Top Analysts See Widening Airbus-Boeing Divide amid Covid

 - December 14, 2020, 2:06 PM

Two of the industry's most prominent independent forecasters see a need for Boeing to invest in new technology in the large narrowbody segment as structural changes brought about by the Covid pandemic widen Airbus's sales advantage in the overall single-aisle market. Speaking remotely during Monday’s Aero Montreal conference, Teal Group vice president of analysis Richard Aboulafia cited International Air Transport Association statistics attributing far more of the 66 percent decline in traffic this year to international markets than domestic and the resulting airline preference for smaller aircraft. For several years, Boeing has held a fairly large advantage over Airbus in the widebody market while Airbus has seen broader and deeper demand for its narrowbodies than has its U.S. competitor. Aboulafia sees that trend becoming more pronounced over the coming years unless Boeing does something to address the segment of the market occupied by the long-range A321neo in particular.

“You could look at it as an opportunity for Boeing or as a major threat to Boeing, but because of that massive divergence in fortunes in the 200-seat segment, Boeing now has a very difficult choice to make,” said Aboulafia. “Either it cedes 10 points of market share to Airbus or it does the right thing and creates a new, large single-aisle [airplane], basically something in the 757 class. It’s something I think they need to do, but, unfortunately, they don't appear willing to do it right now.”

By 2018 Boeing Commercial Airplanes had consulted with more than 60 airlines on a concept centered on a twin-aisle, 220- to 270-seat jet called the NMA, or new midsize airplane. However, by January of this year, new Boeing CEO David Calhoun had essentially nixed the idea after a reassessment of the company’s product development strategy to reflect a “refresh” of its plans. Since then, while still occupied with returning the 737 Max to service and laying plans to cut production due to the Covid pandemic, Boeing hasn't publicly discussed the subject of an alternative to the NMA. 

Kevin Michaels, managing director of Michigan-based AeroDynamic Advisory, agreed with Aboulafia’s assessment about the narrowbody market’s relative strength.

“I think on the other side of this crisis…there will be a structural change in the market where we will need fewer twin aisles and more single aisles,” concurred Michaels. “And I think that’s part of what underpins the optimism Richard talked about with the 321neo and really how it’s going to take on this greater share of the plus-200-seat market.”

Michaels’s outlook did diverge from Aboulafia’s as it related to the ultimate recovery in air traffic, however. While the Teal Group analyst said he sees a recovery to 2019 traffic levels in about 2023, Michaels showed more pessimism in his prediction that such a recovery won’t happen until much later in the decade. As a result, he sees recovery in widebody production rates in particular taking longer than some others expect.

“Clearly airline balance sheets are under tremendous stress,” said Michaels. “The world's airlines are going to lose over $100 billion, possibly in the last six months of this year; their balance sheets are going to be in tatters, and the economics of keeping older aircraft in service in a low fuel [price] environment we think are very compelling.  So we anticipate [more] order cancellations on the horizon, and production—it's recovering—but I think it's not getting up to pre-Covid levels till the latter half of the 2020s.”

Still, Michaels noted that the Boeing 787 and Airbus A350 “have done really well through this crisis,” but not well enough to result in further production cuts. “It will continue to go down, and we just heard last week that Boeing has taken its 787 production down another unit per month, to five units,” he said.

Reviewing what he called winners and losers in the crisis, Michaels, of course, placed the A380 on the losing side of his ledger as that airplane completely goes out of production next year, while reiterating his optimism for the A350. Among narrowbodies, he also gave high marks to the A320neo and the A220, the former Bombardier model that has proved its resiliency during the crisis with a comparatively high percentage of the fleet still in service. However, he said, Airbus “will have to determine what to do with the A330neo at this time,” given its slow sales and market overlap with the A350.

As for Boeing’s prospects, Michaels projected a strong comeback for the 737 Max in the long run; however, his tepid outlook for the 777X reflected a bearish attitude toward large widebodies in general. “The 777X suddenly looks to be almost too big—this is now the largest airplane in production. Is this the A380 of its times, heavily dependent on Middle East carriers? I’m not sure about that. In time, this will have its niche. It’s a great cargo aircraft and on some of the long-haul thicker routes in Asia, you’re not just going to do with a 787 and A350. So you will need this, but the outlook for it in terms of production isn’t quite what we saw before the Covid crisis.”