After initially downplaying the idea, Airbus (NASDAQOTH:EADSY) executives have started to seriously consider launching an even larger version of the new A350 widebody jet. This new model -- tentatively named the A350-8000 (or perhaps the A350-1100) -- would compete with the 777-9 that Boeing (NYSE:BA) is currently developing.
John Leahy, Airbus' chief salesman, has stated that a stretched A350 would be similar in size to the 777-9 and offer lower unit costs. Even so, Airbus is unlikely to break Boeing's dominance of this 400-seat market segment -- and may not even try.
Airbus warms to the 400-seat segment
At a recent industry conference, Leahy noted that he had initially been skeptical about the potential demand for a plane 40-45 seats larger than the A350-1000. However, as he has spoken to customers in recent months, his opinion has shifted somewhat.
Leahy thinks that some of Boeing's design choices for the 777-9 create an opening for Airbus. For the 777X, Boeing had to meet the exacting specifications of the big Middle Eastern carriers: Emirates, Qatar Airways, and Etihad. These airlines needed a plane with a big wing and very powerful engines in order to take off fully loaded during the summer. (High temperatures reduce aircraft engine performance.)
By meeting these demands, Boeing secured 235 orders for the 777X from these three carriers, mainly for the larger 777-9 variant. However, the 777X's big wing and powerful engines add weight, which hurts its fuel efficiency on shorter flights.
The A350-1000 is significantly lighter than the competing 777-8. That will give it a fuel-efficiency advantage. A larger A350-8000 should have a similar weight and fuel-burn advantage over the 777-9.
Airbus faces a trade-off
The trade-off for having a lighter aircraft is lower range. If Airbus were to stretch the A350 again, it would face a big choice. It could design a significantly larger wing in order to keep the airplane's range in the same ballpark as the A350-1000. However, that would add weight, reducing or eliminating any fuel-burn advantage over Boeing's 777-9.
On the flip side, it could minimize the design changes relative to the A350-1000 to maximize fuel efficiency. That's what Boeing chose to do with the 787-10. The result was an extremely fuel-efficient plane with about 1,200 nautical miles less range than the 787-9 it was derived from.
Airbus is far more likely to choose the second path. Leahy admits that Boeing has won the battle for Emirates, Qatar Airways, and Etihad. Instead, he wants to optimize a stretched A350 for the likes of British Airways and United Continental. But would those airlines necessarily buy a 777-9 rival with better fuel efficiency but shorter range?
The problem is that most airlines want to simplify their fleets. The A350-8000 would be able to cover most long-haul airline routes, but most airlines do operate some flights beyond its likely range. If they need the 777-9's range for some routes, they might be willing to sacrifice some fuel efficiency rather than buying two planes in the same size segment.
It's instructive to note that Boeing has more than three times as many orders for the 787-9 as it does for the larger, shorter-range 787-10. Airbus' A350-900 -- which is similar in size to the 787-10 with more range but somewhat higher fuel burn -- has outsold the 787-10 by a similar margin.
Airbus has fewer than 200 firm orders for the A350-1000 model today. A larger model with less range would probably sell fewer units -- and some of those would be cannibalized from the A350-1000. This casts doubt on whether Airbus will find enough of a market to justify developing a larger A350.
What will Airbus do?
Airbus expects to announce a decision on stretching the A350 at the Farnborough Air Show in July. If it can keep the development costs relatively low, Airbus may go ahead even if the market size seems relatively small.
However, a stretched A350-8000 would hardly be a 777X killer. In addition to having less range, the A350-8000 would probably be about 265 feet long, making it the longest plane in the world by nearly 15 feet. Emirates President Tim Clark recently pointed out that this would complicate ground handling at some airports.
Airbus will also probably have its hands full meeting demand for the A350-900 and A350-1000 until well beyond 2020. As a result, Boeing is likely to maintain its supremacy in the 400-seat airplane market for the foreseeable future.