Podcast: Is Boeing Building Something That Nobody Wants?

The Boeing 777X looks poised to hit the market at the perfect time, but its long-range variant has been a tough sell with airlines. Aviation Week editors discuss the 777-8's prospects.

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Rush Transcript

Joe Anselmo:

Welcome to this week's edition of the Check 6 podcast. I'm Joe Anselmo, Aviation Week's editorial director and editor-in-chief of Aviation Week magazine. Boeing's 777X widebody aircraft is scheduled to enter service in 2025, and that timing just might be perfect. If current trends hold, some analysts see the market being 20% to 30% larger than it was in 2019. The passenger versions of the 777X come in two sizes: The -9, which will carry about 426 passengers with a range of 7,300 nautical miles; And the -8, which has about 30 fewer seats but can fly 1,400 miles further. The -9 has attracted about 300 orders but there are at best just eight orders on the books for the -8. Which leads us to this question: Is Boeing building an airplane that nobody wants? Joining me to break this all down are Jens Flottau, Aviation Week's executive editor for commercial aviation. Guy Norris, Aviation Week's senior propulsion editor. And Sean Broderick, our chief regulation and safety editor. Jens, let's start with you to tee us up. Explain what's going on.

Jens Flottau:

Emirates has decided to drop an order for 16 777-8s and replace the order with the same number of -9s. But that's been a discussion that's been going on for years actually inside the airline, whether to keep the -8 or drop it and now the decision has been made. And as you say, Joe, now there are only orders for eight aircraft left at best. The last order is from Etihad Airways. Like Emirates, Etihad ordered the 777Xs at the 2013 Dubai Air Show.

At the time, they ordered 25 aircraft: 17 -9s and eight -8s. But then fast-forward five, six years, Etihad changed its strategy and decided to no longer try to mirror the Emirates business model and become this global super connector but rather focus on a boutique airline strategy and become a smaller airline. In that context, they decided that they no longer wanted 25 777s, but only six and no -8s. Now Boeing still keeps the original order in its backlog so the status of the order to me is unclear, with Boeing saying it's still there and Etihad having restructured that commitment. But let's assume there are eight aircraft, it doesn't make a big difference. The question's out there. Will they build it?

Joe Anselmo:

Guy Norris, what's your answer to that question? Will they build it?

Guy Norris:

It's interesting. I mean, first of all, Joe, you can actually say they are already committed to build it because it's going to be built as the freighter. They completely revamped the design in order to make an optimized freighter size using the -8 as the baseline. So, I guess they could argue that Boeing would say, "Yes, we are going to do a -8, it just happens to be the freighter version." But to be serious for a sec, the -8, the passenger model, which by the way, should have been in service for a year about now by the original schedule when it was launched in the late 2013. It was meant to really come in as a second wave to really begin taking up the slack for operators who were looking to the 747-400 replacement market. Even the original 777-300ER, this was going to be the model that would take over from that sector and really keep out Airbus as competition from anything on the A350-1000.

Okay, so let's look at what's going on. Historically, we've seen this before. There's a long tradition going all the way back to the 707 that usually longer range but shorter derivatives traditionally do not sell as well as the main model. So the 707, there was nearly 865 of those delivered, they delivered the 720, which is the short body version, only 154. And you can see that sort of replicated. And of course, the classic example, the 747, of the 1,573-74 delivered from that model, only 45 with a short model, 747SP, the short body. So this is a phenomenon we've seen time and time again. And Airbus has seen the same thing too. The A340 model, every single version, which was the shorter body, the derivative has sold much less than the longer range, long body version. So it's just now a question I think of whether Boeing has to look at the importance from the market of protecting that sector just below the 777-9, because if they don't do a -8, obviously that opens the door to Airbus to come in. Is it best to cannibalize its own market or is it going to let the door open to Airbus and the A350-1000? So it's interesting.

Joe Anselmo:

And the A350-1000 is roughly the same size as the -8, right?

Guy Norris:

It's creeping up there, yes, exactly. So it would be the only available competitor in that sector I think. Right, Jens?

Jens Flottau:

Yes. And that's why Airbus is really watching this closely and wondering what Boeing will do, because as you say, if Boeing was to drop the -8, then Airbus would clearly benefit. And don't forget, I mean the -1000 has been struggling for years. It hasn't sold well. In the A350 case, it's interesting that the -900s, the baseline version of the family, has so far done much better than the -1000. And that's only changing slowly now. We've seen big orders from Air India, like 34 -1000s and Lufthansa has finally decided to also order the -1000 in addition to the -900s that are already in service. So yeah, it's a tough call. I would say there are arguments to drop the -8, just because it's another expensive development program at a time when you really can't afford it and there's a lot of other things to do. The freighter, the future narrowbody, all that research effort. On the other hand, you don't want to create an opening for your competitor, so it's a tough choice.

Joe Anselmo:

And Jens, we should point out, you wrote about this notion last week about possibly dropping the -8 and Boeing reached out to you. What did Boeing tell you?

Jens Flottau:

Boeing told me that they are committed to the -8, they will build the -8. They also pointed out that they have always said that they will do the freighter first and that is absolutely the case. I would say get the -9 out first, get it certified. Then the freighter is hugely important because it's going to replace the 777Fs and the 747-8Fs. And it is going to be really, really key for Boeing to keep its dominance in the freighter market. And then the -8 passenger version is clearly less important but maybe they'll do it anyway.

Guy Norris:

Can I just jump in a sec with one point? Boeing's decision to go for the freighter by adding those two frames really potentially did change the whole balance of probabilities on this market I think. Because by optimizing that fuselage for a freighter and adding those two frames, that basically decided at that point they would eliminate a dedicated third model just for that smaller passenger model. And at the same time, they made it more difficult for the market to really get interested in the -8. Because they shrunk the difference in passenger capacity between the -8 and the -9. And I think that was the calculated decision at the time. Boeing knew obviously that that was going to happen and I think they just decided that they would prefer at that stage to protect their large freighter capacity at a time when obviously freighters were starting to go gangbusters against what was obviously a very limited passenger market for the -8. So anyway, I'm sorry if I repeated anything that was just said.

Joe Anselmo:

Sean Broderick, let's bring you into the conversation. Where do we stand on timing for certification of the -9, which goes first?

Sean Broderick:

Well at Paris, Boeing told Guy and I that it believes the airplane is ready for the next and really the final stage of a major certification program and that is the flight testing that counts towards FAA certification, otherwise known as the Type Inspection Authorization milestone, after which you start that flight testing. Boeing has, I believe -- and Guy will correct me if I'm wrong, as he always does because I usually am -- three airplanes in the test program I think. And they've flown about 3,000 hours, a thousand cycles. So the airplane has done everything Boeing wants it to do, leading into that FAA authorization to bring FAA inspectors on board and start flying it for that final milestone.

But in the environment that we're in now with certification, just because the airplane is ready, doesn't mean that the application is done or the applicant has done all the required work. As we're seeing with the 737-7 and 737-10, two derivatives, and the 777X, let's remember, the application is for a derivative that’s based on the 777-300ER. This is not a brand new airplane, not supposed to be a brand new type certificate. It is being certified as an evolution or as a derivative really of another airplane in a way. There's a lot of things that Boeing's going to have to do that was not done on the 777-300ER. The biggest thing, again, as we're seeing on the 737s, it's validating these system safety assessments that have to do with making assumptions about. pilot reactions during non-normal situations. So if there's a problem with the system, Boeing shows the fault analysis, and whenever a pilot interrupts that to solve the problem, there's a lot of analysis now and a lot of support of that analysis that has to be done following the 737 grounding and some of the changes that FAA was required to do.

737-7 and -10 are the first airplanes that have to go through this. It's a brand new process that Boeing and FAA are developing iteratively. The 777-9 is supposed to have what's called an issue paper, which is basically a piece of guidance that the FAA offers you that covers something that's not in the regulations to show how to comply with something. I don't know if that paper is done. It's going to be important for the 777-9’s expediency in getting those SSAs validated when that time comes. It was not ready for the 737-7 or the 737-10, but some of the theories that the FAA wants to see are being applied to both of those certification programs. But it's a time-consuming process. Both Boeing and the FAA ... Well, Boeing is confident that this process will be iterative in terms of learning how to get it done with the regulator and it will be a little bit better on the -10 and then a little bit better on the 777-9. We will see. Is Boeing planning to have the airplane in service in 2025, late 2025? Yes. Could that change? Absolutely. Because none of their plans that they have laid out since the 737 MAX grounding have come to fruition. Partially its because of their actions but also because of the new world order we're in on the certification side. You just don't know how long things are going to take. And the 777-9 is absolutely in that situation because it's a little more complex than the -7 and the -10 derivative from the 737NG.

Joe Anselmo:

So the 777-9 goes first, and then the freighter follows I believe a 2027 certification target. And then the -8, if they go forward with it, the passenger -8 would be 2028. Correct?

Sean Broderick:

In theory, the timeline would look something like that. Interestingly, when we talk about Boeing's resources and what they'll need for that 777-8, if they go and do the freighter, that's going to get them part of the way down the road in certifying a passenger version. Obviously they're different, but once they certify the airframe and some of the basic flight characteristics, again, different with the freighter, but not altogether as different as it would be if they didn't have that freighter. So I wonder how much of an issue that really is, vis-a-vis how much the market really wants that passenger airplane. It'll be interesting to see.

Joe Anselmo:

Guy, I went back yesterday and looked at what we've written about 777X in recent years, and during the depth of the COVID crisis, a good body of people were saying “It's just too big for the market, the -9 is too big.” And we asked Dave Calhoun, the CEO, about it and he said, "No, it's not. I'm comfortable." Dave Calhoun was right, wasn't her? It's looking pretty good for Boeing now.

Guy Norris:

Yeah, the world has definitely changed even since the launch in November 2013.Jens and I have talked about this before. The emergence of the 777X family, particularly the -9, while it was said to be too large for the market at the time, it probably helped accelerate the demise of the A380 in some ways because if you've got a very large new airplane why go for something with four engines when you can have just two? And it also basically moves into this new slot where people, they don't have access to the A380 anymore, other than the ones that have already been brought back into service. But they can fill those on some routes. And on the other side of the coin, there is going to be obviously a demand on the longer range trunk to trunk routes for a big airplane. It just simply is.

So if you do that with the economies of a big twin, why on Earth wouldn't you? So I do see that the market has evolved and I see that, if anything, the market for the 777-9 is much bigger than it was 10 years ago. And it will go forward, which could be another reason why they don't see the imperative to keep the -8, force it into the market when there really is no need. They may be completely happy with that. If things do change, well, as Sean says, they'll have done a lot of the spade work with the freighter, so they'll have that as a potential in their back pocket.

Joe Anselmo:

Jens, we're running short on time, but I wanted to end with a market question for you. Richard Aboulafia, one of our regular columnists in Aviation Week, recently wrote a column noting that in terms of value, the market used to be split pretty evenly between widebodies and narrowbodies. Now it's 70/30 in favor of narrowbodies. And you look at the widebodies that have been developed, the last clean sheet was the A350. The 777X is a derivative and that's almost 10 years old now. And we're not hearing Airbus or Boeing talking about next generation widebodies, are we?

Jens Flottau:

No, we're not. But I'd still argue that the numbers you just cited are not necessarily a reflection of a widebody crisis. They are mainly a reflection of the fact that in the narrowbody market, you've seen new business models emerge, particularly the low cost carriers, which have just transformed that sector and have opened it up to new routes that have not been served by narrowbodies previously. And in emerging economies like India, you suddenly see airlines buy a thousand airplanes or 1,200 airplanes like Indigo. There's many, many other examples like that.

On the widebody side, we haven't seen a new business model that's been nearly as successful as that. In fact, low cost carriers have tried and failed if you look at Norwegian, for example, which has exited that market. So it's business as usual in the widebody market. There's going to be replacement needs, there's going to be new players like Riyadh. There's also huge orders from people like United. Don't forget, they just ordered 100 787s. So, I don't see that crisis at all. I just see that it's business as usual and not being a sector that benefits from new models that accelerate growth.

Joe Anselmo:

Guy Norris, you heard what Jens just said. We haven't seen a clean sheet widebody from Boeing since the 787 in 2003/04. And then the A350 came along, in 2005, 2007. Are we ever going to see a clean sheet widebody again from Airbus or Boeing?

Guy Norris:

Right now there is no sign of any new widebody clean sheet design. And that's simply because there is not the financial or market imperative to go there. And certainly that's what the engine makers think. I mean, from all the signs I'm seeing, they're looking to the next decade as re-engining possibilities because these new widebodies will need to meet sustainability goals. And the only way they're going to do that is with sustainable aviation fuels and new engines that are more efficient. And I don't think any manufacturer, Airbus or Boeing, is ready to step up to the plate with a new design. The only possibility I see out there for an all new design is the blended wing body option that's being explored by the Air Force with a potential commercial spinoff. Other than that, it's tube and wings as far as you can see and re-engining in the 2030s. That's my call.

Joe Anselmo:

Okay, well we will have to end it on that note, but gentlemen, thank you for a very informative conversation and we'll see where the -8 ends up in the years to come. That is a wrap for this week's Check 6 podcast. A special thanks to our podcast editor in London, Guy Ferneyhough. If you can't get enough of Jens, he's also on this week's Window Seat podcast. Go to aviation week.com/podcast to view all of our podcast offerings. That's all the time we have for today. To our listeners, we say thank you for your time and we wish you a prosperous week.