What Is Behind Boeing’s Decision To Hold Off On A New Airliner?

In December 2003, then-Boeing Commercial Airplanes CEO, Alan Mulally asked a Seattle audience to “savor” the news that the company board had just given the green light to offer the 7E7, soon to become the 787.

For much of industry, airlines and the company’s rank and file it was indeed a moment to savor. Coming 14 long years after Boeing had approved the 777, the market seemed hungry for the U.S. manufacturer’s first all-new commercial program of the 21st century.

• Next all-new airliner pushed to 2030s
• Deliveries targeted at 800 commercial aircraft per year by mid-2020s

But few in that crowd could have guessed that no new stablemates would emerge over the next 19 years and—more worrying still—that the company would admit in 2022 that there would be nothing in the pipeline for several years after that. Instead, Boeing will continue through this decade to focus on steadying production and developing and introducing the 737-7/-10, 777-8/-9 and -8F derivatives.

This was the surprising and—to some—disturbing message from Boeing CEO and President Dave Calhoun on Nov. 2 at the company’s first investor day briefing since before the COVID-19 pandemic. “We won’t even contemplate a new airplane” under current circumstances, he said.

Calhoun’s position is based on the assertion that only a step change in efficiency can justify the launch of any all-new product—a step change that is currently impossible to achieve. “It’s got to be 20% better than the other airplanes that they can buy in the existing portfolio,” he said. “There is nothing proven in the propulsion side of the house—nothing—that’s going to deliver that in this decade.”

While there is no denying that the past 19 years have been very different from the previous hectic 19 years between 1960 and 1979—over which Boeing successfully launched five new commercial models—Calhoun’s realpolitik approach to deferred product development strategy raises questions. Commenting in Forbes, Richard Aboulafia, managing director at AeroDynamic Advisory, states: “Calhoun’s no-new-jet rationale, in short, looks like an excuse to not spend any money on creating new products.”

The company’s development stance has shifted dramatically from earlier this year, when Boeing hinted that a new project could be feasible later in the 2020s if it could satisfactorily reduce production costs through its ongoing joint digital design and manufacturing initiative. It now says it will focus on stabilizing production and development of the current portfolio, with no possibility of a new product launch until significant advances in both digital and propulsion technologies are in place.

The focus on plans for generating $10 billion in free cash by 2025-26 seems like good news for Wall Street’s short-term event horizon (AW&ST Nov. 7-20, p. 20). But Boeing’s growing overreliance on derivatives rings warning bells for those who recall the fate of McDonnell Douglas, which merged with Boeing in 1996 after losing market share, mostly to Airbus, following decades of underinvestment in new commercial projects. “It could be the beginning of the end for Boeing as a jetliner prime,” Aboulafia notes.

A failure to refresh the product line at a time of ascendency for Airbus also seems risky, particularly as the A321neo continues to rule the growing single-aisle midmarket. “The A321 airframe is 35 years old and could easily be beaten by something more capable,” writes Aboulafia, adding that the future of the 737-10, Boeing’s only near-competitor to the A321neo, remains far from certain.

While few might argue with Calhoun’s near-term prioritization of production and cash-flow recovery, questions are being asked about his logic for delaying an all-new project into the 2030s, as well as the wider implications for areas ranging from skills retention to maintaining a healthy supply chain. It is true that the company cannot currently afford a new airplane program, but can it also afford not to at least signal an intent to refresh the product line later this decade?

At the crux of the debate is whether requiring a 20% efficiency leap is a realistic or necessary benchmark, given the more modest performance improvements marked by the introduction of all previous new models, barring the 787.

The timeline of known propulsion and advanced airframe concepts such as CFM International’s open-fan Revolutionary Innovation for Sustainable Engine (RISE) and Boeing’s Transonic Truss-Braced Wing (TTBW) could combine to reach this territory or beyond—but not until the 2030s. Even then, none of the technologies targeted by these developments would be suitable for larger aircraft of more than 200 seats.

More recently, Boeing’s product development team has focused efforts on a larger single-aisle 757-767 replacement, which emerged early in 2021 from the upper end of the former new midmarket airplane (NMA) studies conducted extensively over the last decade. Even at its most optimistic outlook, the -5X project—as it was apparently called—was unlikely to come close to Calhoun’s launch threshold. As previous generations have shown, however, the development of better engines over time means a long-term upgrade potential can be inherent, provided the airframe design is provisioned accordingly with adequate ground clearance and other features.

The CFM56-7B-powered 737 Next Generation aircraft, for example, carries 40% more passengers almost 120% farther using 23% less fuel than the earlier family members, while the Leap 1B engine ushered in a further 12% lower fuel burn with the MAX. The GEnx-2B on the 747-8 provided a 20% improvement in fuel burn over the Pratt & Whitney PW4000 on the 747-400—which itself had a 7-10% fuel-burn advantage over earlier JT9D-powered 747s. The 400-plus seat GE9X-powered 777-9 is, meanwhile, designed for a 20% per-seat fuel-burn improvement over the GE90-115B-powered 365-passenger 777-300ER.

Despite the growing number of advanced propulsion concepts now under study—including the RISE, new Pratt & Whitney geared-turbofan studies and several more hybrid, geared and hydrogen-fueled proposals from GE and Rolls-Royce—Calhoun said none will be close to the maturity or performance level needed within the next seven-year timescale. “There are concepts—but there is nothing that’s going to do it,” he said.

“My guess is [that] when [the engine-makers] do it, it’ll be somewhere around the 10% [fuel-burn improvement] at the high end—probably something south of that,” Calhoun said. “And without a real invention on the wing, it’ll never spell ‘mother.’ We’ve got those two factors, and then we have this sustainability question attached to both of those—we have to make an appreciable difference on sustainability. So if [that] feels like new news, then it is.”

The company must stay the course on its long-term, lower-cost digital manufacturing goals and maintain “the discipline to build these underlying technologies, so that next one is truly differentiated,” Calhoun insists. “That is what we’re focused on and we’re invested in. But I don’t think we’re going to even get to the drawing board this decade.”

Boeing’s path to stabilizing and quickly increasing output—and unlocking cash-generating delivery payments—is meanwhile focused on its two most important in-service programs, the 737 and 787. The 737 MAX program faces the steeper climb. Through October, year-to-date deliveries stood at 289, or about 29 per month. The figure is below Boeing’s notional 737 production rate of 31 per month—a figure company executives acknowledge is not stable.

Boeing is loading its two 737 production lines to be able to crank out 31 airframes every month. But the actual number of rollouts is lower. The Aviation Week Network Fleet Discovery database shows that Boeing has been averaging about 18 new-build 737 MAX deliveries per month, with the balance coming from the inventory produced before December 2020, when deliveries restarted following a 21-month pause linked to the model’s global grounding (AW&ST Nov. 7-20, p. 22).

Boeing’s initial 2023 guidance includes a broad range of 400-450 737 deliveries. Chief Financial Officer Brian West, speaking at the Nov. 2 event, framed the range’s bottom end as a worst-case scenario “to give you a high-confidence set of projections.” The company’s narrower 2023 target is 425-450 737 deliveries, broken down into monthly averages “in the low 30s” for the first half of the year and stepping up to the “low 40s” in the back half of the year, he said.

“That will give us time to continue to stabilize the supply chain in the factory and even talk about getting ready for a rate ramp,” West added. Boeing made it clear that while the numbers are not set in stone, its preference is to produce 38 737s per month—mostly 737 MAX variants for airlines, with a few business jets and military aircraft mixed in—by sometime in 2023, preferably around midyear. Many suppliers are producing at or close to that rate already, and Boeing has hired the personnel required to do the work—a key sign of its intentions.

“We typically like to bring our resources in about six months in advance” of a production-rate increase, Boeing Commercial Airplanes President and CEO Stan Deal told analysts at the investor day event. That allows new hires to be fully trained before being assigned to production lines, he said. In this case, Boeing may stand up a third 737 production line to provide an incremental bump-up to 38 aircraft, Dea noted.

Calhoun emphasized that his company’s confidence in CFM International’s ability to deliver enough engines to support any rate bump is a key factor in determining when 737 production will increase.

“When we get to that moment, where that weekly rate hits the number we think is required to get our rate increase, we’ll announce it that day,” Calhoun said. He added that the GE Aerospace-Safran joint venture is confident it can deliver the engines Boeing needs, though no firm deal has been struck.

Assuming a handful of aircraft are pulled from stored inventory every month—as of Nov. 1, Boeing had about 160 737s built before December 2020 on hand—actual new-build deliveries will be somewhere in the mid-20s for at least half of 2023, Boeing’s projections suggest. Jefferies analysts who toured Boeing’s 737 factory as part of the investor day program concur. They see 737 MAX production averaging 23 units per month this quarter, 25 per month in the first half of 2023 and 31 per month in the second half of next year.

The aircraft-maker did not provide any insight into 2024. Further out, Boeing’s 2025-26 guidance has 737 production ramping up to an average of about 50 per month as part of a plan to deliver a total of some 800 commercial aircraft annually—around 160 of which will be widebodies. It also factors out China, due to ongoing uncertainty related to both orders and deliveries of aircraft to the country. “We’ve derisked China for the foreseeable future,” West said.

Boeing also expects the long-running slump in its widebody business to recover significantly starting next year, with 787 deliveries rebounding next year and production of both 777 freighters and 777-9s stepping back up again by 2025-26. Between 70 and 80 787 deliveries are expected in 2023, around half of which will be refurbished airframes from the undelivered inventory. About 115 aircraft are undergoing rework after a spate of production quality issues that have twice halted the 787 line since 2020.

Production of new-build aircraft at Boeing’s consolidated 787 assembly site in South Carolina is expected to begin to climb back gradually toward a near-term rate target of five per month by 2024, growing to around 10 per month in 2025-26. “That’s a demonstrated rate—we’ll get a lot of efficiency out of doing it in one place,” Calhoun said.

“The limiter is the pace at which we can deliver these finished-goods aircraft, because it occupies one of the lines in the factory as we do the joint verification work,” he added, referring to the time-consuming rework underway to ensure the fuselage barrel sections of the 787s in the inventory fleet are correctly mated and assembled.

Although only a handful of 787s have been handed over to customers since deliveries resumed in August, “we’re going to do more in the fourth quarter,” West said. “And as we turn the corner into 2023, we’ll have under 100—in all likelihood—[remaining] of the 115. Then it’s more or less half in 2023 and half in 2024, tied to working them through the joint verification process.”

Production of the 777/777X family is meanwhile set to grow back to around four per month in 2025-26 as assembly of the 777F freighter continues and manufacturing of the 777-9 resumes eventually. Production of 777-9s, the first member of the new 777X family, was paused this year amid continuing delays to the start of certification of the stretched twinjet. Initial 777-9 deliveries remain on track for 2025 under the revised schedule announced this April.

The uptick in production plans from the current 3-4 per month over the next three years appears to reflect increased confidence in securing the certification basis for the 777-9 as well as accelerating progress on the recently launched 777-8F freighter derivative. Deal also confirmed that the 777-8 passenger model remains in Boeing’s 777X development plan later this decade.