Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Boeing's Disruptive New Airplane Really Is a Game-Changer

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Last weekend, Boeing (NYSE: BA  ) formally launched its new 777X widebody at the Dubai Airshow. Even though the plane isn't expected to be ready until 2020, Boeing has already racked up 259 orders worth more than $95 billion at list prices. Most notably, Emirates -- which is now the world's biggest international airline -- placed a record-setting order for 150 of the new jets!

The 777X is Boeing's new weapon for disrupting the jumbo-jet market (Photo: Boeing)

The 777X will allow Boeing to maintain its dominance in the widebody aircraft market for the foreseeable future. Between the 787 family and the new 777X family, Boeing now offers highly efficient long-range widebody aircraft that can meet almost any size requirements. Moreover, I don't think Airbus has any good response available.

The decline of the jumbo-jet

For a long time, the market for widebodies capable of long-haul flights was divided between smaller twin-engine jets and large three-to-four-engine planes like the Boeing 747 and MD-11. However, as engines have become more powerful and more reliable, twin-engine designs have taken over more and more of the market.

The original Boeing 777, which entered service almost two decades ago, began that process, as it was close in size to early 747 variants. The 747 has grown in size in order to avoid competing with the 777, while Airbus has more recently introduced the massive A380 "super-jumbo."

However, the super-jumbo segment is a niche market, as most airlines do not fly many routes that can support airplanes of that size. Indeed, while the Airbus A380 entered service six years ago, through the end of October Airbus had just 259 total firm orders . That's the exact same number of orders that Boeing announced for the 777X this weekend alone! (Airbus did receive another 50 A380 orders from Emirates this week, so it is still ahead for now .)

A whole new ballgame

The one factor that keeps four-engine jumbo jets like the 747 and A380 flying is that their higher seating capacities have given them a unit cost advantage. However, a four-engine airplane will invariably burn more fuel per seat than a large twin-engine plane. With the rapid increase in jet fuel prices over the last 10 years, this fuel "penalty" has shrunk the jumbo-jet cost advantage.

US Gulf Coast Kerosene-Type Jet Fuel Spot Price Chart

US Gulf Coast Kerosene-Type Jet Fuel Spot Price, data by YCharts

With the 777X, improvements in engine technology and wing design are boosting fuel efficiency even further. At the same time, the larger model (the 777-9X) is significantly bigger than the 777-300 (Boeing's largest twin-engine plane today), or the A350-1000 that Airbus is currently developing. As a result, the 777-9X will have the lowest unit cost of any commercial airplane .

If the 777-9X really does deliver unit costs below the 747 and A380, it will rapidly cannibalize demand for both jumbo jets. Aside from a few special cases, there is no reason for an airline to operate a larger airplane unless it offers a lower unit cost. Otherwise, reducing the number of seats available is a no-brainer, because it boosts unit revenue, leading to higher margins.

Out in the cold

Airbus has done an admirable job growing in the narrowbody market; its A320 aircraft family has overtaken the Boeing 737 in terms of future orders. However, it has been unable to catch Boeing in the widebody market. Despite a variety of reliability issues, Boeing's 787 Dreamliner just passed the 1,000 order mark , whereas the competing Airbus A350 only had 764 orders as of Oct. 31 .

The launch of the 777X will complete Boeing's domination of the widebody market. Boeing has effectively "covered" the A350's market and then some with its new widebody lineup. At the bottom of the A350 family, Boeing's 787-9 competes directly with the A350-800. The recently introduced 787-10 competes directly with the A350-900. Meanwhile, the new 777-8X competes directly with the larger A350-1000 model .

Boeing also launched the 787-10 this year, filling another market segment (Photo: Boeing)

However, Boeing also has the 787-8 (which is smaller than any A350) and the 777-9X (which is larger than any A350). The result is that while Airbus was able to save money by developing a single twin-engine widebody to serve a large swath of the market, Boeing can offer its customers a greater range of sizes. With unique planes at the bottom and top of the twin-engine widebody spectrum, Boeing can meet the needs of any airline, in a way that Airbus cannot.

No good solution

Right now, there are no particularly good options for Airbus. It's probably not feasible to stretch the A350 any further than it has already done with the A350-1000. On the other hand, if Airbus developed a true competitor to the 777X, it would cannibalize A350-1000 sales.

As a result, Airbus is likely to stand pat and try to compete on price with the A350 and A380. For the moment, the A380 also has the advantage of availability -- today, airlines are looking at nearly 10-year lead times for the 777X. However, in the long run, the superior economics of the new 777X can virtually guarantee Boeing a big lead over Airbus in the widebody market.

Our top pick for 2014
The stock market has roared this year, leaving many portfolios in its dust. Investors in The Motley Fool's Top Stock will have the last laugh though, because they made a fortune off the little known company our Chief Investment Officer hand-picked to crush the market. To find out which stock he's picked for 2014, read his in-depth report outlining another stock that has room to run. Simply click here, it's free!

Read/Post Comments (13) | Recommend This Article (30)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 19, 2013, at 11:14 AM, hunter3203 wrote:

    Good article. Airbus bet on the A380 being the dominant player in the widebody arena. That's not how the market is shaping up. Boeing is effectively killing its own 747 with the largest of the 777X model. That plane will still work great for cargo but the 777 has superior passenger economics.

  • Report this Comment On November 19, 2013, at 12:18 PM, Schlosser56 wrote:

    As reward to the Boeing Corporations efforts and it's engineering designer staff to design such a fine aircraft, the unions use there time to be ready for there ritual strike games. Make no mistake Airbus will come out with a similar aircraft and in there sales clauses there will be no such mention as to in case of labor strikes the delivery time might be different a clause that is used almost exclusively by US Manufacturers only. We used to sell lathes and milling machines all over the world but these days are gone as other country's build quality products that are delivered on time.

  • Report this Comment On November 19, 2013, at 2:37 PM, TMFGemHunter wrote:

    Europe is much more unionized than the U.S., although I don't know the specific circumstances at Airbus. In any case, either the union will agree on a long-term contract with Boeing, or the 777X work will go to a non-union plant. I don't see much of a risk of disruption either way.


  • Report this Comment On November 19, 2013, at 5:21 PM, CrazyDocAl wrote:

    Time will tell. Airbus put both feet in with the 380 without thinking it through. Of course they are government(s) owned so they prove the point that private companies that need to make a profit to survive do better. The 380 is too big. Most runways can't handle the weight and the terminals can't accept the plane. That leaves them the 350 as their only other option.

    With Boeing they need to get the "x" in the air and on time. No mistakes and, if possible, early. If they can this plane will be the key to taking a large chunk of the market. It will also help move past the mistakes of moving from Aluminum to carbon fiber (a needed change).

    Boeing needs to sort out where to build them, either with union labor on the left coast or in a right to work state. I'm not sure why the union wouldn't be trying to hammer out a deal that would benefit them with a decades of work.

  • Report this Comment On November 19, 2013, at 7:29 PM, DNMay wrote:

    I am not sure that an A350 version that can compete with the 777-X is out of the picture.

    With launch money generally available from low-interest loans . . . with a fuselage already wider than a 777 so presumably stretchable . . . with eight years to do it . . . why shouldn't they enlarge the wing and fit new engines?

    Airbus understands the need to compete in all payload-range segments just as much as Boeing. In an A350-2000 (if so named), they'd have newer technology than Boeing, too (a composite fuselage as well as the wing).

    And, as you so rightly say, they'll be trying to snuff Boeing sales by undercutting on price across all segments of the market. It's time the Boeing unions really got the message that this is a war of attrition as much as a race to line their own pockets. Winning the war will conserve their jobs.

  • Report this Comment On November 19, 2013, at 8:07 PM, TMFGemHunter wrote:

    @DNMay: Actually, the A350 is the same width as the 777X to within an inch. Boeing doesn't seem to think it would be very easy for Airbus to stretch the A350. I'm inclined to agree -- although I am not an engineer! But in addition to the wings and engines, you need more structural support for a bigger aircraft. I don't think that the A350 was designed with the capability to be stretched beyond the -1000.

    Leaving that aside, even if Airbus needs relatively minor changes beyond the new wing and new engines, it's still almost as big an R&D project as what Boeing is undertaking, but only attacking 1 of the 2 777X market segments. So it's a less efficient investment from that perspective.


  • Report this Comment On November 20, 2013, at 6:53 AM, DNMay wrote:

    I certainly never said that another A350 stretch would be "very easy". But it's what's needed to compete, and Airbus will. They probably mounted a last-ditch effort to stave off the 777X launch at Dubai by discounting their current A350 offerings. That having failed, another A350 stretch is likely but not necessarily immediate.

    The 777X design bit-the-bullet in stretching the wing span to beyond what gates can handle without folding the tip. This allows Boeing to gain induced drag reduction from a high (i.e., slender) aspect ratio, and enabling more lift (and thus higher aircraft weight) from increased wing area. (The A380 suffers from a low aspect ratio due to accepting gate constraints).

    The challenges that Airbus designers will face in further-stretching the A350 (and which Boeing alludes to) are as follows. Will the fuselage get so long that rotation on takeoff is impossible without lengthening the gear? Will a gear extension be necessary anyway to provide ground clearance for larger-diameter engines? Will a wingtip extension provide sufficient extra lift that a wing root plug can be avoided? The above issues, when combined, possibly necessitate a new fuselage center section to accommodate a longer main gear, a beefy midline landing gear, and to provide and support a larger-area, longer-span wing.

    These have all been done before. Boeing probably just stepped up to them with the 777X, chasing a probably thousand-airplane market. I doubt that Airbus can neglect this market. They may have to wait until they've digested current new-design commitments to have the human and dollar resources.

    Airbus would probably get two variants from one further derivative program. For one of them, the fuselage length will be maxed-out for more pax. For the other, the fuselage length will be kept a little shorter (fewer pax) and enable more fuel weight for extra range. The development cost of the two will be far, far less than twice the cost of doing one.


  • Report this Comment On November 20, 2013, at 7:16 AM, DNMay wrote:

    Oh, that "disruptive technology" phrase . . .!

    In this case, what's probably really disruptive in the market is Airbus offering stretch A350's in Dubai at prices that forced Boeing to even-more-drastically lower prices on the 777X to launch it. Moreover, for the privilege of selling a lot of planes at cut prices, Boeing only gained one 777X customer beyond the Middle East. They have to hope they'll pick up another European, and a major American, customer soon - before Airbus gets its own weighty orders.

    Large launch orders can be a mixed blessing. Bombardier is trying not to discount the CSeries too much, and is suffering slow sales.

    Some have also claimed that the 777X will nibble at the A380 market. Actually, it may kill the 747-8 market.

  • Report this Comment On November 20, 2013, at 9:16 AM, TMFGemHunter wrote:

    The 747-8 market was already dead, so it's not really a loss in my opinion. Boeing will try to sell a few 747s here and there as cargo planes, but I don't think the company has any illusion that it will sell a significant number of 747-8I planes.

    I don't know why you think Airbus is stretching the A350 beyond the -1000. If you have any source for that, I'd love to know.


  • Report this Comment On November 20, 2013, at 12:38 PM, DNMay wrote:

    There is an impeccable source for p-e-r-h-a-p-s stretching the A350 further. But I'll let this stay a "wait-and-see".

    Airbus will share an outline of this airplane now to try to disrupt 777X sales, and keep 777X profit margins down.

    I think they'll get around to actually launching it if there's enough customer interest and when they have design resources and loans.

    I mentioned this two-for-the-price-of-one variant of a stretched A350 in my previous post. I neglected to be explicit that the two would share the same wing, engines and systems. One would just trade payload for fuel by adjusting fuselage length, with a range adjustment dropping out of that trade-off. I should also mention a third likely variant with a shorter range that won't need as much wing area or engine power. For example it could retain the longest fuselage length, but dispense with a folding wingtip and some of the fuel, and use a derated version of the same engine for longer life because the weight won't be as high. This would be a high-capacity (450-seat) 6000 n.mi. airplane that's decidedly missing from the product line-up. Such a 777X would be more economical at that range than the -8 and -9, and Airbus might fill the same void with a third variant of our "notional A350-2000". The current 777-8 and -9 and its potential A350 equivalents have been sized to Middle East long-range requirements, and not for the trunk routes of North American and the Far East, which are significant markets.

    If Airbus has good timing, which might mean waiting for a new engine, perhaps a very large GTF, they could make the 777X look like old technology a couple of years after its introduction.

  • Report this Comment On November 22, 2013, at 5:16 AM, rkrasnod wrote:

    The original 777 was supposed to have Boeing dominate wide body market. You can see the results.

    Airbus is a technologically-advanced competitor and has the capability of designing a worthy competing aircraft if they see the commercial need and economics.

    Aircraft design is a moving target and the next great plane is just around the corner.

  • Report this Comment On November 22, 2013, at 7:14 AM, TMFGemHunter wrote:

    @rkrasnod: I would argue that Boeing does dominate the widebody market. Through October it's delivered 166 widebodies in 2013 vs 104 for Airbus. The gap will narrow somewhat when the A350 goes into production, but it won't close entirely. There are more 777 orders than A330 orders, more 787 orders than A350 orders, and there's also a few 767 orders hanging around. (That doesn't even count the 777X orders Boeing just received.) The jumbo jet market, which is quite small comparatively, is the only area where Airbus has a lead.

    To be clear: this has nothing to do with technology: I agree that Airbus is just as advanced from a technology perspective. It has to do with design choices and cost. Airbus already has a direct competitor to the 777-8X. So if it wants to design a rival to the 777-9X it will have to do so without the benefits of having an aircraft family -- or it will cannibalize the A350-1000. As I've discussed above, I am very skeptical of the idea that a simple stretch of the A350-1000 would create a legitimate 777X competitor.


  • Report this Comment On November 29, 2013, at 9:44 AM, Mathman6577 wrote:

    As long as GE can make a reliable engine the 777x should be ok. For some reason GE is having some icing issues on its 787 engines. Inflight shutdowns on 2-engine aircraft can be problematic.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2733799, ~/Articles/ArticleHandler.aspx, 9/26/2016 8:19:34 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:02 PM
BA $131.78 Down -0.09 -0.07%
Boeing CAPS Rating: ****