Why The Boeing Company Won't Build a New 757

Last week, my Foolish colleague Alexander MacLennan speculated that The Boeing Company (NYSE: BA  ) could introduce a reengined 757 (the 757 MAX) to compete in the large narrow-body market segment. After all, the original 757 was quite successful -- Boeing sold more than 1,000 before ending production in 2004.

However, the 757 is quickly becoming obsolete. Slightly smaller aircraft like the Boeing 737-900ER and the Airbus Group (NASDAQOTH: EADSY  ) A321 are far more efficient and can cover most of the flights currently handled by the 757. As a result, the likely market size for a Boeing 757 MAX would be far short of the critical mass necessary to justify investing in a reengined model.

The Boeing 757: popular but going out of style
The Boeing 757 has been a workhorse of the three big U.S. legacy carriers for the past few decades. In fact, nearly half of the 757s in operation today belong to the U.S. legacy carriers. (U.S. cargo operators also account for a significant chunk of the 757s still in use.)

Nevertheless, U.S. carriers understand that the 757 is becoming increasingly uneconomical to fly. For example, Delta Air Lines (NYSE: DAL  ) is replacing most of its 757-200s (the smaller, more common version of the 757) with Boeing 737-900ERs and Airbus A321s in the next five years.

Delta Air Lines is starting to replace its Boeing 757s. Photo: The Motley Fool

Delta has stated that the 737-900ER is 15%-20% more fuel efficient than the 757-200. The A321 is similar to the 737-900ER in terms of fuel efficiency. Meanwhile, Delta is adding seats to the 56 757-200s that will remain in its fleet longer term, in order to reduce the gap in cost efficiency compared to modern aircraft.

While most of the 757s that Boeing built are still in service today, that may not be the case even five years from now. Airlines are rapidly retiring their 757s and replacing them with aircraft that are slightly smaller, have somewhat lower range and payload capabilities, but offer huge cost savings. By the time a 757 replacement would be ready for mass production, there will be very few 757s left to replace.

What about long-haul routes?
There is one niche that the 757 still rules -- long-haul routes with insufficient demand for widebody service. The 757 has unusually long range for a narrow-body: up to 4,100 nautical miles with winglets. That's significantly more range than Boeing's 737-900ER or Airbus' A321.

In the last decade or so, rising fuel prices have made it critical for airlines to appropriately match capacity to demand in each market. For U.S. airlines looking to fly from East Coast hubs to smaller markets in Western Europe or from non-hub cities in the U.S. to the big metropolises like London and Paris, widebody planes may be too large, but other narrowbodies don't have enough range.

As a result, routes between the U.S. East Coast and Western Europe have become the "sweet spot" for the Boeing 757. All of the U.S. legacy carriers use 757s for this purpose to some extent. (In addition to U.S.-Western Europe flights, 757s are also needed for some U.S.-South America flights.)

No room for a new 757
However, it's important to remember that the 757 was designed for short-medium haul domestic routes, the same mission as the 737 and A320 aircraft families. Most 757s are still used for that core mission. (Delta has more than 100 757s, but only seven configured for international service.) Fewer than 100 Boeing 757s are operating the long-haul transatlantic or South America routes that are its unique specialty.

Furthermore, new engine technology on the 737 MAX 9 and the A321NEO will cut fuel burn, thereby increasing these planes' range. The A321NEO could thus take over many transatlantic routes, though not all of them.

Lastly, a reengined 757 would not be very fuel efficient. As noted above, current-generation Boeing and Airbus planes offer a 15%-20% fuel burn advantage over the 757. Suppose new engines could fully close that gap for a 757 MAX. By the time it would go on sale, the 737 MAX 9 and A321NEO will offer double-digit fuel-efficiency gains compared to current-generation narrowbodies and the 757 MAX. Talk about a tough sell!

Adding it all up
In short, there's no market for a 757 MAX. Development costs for a reengining project would probably exceed $1 billion. That would make financial sense if the 757 MAX could actually sell as well as the original 757.

However, a 757 MAX would be more expensive and carry higher unit costs than the Boeing 737 MAX 9 or the Airbus A321 NEO. Airlines might be interested in buying a handful to replace 757s on their long-haul international routes. As for the 757's bread-and-butter busy domestic routes, airlines like Delta have already given that job to the 737-900ER, Airbus A321, and their reengined successors.

Ultimately, the long-haul narrow-body market isn't big enough to support the cost of developing a reengined 757. Airlines will have to make do with a combination of smaller narrowbodies and small wide-body craft like Boeing's 787-8 for the foreseeable future.

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Read/Post Comments (12) | Recommend This Article (7)

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 April 16, 2014, at 2:11 PM, dickeha wrote:

    Boeing does not have the plant space to build the 757 Max. The 757 was made at the Renton, WA facility which is now at full capacity making 42 737's per month with a future build plan of 52 737's per month. The other facilities are also at max building the 767, 787, 777X, and the 747-8. Boeing's present build plan is approx. 62 aircraft per month. WOW!

  • Report this Comment On April 16, 2014, at 5:13 PM, SwampFox315 wrote:

    Recently, Delta's CEO was quoted in Aviation Week, saying "Boeing made a mistake by not designing a replacement for the 75/76."

    Also, the company is learning how inefficient the 73-9 is at hauling any cargo or a full load of bags in the transcontinental market. The aircraft is underperforming and it was initially purchased for the purpose of "replacing" or rather a "stop-gap" fo the 75 fleet, if you will. Airbus A321s are expected to perform only marginally better. I believe there is more to the efficiency argument and the value of the high performance 75 -when you have to leave bags and people behind (especially in the summer months when air temps will really impact aircarft performance.) Delta will continue to learn this lesson the hard way.

  • Report this Comment On April 16, 2014, at 5:39 PM, wuzafan wrote:

    in the pax number it would be sized at, say 200-250, most airlines would prefer a twin aisle aircraft.

    one of the big bugaboos for the 57-300, was the too long tube effect, and the eternity to offload all the pax, after arrival.

    going two aisle does not come cheaply, though, as it adds weight and cross section area.

    since the narrow bodies are 148 in dia, and the plastic pig, is 226 in, an intermediate size is not just 148 in + two aisles of 21 in ea, or 190 in. the 67 sits at 198 in dia, and with a new lighter wing,and, the engines developed for the pig, it could offer superior economics at ranges below 7,000 nmi, which most of the market would want.

    the only negative to this option, is that mcboeing would not want to build something that would take away from the pigs sales.

  • Report this Comment On April 17, 2014, at 11:54 AM, captainstanger1 wrote:

    Right now Boeing has a real problem with the moral of their work force. The 42 737s a month is going to be a stretch and building 52 or 62 planes just isn't going to happen. Boeing CEOs have greatly underestimated the effect of the slanted pension vote they pushed through and also the outsourcing of engineering jobs. They are going to need this disenchanted work force on their side to make these things happen and that's just not in the cards. McNerney and co. are strip mining the company from the inside out, and all these "non-aviation" CEOs and VPs need to know that it takes more than putting something on paper to make it happen. They undervalue their employees and it's going to bite them very soon. IMO it has already started.

  • Report this Comment On April 17, 2014, at 12:52 PM, TMFGemHunter wrote:

    @SwampFox: I saw that comment from Richard Anderson, but in my opinion it was kind of self-serving. Really, what he means is that Delta would like some 757 replacements -- not that there is actually enough demand globally to justify re-engining the 757 and putting it back on the market or designing a completely new plane in that size range.

    I don't know the specifics about Delta's early experience with the -900ER. I'm surprised that it's having issues because most of its east-west flying is out of Atlanta or Detroit, where it's only about 2000 miles to the West Coast (2200 miles at most). That should be well within the aircraft's range. I could see having problems on the occasional Boston-LA flight or something like that, but the true transcontinental flights are smaller in number for Delta. (I'm leaving out JFK to LA/SF/Seattle, which are all 757/767 for the foreseeable future.)

    Longer term, the new engines on the NEO and MAX airplanes and split-scimitar winglets/sharklets should resolve essentially all of the range/payload issues for domestic flights. There are a few outliers like Phoenix-Hawaii or East Coast-Anchorage, but this is a tiny subset of the market. Either the flights will be dropped or they will go to widebodies.

    Adam

  • Report this Comment On April 17, 2014, at 3:01 PM, dieselniner wrote:

    Excellent piece, as a newcomer to the fool it' s my first encounter with Adam L-W, and I find this article a real gem. Author is evidently knowledgeable in the field and explains his opinion with facts, numbers and a clear historical perspective of the matter; a non-aviation person gets all the relevant info, in plain english.

    Wish had more writers like this one in the aviation press.

  • Report this Comment On April 17, 2014, at 3:59 PM, Guidoontheroad wrote:

    The article is right on...they are both equally uncomfortable in coach and the smaller 737 is more economical.

  • Report this Comment On April 18, 2014, at 9:42 AM, EricBryce wrote:

    When the 757 was first developed it was being called a 727 replacement which at time was called the workhorse of the worlds airlines. Boeing actually did studies of the feasibility of removing the center engine on existing models but the removal of the S duct and redesign of the rear of the plane proved to be just not cost effective.

  • Report this Comment On April 18, 2014, at 1:16 PM, aktundra wrote:

    Although the 739 in both ER and non ER models has been pushed as a 752 replacement, I doubt that its customers truly believed that it would fill that role. About the only thing is does that the 752 did was carry around 190 pax. Beyond that there is no way that the airframe, wing or engines could ever do what a 752 does. The A321 NEO will be much closer to being able to fill the shoes of a 752 when used at its max range. That said, when you look at the uses of the 752 by US operators, they still do mostly short and medium haul jobs that a 739 can easily do. The number of 752s that do trans Atlantic is small, Delta has only 10 international configured 752s out of their fleet of 100 752s. The 753 should not be discussed when talking about range since its range is less than the 752 yet the 753 is still utilized on Hawaii routes. With a range of around 3250 miles the 739 cannot come close to doing trans Atlantic so in that regard it falls flat but transcon should not be a problem, Im surprised it is having issues with anything other than cargo/bags which is a direct effect of the room you loose with the aux fuel tanks. There has also been talk of airlines wanting a twin aisle plane in the 190-250 seat range....been there, done that. The economics, at least in the last 30 years of an airplane in that size range with two aisles just cant compete economically. Best example was the Airbus A310, arguably the perfect size for a 757 replacement but totally unable to compete. Overpowered gas hog with in some configs, less than 200 seats. The 767-200 (non ER) was another plane that had its time but lost favor once fuel prices shot sky high. The 762 carried only marginally more people than the 752 with about the same range but with a lot more fuel burn. The 762ER made more sense with its very long range. The best thing about the 767 series is its comfortable layout, the 2-3-2 config is the best for passengers but offers only one additional seat across compared to a narrowbody, not quite enough to warrant its additional weight.

    Anyway..........

  • Report this Comment On April 18, 2014, at 2:02 PM, dwightlooi wrote:

    It's very simple...

    The -300 -- a 289-seater -- is the version of the 757 with a huge capacity difference over the 737-900ER or the A321. The -200 is a 239 seat aircraft which isn't that much more capacious than an A321 (215 seats).

    Of the 1,049 757s built, only 55 are 757-300. Everything else is 757-200s. In other words, there wasn't much of a market for the -300 even before the advent of the "long" 737NGs or the A321. And, if there was it would have been filled by the 787-3. There wasn't which is why only 55 753s were built and the 783 was stillborn.

  • Report this Comment On April 19, 2014, at 12:34 PM, TMFGemHunter wrote:

    @dwightlooi: That's definitely true to some extent. There were other contributing factors for the poor sales of the -300, though. The 1999 didn't have its first delivery until 1999, which was right after the Asian financial crisis and right before 9/11. The market for aircraft of any size died and didn't come back until after Boeing had ended production. The -300 may have been unsuccessful anyway, but it never got a real shot.

    The 783 was a different issue: the concept of a short-haul widebody just doesn't make very much sense (especially when it's a derivative of a long-haul plane). Too much unnecessary structure compared to a narrowbody.

    @aktundra: I agree that the 739 is not a 757 replacement in terms of its actual capabilities. But looking at the main missions that carriers are actually giving to the 757, the 739 and A321 are both good replacements. (The MAX/NEO versions will be even better!)

    These planes are being used for flights like Chicago to Newark, Houston, Denver, SF, LA, etc. (in United's case). It's a waste to have plane with 4,000 miles effective range and then use it for flights with an average stage length of maybe 1,500 miles.

    Adam

  • Report this Comment On April 21, 2014, at 8:43 PM, feralblue wrote:

    True the 737 is 15 to 20% more economical, but has 15 to 20% fewer seats than the 757. The 737 has a small wing requiring high approach speeds and braking is much less efficient than that of the 757. The 757 (unlike the 737) is used extensively for trans Atlantic flights and is the only plane that has the power to fly into high altitude airports like La Paz and Quito.

    The bottom line is price, the 737 is cheaper to manufacture and buy, but compared to the 757, it is a piece of junk, think Chevy to BMW.

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