in 2030 and that the next 20 years will see 1,780 very large airplanes (VLAs) being ordered, including 1,331 very large passenger aircraft, according to its latest Global Market Forecast (GMF) released in November 2011.

In the past 5 years from 2006 to 2011, Boeing has sold only 96 747-8 aircraft, whereas it has sold 121 767s, 536 777s and 568 787s on a net basis.

Meanwhile, stretching the 365-seat 777-300ER further will offer airlines a true one-to-one replacement for the 416-seat 747-400, which may inevitably undermine the business case of the 747-8I Intercontinental.

The 777-9X will be 76.48m (250ft 11in) long, a 2.58m stretch of the 777-300ER’s 73.9m fuselage, while accommodating 42 more passengers and more revenue-generating cargoes.

The 777-9X will feature a maximum take-off weight (MTOW) of 344 tonnes (759,000lbs), powered by a 99,500lbs GE9X engine whose specific fuel consumption (SFC) is “very close to 10%” lower than that of the GE90-115B engine, whereas the 353-seat 777-8X will be 69.55m long and feature a MTOW of 315t, powered by a derated 88,000lbs GE9X engine.

The 416-seat 747-400 has a MTOW of 396.9 tonnes (865,000lbs), whereas the 747-8I Intercontinental, 777-300ER and A350-1000 have MTOWs of 447.7t, 351.5t and 308t, respectively.

Boeing is currently evaluating 4 different wingspans for the 777-9X – 65m (213.3ft) with winglets, 68.6m (225ft) with winglets, 71.1m (233.4ft) with raked wingtip, as well as a 233.4ft option with a folding wingtip. The encroachment of the 777-9X will make it an International Civil Aviation Organisation (ICAO) Code F aircraft instead of the 777-300ER’s Code E. The ICAO Code E features airplanes with wingspan between 52m (170.6ft) to 65m (213.3ft) whereas the Code F features airplanes with a 65m (213.3ft) to 80m (262.5ft) wingspan.

As Boeing makes progress in the 777X’s development, after having issued a request for proposals (RFP) for 100,000lbs engine to all three engine manufacturers, it is apparent that big twin is going to become the mainstay of most carriers’ long-haul fleets and a shrinking role for 4-engined 747-8I Intercontinental and A380s.

Rolls-Royce is developing the 99,500lbs RB3025 engine with a 132.5in (337cm) engine fan size and a bypass ratio of 12:1, as well as an overall pressure ratio (OPR) of 60:1, which will make the RB3025 “more than 10%” more fuel efficient than the GE90-115B.

In addition, Aspire Aviation‘s sources at Pratt & Whitney (P&W) and Boeing separately confirmed that the world’s third-largest engine-maker has presented 3 proposals with different engine concepts to Boeing at a recent briefing, including a geared turbofan (GTF) engine that is “13% more fuel efficient” than the GE90-115B engine.

The same Pratt & Whitney (P&W) source claims that a 13% reduction in engine specific fuel consumption (SFC) over the GE90-115B is a “conservative estimate”, adding the scaling effect of a larger fan should make the engine SFC even lower.

Image Courtesy of Boeing

Frequency, cargo & growth
As the 407-seat 777-9X becomes more capable with the aforementioned 787-styled carbon fibre reinforced polymer (CFRP) wing and more fuel efficient engine, coupled with lightweight aluminium lithium (Al-Li) material that is 10% lighter and produces 6% less drag, it enables airlines to grow from the 777-300ER nicely without compromising frequency and cargo volume.

The 777-9X carries distinct advantages over the 747-8I Intercontinental in these regards.

First of all, the 747-8I Intercontinental will only have the same seat-mile costs as the existing 777-300ER after the former meets its 2006 specifications from 2014 onwards. However, the 21% fuel burn reduction per seat and the 16% lower cash operating cost (COC) per seat than the 777-300ER with a range of around 8,000nm (nautical miles) are unquestionably going to be translated into even lower and more competitive seat-mile cost.

Moreover, the 777-9X offers airlines the most significant flexibility in its deployment and fits into more airlines’ network structures than the 747-8I Intercontinental does, despite the fact that the 747-8I itself is nonetheless better in fulfilling this task than the Airbus A380 superjumbo.

The 777-9X enables airlines to achieve incremental growth in capacity by up-gauging from the 777-300ER or open longer routes than the 747-400, while retaining the number of flight frequencies, thereby maximising the flexibility to price-inelastic, last-minute walk-up business travellers. These walk-up business travellers are usually the highest-paying passengers and the most lucrative for airlines, but would fly on flights offered by competitors and result in spilled demand should the preferred time of departure is different than the actual time of departure on offer.

The deployment of A380 has generally resulted in a reduction in the number of frequencies, with two other flights being replaced by a single A380 flight. Examples include Air France replacing a 270-seat 777-200ER flight and a 272-seat Airbus A340-300 flight on the Paris Charles de Gaulle (CDG) – New York John F. Kennedy (JFK) airport departing within 2 hours of each other by a single 538-seat A380 flight. While this results in an 18% lower cash operating cost (COC) per week, it is unclear if this has resulted in any spillover demand at all.

As the global economy weakens and the growth in premium traffic falters to 5.8% in April 2012 versus a year ago as business confidence softens, according to industry body International Air Transport Association’s (IATA) premium traffic monitor for April, the recent trend in competing for the crown of being the most luxurious A380 cabins in the sky is worrisome, such as Singapore Airlines’ all business class upper deck that sits only 409 passengers, Korean Air’s A380 with 407 seats in a 3-class configuration and Malaysia Airlines A380′s First Class seats that feature a seat pitch of 87 inches and better than SIA’s 81 inches.

While premium travel at the front-end is the most lucrative portion of the aircraft while the low-yield price-elastic economy class passengers only help the flights break even, seat count and seat pitches by no means should be the only measure in an airline’s price/service offering and there is a paradigm shift that sees premium passengers as a percentage of total gradually slumping from 10% in April 2004 to around 9.5% in April 2008, then nose-diving to less than 8% in April 2009 and plateauing at the same level ever since.

Australian flag carrier Qantas Airways is reconfiguring its A380 fleet to add 39 more economy class seats, 3 more premium economy class seats and remove 8 business class seats, in addition to the removal of 5 self-service snack bars. The reconfiguration of Qantas’ 12 A380s will be completed by April 2013.

Furthermore, stretching the 777-300ER further to the -9X’s 76.49m length will strengthen its cargo lead, given the 777-300ER already enjoys a significantly bigger revenue cargo volume than both the 747-400, -8I Intercontinental and Airbus A380.

Revenue cargo volume is the remaining sellable underbelly cargo space after fully loading passengers’ luggage and is crucial for carrying freight for Asian carriers such as Korean Air and Cathay Pacific, the latter of which carries 70% of all of its freight in underbelly cargo space in passenger aircraft, as Asia/Pacific airlines carry 39.0% of the world’s airfreight, according to International Air Transport Association’s latest figures.

The 777-300ER has a revenue cargo volume of 5,200ft³ , versus the A380′s 2,995ft³ and the 747-8I’s 3,895ft³, as well as the 747-400′s 3,861ft³. The 777-300ER has a total cargo volume of 7,120ft³, versus the 747-400′s 6,025ft³, 747-8I’s 6,345ft³ and A380′s 5,875ft³.

Image Courtesy of Bloomberg

Make no mistake, the 747-8I Intercontinental does have some advantages over the 777-9X and that Boeing is favourably positioned in the widebody segment.

For instance, with the 747-8I backlog standing at 32 aircraft as of May 31st, any customers placing a firm order now could secure early delivery slots in 2015 and take deliveries of -8I meeting the 2006 original specifications, whereas the 777-9X will only enter into service by mid-2019 and thundering demand for the upgraded 777X could easily make the delivery slots only being available in the 2020s.

“We’ve got a large-aircraft [acquisition] programme and so has Iberia, so we’ll get a better buying capability by combining the two. But when we get into the big-twin programme, our 747s will be that little bit older so we won’t have the same flexibility as we had this time round, so we’d like some certainty on the delivery schedule,” British Airways chief executive Keith Williams said in an Airline Business interview.

“The problem is, is the next generation going to be so much more fuel efficient than 777-300ERs to make it worth waiting for? But I’m conscious of the fact that if you wait for something and it never turns up eventually you don’t have any aircraft,” Williams questioned.

In addition, the 747-8I remains 14.7% bigger than the 407-seat 777-9X even when the bigger 777 variant is launched, making it the only complementary aircraft model between the 407-seat 777-9X and 525-seat Airbus A380.

It is particularly suitable in playing a niche role for filling this capacity gap such as Lufthansa and Korean Air’s fleet plans have outlined as well as for those carriers where growth in air travel demand requires even a bigger aircraft than the 777-300ER and 777-9X, yet not an aircraft as large as the A380. Air China and Turkish Airlines may be examples to this case.

Notwithstanding this, Aspire Aviation thinks the preferred route by airlines, especially those with large 777 fleets such as British Airways (BA), Emirates Airline, Cathay Pacific, All Nippon Airways (ANA) and Japan Airlines (JAL), etc, will opt for additional 777-300ERs to provide interim lift before migrating to the more fuel efficient and bigger 777-9X for growth and as a direct 747-400 replacement.

This would provide more flexibility in fleet strategy to airlines as the 777X fits into the business models of airlines of various types considerably better than the 747-8I, especially should they be able to obtain additional 777-300ERs at favourable pricing and should Boeing press ahead with the 777-300ER+ improvement package.

The 777-300ER+ will incorporate a recontoured belly-fairing, weight reduction and an improved GE90-115B engine, according to Aspire Aviation‘s sources at Boeing, which cautioned that the study is still being undertaken. If implemented, it will shave another 4%-5% of block fuel burn of the 777-300ER and provide a smooth performance bridge to the 777-9X.

“The 777-300ER was already eating into the jumbo aircraft niche. Extending its range and capacity will make the problem worse,” Fairfax, Virginia-based Teal Group vice president (VP) of analysis Richard Aboulafia concurred.

Last but not least, as the 777X product strategy takes shape, the 747-8I Intercontinental will be under increasing pressure from not only the Airbus A380, but also the more capable 777-9X aircraft and that the future of widebody segment lies in “big twin”, such as Airbus and Cathay Pacific are understood to be in advanced discussions at potential A350-1000 orders that include some examples being switched from the carrier’s 38 A350-900s on order and additional new orders. A deal could be reached as early as the Farnborough Air Show, sources at Cathay Pacific say.

“We’ve been working with them for quite a long time and are a little bit exasperated by the time it’s taking. My view is that a significant number of carriers will sign up for this airplane. I believe the demand is there. Anybody who has a 777 today of size of [-300]ER will be automatically interested in its derivative,” Emirates president Tim Clark said.

“The 777 and its derivative is of great interest to us because we started taking the 777-300ERs in 2005 and they will start retiring in a 12 year period. If you think you don’t have to move because the [A350]-1000 is in trouble, think again. If you believe in your product and your client base is telling you the same, why wouldn’t you get on with the job and bag it?” Clark asked.

It looks like the Farnborough Air Show next week is going to be a litmus test for not only Bombardier CSeries, but also the 747-8I Intercontinental as well.