Moving 200-250 people 4,000-5,000 miles presents an interesting challenge for airlines these days. That mission historically was filled by the 767 family. But the passenger side of that production line went quiet three years ago, delivering a 767-300 to Air Astana in May 2014. Airbus says the A330neo can fill that role, though it is also slightly larger and has a significantly higher range. Boeing has the 787 Dreamliner family, too, with the correct seat count but also a much higher range. So what is an airline to do?
If rumors are to be believed the answer might be a surprising one: Boeing is considering bringing the 767 back into production for passenger service. Boeing is reportedly in contact with suppliers to see if the necessary components can be delivered quickly and in volume. Some 50-100 of the type are needed, it seems, with deliveries in the early 2020s.
United Airlines is the presumed customer, with an aging fleet of 757s and 767s used for intercontinental operations and a penchant for Boeing aircraft orders. The carrier scaled back international 757 service recently as it increased domestic service while its aging 767 fleet (20+ years on average) remains challenging on the dispatch reliability front. That adds up to real money for the carrier. New aircraft have lower maintenance costs and generally better reliability. But can Boeing get there at the right price?
Playing with the numbers
The economics of such a move are complex, both for Boeing and for an airline customer. Boeing wants to sell more 787s and, eventually, the 797/NMA/MOM aircraft. Those planes would be available in the middle of the next decade, in theory. But that project is not officially live, complicating matters. With a 20-year operating life the idea of selling the 767s in the early part of the 2020s only to replace them 5 years later potentially reduces demand for the NMA market, even if only 50-100 frames. That shift could be offset with a planned early transition of the 767s into freighter service, with the passenger airline taking NMAs, but the costs for a stopgap program like that are high.
Another risk with the move is the bet it places on long-term fuel prices. The 787 offers lower costs per seat mile than the 767 but also comes with a significantly higher up-front price (~$50mm at list prices back when both were on sale). With oil prices relatively steady and low right now the bet on the 767 could pay off. But that also means predicting geopolitics and economic development decades into the future for the immediate impact. That’s a significant gamble.
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Yet another risk with bringing back the 767 is the impact to profitability of the 787 program overall. By most measures Boeing is nowhere close to profitability on the Dreamliner program and dipping in to potential sales does not help that effort.
What is the real market demand?
The discussions around the NMA or bringing back the 767 raise another interesting question: Who drives market demand these days? In prior generations the US and Europe-based carriers held significant sway over developments at Boeing and Airbus. In the past decade the mega-orders shifted to the Middle East, significantly altering the dynamic of what would be built and the specifications on those aircraft. Uncertain profitability and stability in that region, combined with the growing long-haul LCC market have many analysts expecting significant deferrals of both Airbus and Boeing long-haul orders in the coming years.
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US carriers are also pushing back on delivery dates for larger planes; all of the “Big 3” US carriers have deferred A350 orders multiple times in recent years. And the big push into secondary cities – the “long, thin routes” supported by the Dreamliner – appears to be scaling back in favor of strengthening join ventures and hub connections.
At the same time, however, LCCs and smaller carriers are pushing heavily into secondary cities, especially in the Transatlantic market. And that’s the market where the NMA appears truly focused. Continental Airlines loved using 757-200s into secondary European markets and United Airlines mostly kept those routes after the merger. But they’ve pulled back in recent years to focus on stronger domestic yields. Growing that fleet could bring routes back. Or it could just be a replacement cycle because of existing aircraft age, with the NMA the real growth somewhere down the line.
Betting on cargo
Residual value of the 767s is also critical to the math behind bringing them back into passenger service. And these days the secondary market is nearly all cargo. It would be interesting to see Boeing facilitate that transition, having the planes fly in commercial service for 5-10 years until they can be replaced by the NMA with Boeing guaranteeing the buy-back of the 763s and conversion to freighters. That de-risks the impact to the NMA, guaranteeing orders there and a smooth transition. Plus the cargo market gets the freighters slightly younger than they typically do in the used market. And there should still be reasonable demand for the 763F 15 years from now when this all happens.
A passenger win
Assuming the resumption of 767-300ER line comes to pass that’s mostly good news for most passengers. The fuselage diameter and seat sizes pretty much mandate that the seat layout sticks at a comfortably wide 2-3-2 in economy class. United’s version has a direct aisle access business class option in the new Polaris seat (though only one flying in the new layout today). And should the airline ever bother to join the rest of the market with a premium economy product that would fit nicely as well.
The 787 does offer better air pressure/quality and humidity on board but that’s slightly less significant on the “short” long-haul trips the 767s flies in United’s route network.
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