It's been nearly nine years since Boeing (NYSE:BA) delivered its last Boeing 757, and Airbus Group (OTC:EADSY) is looking to take over the Boeing 757 slot with a model of its own. With airline profits growing and the aircraft manufacturing industry booming, what is Airbus bringing to the game to capture Boeing 757 market share?
In a strategy similar to Boeing's, Airbus is updating many of its existing models to better compete in today's aviation marketplace. In Airbus' case, the new models are distinguished from the current-generation version by the addition of the word "neo" to their name. Since "neo" stands for "new engine option," current-generation models are designated as "ceo" models.
The neo models from Airbus are in close competition with updated models from Boeing, although one version of the Airbus A321neo is looking to go after the out-of-production Boeing 757.
Currently, Airbus is looking to get the A321neo certified for a higher maximum takeoff weight, which would allow it to carry additional fuel tanks and extend its range. In a statement from Airbus, as reported by Bloomberg, the manufacturer said, "The higher maximum takeoff weight version of the A321neo will be the ideal 757 replacement, with true trans-Atlantic range, 25 percent lower fuel burn, and true, long-range comfort."
Even though fuel prices have fallen significantly in the past few months, fuel is still not free, and oil prices could reverse course at any time. But beyond the fuel savings, airlines with new planes can offer a better experience to their customers and possibly win over more business.
An extended-range Airbus A321neo would face limited competition from existing Boeing 757 aircraft, since the Boeing 757 has been out of production for almost nine years. There have been constant rumors that Boeing will either update the Boeing 757 or launch a replacement model sometime in the next decade, yet the manufacturer hasn't confirmed these rumors, so a new Boeing 757 may or may not ever come.
In Boeing's current product line, the Boeing 737-900ER and Boeing 737-9 MAX would be the closest products to the Boeing 757 and the extended-range Airbus A321neo. In the past few years, both United Continental Holdings (NASDAQ:UAL) and Delta Air Lines (NYSE:DAL) have ordered Boeing 737-900ER aircraft to replace existing Boeing 757 aircraft.
However, both the Boeing 737-900ER and the current version of the Airbus A321 cannot match the range of the Boeing 757. While both of the newer models feature ranges of up to around 3,200 nautical miles, the Boeing 757-200 tops them both with a range of 3,900 nautical miles.
Airbus expects to resolve this shortcoming in the extended-range Airbus A321, where the manufacturer hopes to top the Boeing 757's range by 100 nautical miles.
Not all airlines have had time to digest the announcement from Airbus, but American Airlines Group (NASDAQ:AAL) is already studying the plane. While the airline has yet to make any commitments to the A321neo, Bloomberg reports that the airline's vice president of fleet planning is studying "the economics and the range and performance capabilities of the long-range version of the A321neo."
American Airlines Group is already undergoing a massive fleet overhaul that has seen it order hundreds of new aircraft from both Boeing and Airbus. It will probably be several months before investors can get an answer on whether American Airlines Group will place an order for the Airbus A321neo, but that a major airline is already discussing the plane is a bullish sign for Airbus.
Another new model
The commercial aircraft manufacturing market is booming while Boeing and Airbus continue to battle for increasingly valuable market share. The extended-range option for the Airbus A321neo is an attempt by Airbus to gain a leg up on the larger Boeing 737 variants while targeting airlines looking to replace aging Boeing 757 aircraft.
Even though Airbus doesn't expect this extended-range A321neo to enter service until 2019, investors should look to see which airlines place orders for this version of the A321 to see whether it can be the ultimate Boeing 757 replacement..