The aerospace industry downturn and Boeing’s financial position has raised fresh questions about its likelihood of developing the long-stalled New Mid-market Airplane (NMA), says two aerospace analysts.
Those analysts still think the NMA would be a winner, even predicting the current downturn will eventually drive up demand for such jets.
But a confluence of factors in recent months places fresh pressure on the programme, they say.
“This crisis is raising questions about Boeing’s ability to proceed with NMA,” says Michel Merluzeau, analyst with consultancy AIR. “You can’t really gamble the future of the organisation on a new programme at this time.”
Teal Group analyst Richard Aboulafia sees an NMA “paradox”.
“This crisis strongly increases the need to do it, but strongly decreases the likelihood [Boeing] will,” he says.
Boeing declines to comment about the status of the NMA project, saying its focus remains on returning the 737 Max to service.
“Our team continues to study the market and develop plans for future commercial airplanes, including taking a step back and reassessing our commercial product development strategy, building on the work we have done as part of the NMA design and production system analysis,” Boeing adds.
The company has talked publicly of a mid-market aircraft since at least the early part of last decade, though in 2003 a Boeing in-house magazine mentioned the “middle of the market” segment as central to Boeing’s future.
As conceived, the composite-winged jet would carry up to 270 passengers, fly 4,000-5,000nm (7,400-9,300km), have clean-sheet engines and enter service around mid-decade.
The project stalled amid the 737 Max grounding, which took effect in March 2019, and Boeing chief executive Dave Calhoun said in January that Boeing was conducting a fresh review of the NMA.
Meanwhile, Airbus gained traction with its mid-market offerings, two A321neo variants: the 4,000nm-range A321LR and newly-launched, 4,700nm-range A321XLR.
But the industry is different now than just weeks ago. The coronavirus pandemic has hammered air travel demand, leading airlines to slash operations (international flights were hit exceptionally hard), ground aircraft, lay off staff and cancel aircraft orders.
Since 1 January, the in-service fleet of Airbus and Boeing passenger jets plummeted 62%, from 20,000 aircraft to 7,540 aircraft on 15 April, according to Cirium fleets data. The number of Airbus and Boeing widebodies in service sunk 71%; narrowbodies declined 60%.
Airlines have grounded all types of jets, but Aboulafia thinks the downturn will actually expand demand for mid-market aircraft, which currently means just A321neos.
He suspects airlines will transfer more former widebody flying to lower-cost, smaller-capacity A321neos and predicts that type will account for roughly 40% single-aisle aircraft delivery values by late this decade.
“People can’t get rid of widebodies fast enough, and the A321neo is a great widebody replacement,” Aboulafia says. “Even more so now.”
Such factors also bode well for Boeing’s NMA, which Merluzeau calls a “slam dunk”. “It’s an aircraft that will do extremely well for North American carriers and… on short overwater routes.”
DEVELOPMENT DURING DOWNTURN
But analysts note that Boeing faces a raft of challenges.
At the end of March, financial analysts estimated Boeing had roughly $30 billion, perhaps less, in cash and liquidity. Those funds could possibly run out in as little as eight or 10 months, said analysts. However, Boeing may receive government aid.
In recent weeks, Boeing also shuttered commercial production sites due to coronavirus, which should help stem cash outflow. Meanwhile, the 737 Max has still not been certificated by regulators.
Such factors could further push Boeing into shelving the NMA, the analysts say.
Merluzeau says Boeing might instead focus its resources on developing what could be a more-critical project: a future single-aisle (FSA) aircraft. Boeing will need such an aircraft by the early 2030s to compete with Airbus’ next narrowbody and a potential competitor from China’s Comac, he says.
Still unanswered, he says, is whether the NMA is a “must-have” or “nice-to-have” aircraft for Boeing.
The FSA undoubtedly falls in the must-have category, he adds. “You cannot screw up the narrowbody strategy at Boeing.”
