Boeing is wrestling with its biggest decision of the decade: whether or not to proceed with developing its "New Midsized Airplane" (NMA), nicknamed the 797 by aerospace industry watchers.
The aerospace titan has been talking to airlines for five years about the 797 but hasn’t given a public timeline for any decision. That could change in 2019. “We do see a decision point this year, and that is a decision of whether we would offer the airplane in the market,” said Boeing CEO Dennis Muilenburg on the company’s latest earnings call. “And we need to complete the business case analysis before we arrive at that decision.” Assuming the market response to the business case is positive, the company would make the final launch decision in 2020.
The 797 would be Boeing’s first all-new design since they unveiled the 787 Dreamliner in 2004. It would be aimed at the budget mid-range route market: the new plane would be able to fly farther than existing narrow-body jets, on routes that don’t have enough passenger demand to fill a big wide-body jet—think Chicago to Berlin or Europe to the Middle East. The plane is projected to seat 220 to 270 people, with trip costs that are about 40 percent lower than today’s wide-body aircraft.
If Boeing is to commit to the 797, now seems an ideal time to do so. The company recorded a strong performance in 2018—revenue surpassed $100 billion for the first time in company history. And the company can rely on an order backlog of about 5,900 aircraft, which should keep Boeing busy producing planes for the next seven years while it invests in the NMA.
But in order to bring it to market, Boeing could easily spend more than $15 billion, according to Ken Herbert, analyst with Canaccord Genuity. It will take years to develop—with inevitable delays—and the plane won’t be an immediate money-maker.
Also, Boeing would have to thread the needle with the design: the NMA would have to be positioned between Boeing’s workhorse 737 narrow-body plane and its 787 wide-body, without cannibalizing sales from those jets—which are lucrative and crucial to the company’s bottom line.
The company also has to fit the development of a brand-new plane into the current transformation of its production system. According to the company’ latest financial report, Boeing’s R&D spending will focus on automation and prototyping, which would benefit the development of a new aircraft, and “key future franchises”— which could itself be a hint of where the company is leaning regarding the NMA.
Muilenburg seemed confident Boeing could pull it off. “We do see a market need here that's in between today's narrow-body and wide-body families,” he said. “It's a market area that really cannot be addressed by modifying those existing platforms and aircraft. Some of that is medium haul, medium-range…If we launch NMA, it will feather in on the backside of 777X. So from a profile standpoint, it fits very nicely.”
The NMA would need to be introduced by 2025, around the time Boeing’s popular but aging 757s and 767s reach their retirement age, if the planemaker is to maintain its market share.
As with many of the company’s decisions, rival Airbus looms in the background. Airbus put on its poker face regarding the NMA, stating they’ll wait for Boeing to show its hand first before responding. The European planemaker’s incoming CEO, Guillaume Faury, described the NMA as a potential response to a market that Airbus already dominates. Airbus has been aggressively promoting its longer-range A321LR as an alternative to the 757s and 767s—and could compete directly with the 797.
"They are in the situation where they are losing this part of the market because they no longer have the right products," Faury said of Boeing. "They believe they have to do something about it, and this is on them to make the next move."
And while Boeing is getting encouraging feedback from its customers, others think Boeing should forget the 797. “If Boeing were to ask my opinion, which it hasn’t,” said former long-time Airbus exec John Leahy, “I would tell them I don’t think there is a business case for that… They need an answer to the [Airbus] A321. If they want to build something, I would advise them to put their money into building a single-aisle airplane and then that could roll over to replace the 737 MAX in the middle of the next decade.”
Richard Aboulafia, aviation analyst with Teal Group, also sees potential for trouble. “Every single other Boeing jet has been pretty much a guaranteed home run, even if it wasn’t clear at the time,” he said. “This is different. They’ve got to be careful with this…They need the 797 to have twin-aisle capabilities with single-aisle economics, which is a very hard proposition.”
If Boeing scraps the NMA, it wouldn’t be the first time a proposed plane was abandoned. In 2002, the aerospace giant ceased development of its Sonic Cruiser jet after spending a couple of years exploring the concept.
After years of teasing, it looks likely that Boeing will finally make a decision on the 797 in 2019. And whether it’s a yes or a no, the decision will shape the aerospace industry for years to come.
Read more about Boeing’s manufacturing history and future at End of the Line: Will Boeing Ever Build an Airliner Again?