Boeing Is Already Getting Crushed at Paris Air Show

June 17, 2019 by Paul Ausick

No one is expecting much good news from The Boeing Co. (NYSE: BA) during this week’s Paris Air Show. Drawing a line under that expectation is an announcement Monday from rival Airbus that Air Lease Corp. (NYSE: AL) has signed a letter of intent for 100 of the European maker’s jets.

Air Lease has signed on for 50 A220-300s (the regional jet it acquired from Bombardier last year) and 50 A321s. Of the latter, 27 are a variant of the A321LR designated the A321XLR, for extra-long range. The XLR variation is the company’s response to a plane Boeing has teased for years but can’t quite bring itself to commit to building.

Before the grounding of the Boeing 737 MAX following two fatal crashes that combined killed 346 people, Boeing was expected to announce “authority to offer” the company’s long-awaited New Midsize Aircraft, variously called the NMA or the 797. A decision to build the plane was postponed until next year.

Two years ago, Boeing closed out the Paris Air Show with $75 billion worth of new orders and commitments for 571 airplanes, more than half of which were the company’s 737 MAX 10.

Boeing’s unannounced 797 and the Airbus A321XLR are niche airplanes aimed at filling a gap in the market left following Boeing’s decision to stop building its 757 (single-aisle) and 767 (twin-aisle) passenger jets. The A321XLR is a single-aisle plane that Airbus says will carry up to 244 passengers in a single-class configuration on trips of up to 4,700 nautical miles (about 5,400 miles). Boeing’s twin-aisle 797, though not yet officially confirmed, is expected to carry up to 275 passengers in a single-aisle configuration on trips of up to 5,000 nautical miles (about 5,750 miles).

Why is Boeing stalling? The demand for a 797 has been questionable. And since the 737 MAX crashes, there has been some talk that Boeing needs to design an all-new aircraft to replace the 737 MAX. That talk is based on the corners Boeing is alleged to have cut when it was designing the MAX and the hash the company has made in response to the plane’s grounding.

There are more than 4,500 737 MAX planes in Boeing’s backlog and once the company has received certification for the fix it has created for the anti-stall system in the MAX planes, most of those planes will be delivered. Aerospace industry analyst Scott Hamilton at Leeham News and Analysis does not believe Boeing will skip the NMA/797 and go directly to a new 737 replacement.

Boeing has just announced an agreement with GE Capital Aviation Services (GECAS) to exercise purchase rights to 10 firm orders for 737-800 Boeing converted freighters (BCF) and adding purchase rights to an additional 15 of the freighters. Including the conversion cost, a 737 BCF has a list price of around $110 million.

At list prices, the baseline Airbus A321neo sells for around $129.5 million and the A220 carries a list price of $81 million to $91.5 million, depending on the model. The total value of the announced order from Air Lease could reach $11.9 billion.

Boeing has set expectations very low for the Paris Air Show and rightly so. Even though the company claims to have a fix for the anti-stall issue, the timing of the recertification of the 737 MAX keeps getting pushed out. It is also clear that many civil air regulators will not depend on U.S. Federal Aviation Administration (FAA) certification this time around. China, the European Union, and others have already said that they will require that the fix be certified locally.

Once the plane is certified, then all Boeing has to do is get people to fly on the plane again — and this is how they plan to do it.

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