Boeing Is Preparing Its First New Plane in 15 Years. What Does the 797 Say About How Aviation Has Changed?

Boeing sees a market opening up, but its $15 billion bet lands in an uncertain time.

The deadline came, and Boeing CEO Dennis Muilenburg was still hesitating.

On an earnings call in late January, Muilenburg said the decision on whether to launch the 797 program would wait until next year. And next year's decision might be no more than the board weighing in, not the start of an actual program.

Development of Boeing's first all-new plane in 15 years has slipped another year.

Over the past five years, Boeing's sales staff have surveyed airlines again and again. The 797 team, led by former 787 program head Mark Jenks, meets every month with Boeing's chief executive and chief financial officer.

Under the original plan, Boeing was to decide in 2019 whether to build the 797.

Paul Clark, managing director of the aviation consultancy Through The Looking Glass, has no trouble understanding Boeing's decision. He told QDaily: “Aircraft makers are extremely careful with feasibility studies for a program. When you design a new plane you have to judge the market's potential over a much longer horizon. As we saw with the A380, one mistake can change everything about a program.”

Before he moved into consulting, Clark was general manager of market development at Airbus. Two weeks after Boeing announced the 797 delay, Airbus said it would stop building the A380, the largest airliner in the world, in 2021. Since it went into production the A380 has sold only 313 units, at an estimated loss of about $10 billion.

Boeing's new plane will not be as eye-catching as the A380 and its glorious failure. It is not a new generation of jumbo jet, and it cannot fly at twice the speed of sound the way the Concorde, killed off even earlier, once did.

The Boeing 797 Is Not a Radical Product. The Point Is That It's Cheap

Boeing has not released details of the 797. But after several years of sounding out the market, and according to reporting by Bloomberg, Aviation Week and Reuters, the 797 will not have a shape that breaks with convention.

Two turbofan engines, with sawtooth trailing edges on the nacelles, possibly newly developed. But it will still fly at 0.85 times the speed of sound — the speed of nearly every jet mainline airliner.

In passengers carried and distance flown, the 797 will sit between the planes that fly intercontinental long-haul routes and the ones that fly short domestic hops. It will carry 225 to 275 people per trip, with a nonstop range of roughly 8,300 to 9,300 kilometers.

The elegant upward curve of the wingtip, which began with the 787, will most likely carry over to the 797. Jon Ostrower, editor-in-chief of the aviation outlet The Air Current, said: “Look only at the wing and it's hard to tell the 797 from the 787.”

For passengers, the most obvious difference is that with the same 200-odd people on board, a wide-body plane can give each seat a little more room, and its belly can hold more cargo.

The cabin will probably also be much quieter than on older models. The composite fuselage and the sawtooth nacelle edges both cut noise. Ceiling mood lighting that fades from purple to blue is more or less unavoidable too, though that has little to do with the 797 itself.

What will really change is the price.

Boeing will probably price the 797 at around $70 million, which would make it the cheapest wide-body plane on the market, and in Boeing's own fleet would put it above only the 737. Boeing's official list prices (real sale prices always come in lower) put the 777-300ER at $361 million, the 787-9 at about $281 million and the 737 MAX-9 at about $124 million.

And by Boeing's own 2018 calculations, the 797 will burn 40% less fuel than the wide-body jets launched in the 1980s that are still flying, and earn 30% more revenue than the narrow-body jets delivered in the same years.

Boeing expects the 797 to cost less to run than older models not only because of lighter airframe materials and better engines, but also because it expects the plane to match the passenger demand that is actually there, filling more of its seats and spreading the cost of each flight further.

Boeing has floated the idea of a “middle of the market,” which is essentially the combination of passengers and distance the 797 is built for. Airlines normally fly wide-bodies on routes over 10,000 kilometers and narrow-bodies on short and medium routes of around 5,000 kilometers. Because of the technology and the costs of an earlier era, few airlines have served the middle in any volume. A 777 is too big for it; a 737 doesn't carry enough people.

Load factors on many international routes out of China's second-tier cities, for example, hover around 50%. Even at a discount the seats go unsold, and government subsidies are what keep the flights going. Airlines have dropped some of them anyway, among them Chengdu–London and Shenyang–Frankfurt. Those routes are usually flown by wide-bodies carrying around 300 people. Switch to a 797 carrying around 225, and the load factor rises sharply while the airline's costs come down.

Boeing's definition of what the 797 is for has caught the interest of its biggest customer, United Airlines. Even with no final design, and with range, seat count and other numbers still liable to change, United's chief financial officer, Andrew Levy, said: “We certainly hope Boeing brings this plane to market. We think there will be demand for it.”

Alaska Airlines, Emirates and Delta Air Lines have also shown potential interest. Delta in particular wants to be the 797's launch customer, so it can replace a Boeing fleet averaging more than 15 years old as fast as possible.

With No Technical Breakthrough Left in Aviation, Airlines Watch Only a Few Numbers, All About Carrying People Cheaply

Forty years ago an engine lasted about 1,000 hours in service; today it lasts 20 times that. Lighter materials, better aerodynamics and more efficient engines have all raised operating efficiency to some degree, but none of it compares with what came before.

When Airbus and Boeing advertise that a new plane burns 10%, 15% or 20% less fuel, what they are comparing is the cost per seat at a given number of passengers. However little fuel a plane burns, put it on a route that fills half its seats and it loses money.

That is exactly why the days of airlines buying planes simply to have newer technology are over.

The Concorde was once the emblem of innovation in civil aviation. Built jointly by the British and French aerospace industries, it flew its first test flight in 1969 and its first commercial flight in 1976, and its cruising speed of twice the speed of sound made it the fastest jet airliner in the world. In 1996 it set a record by flying from London to New York in under three hours, less than half the 6 hours 55 minutes such a flight averages today.

With its elegant, slender lines, the Concorde was often likened to a swan. But it carried few passengers per flight, burned a lot of fuel and had to stop en route, all of which made Concorde tickets very expensive. Environmental rules on aircraft noise meant it could only go supersonic over the ocean, which narrowed further where it could be used. Airlines preferred the 747, which could carry 500 people at a time, for flying intercontinental routes at scale. Shortly after a 2000 crash that killed 113 people, the Concorde was grounded for good.

Boeing once had a less radical plan of its own. In the early 2000s it worked on a 300-seat plane that would fly at 0.98 times the speed of sound and burn about as much fuel as a 747. On a Beijing–New York flight, which takes about 11 hours today, subtract an hour for takeoff and landing and, over the remaining ten hours of cruising, the new plane would be 15% faster than an older one cruising at 0.85 times the speed of sound — about 1.2 hours saved.

Nobody complains about a faster plane. Whether they will pay more for it is another matter.

Airlines would rather have a new plane that saves fuel than one that flies faster on the same fuel. “There are many ways to judge whether an airline is run well, and profitability is the most direct one,” Paul Clark said.

As he explains in his book Commercial Airline Fleet Planning, airlines always want to be able to adjust frequencies and capacity at any moment, to handle the unexpected and a market that changes by the hour. So they grow their fleets by leasing planes and buying used ones — something the three big U.S. carriers, Delta, United and American Airlines, do all the time.

In the 1980s the world's airlines had just passed 1 billion passenger trips a year; today the figure is over 4 billion. Over those decades flying went from expensive and luxurious to cheap and mass-market. Figures from IATA's economics research unit show that over the same period the average fare airlines charged to carry one ton of people and cargo one kilometer fell from $2 to under $1. Most passengers care about price above everything else, then about whether the flight is direct and when it takes off and lands.

Book a ticket on Trip.com Group or Fliggy and the flights those platforms put in front of you are ranked by price and by whether they are direct. Aircraft type is a secondary filter.

With fares falling year after year, some routes that stay full all year may have no cost left to cut. To raise margins, some airlines are pulling out first-class cabins that few people use and filling the space with more business and economy seats.

Germany's Lufthansa unveiled a cabin plan last year that replaces the A380's staircase with a spiral one, so that more economy seats fit where the old stairs stood. British Airways, Air France, Lufthansa, Cathay Pacific and other leading global carriers have already gone, or plan to go, from nine economy seats a row to ten. How cramped economy passengers feel matters less to an airline than what it costs to fly one person one kilometer.

Airlines Are Adding Direct Routes for Passengers Sick of Connections, but the Economy Makes It Uncertain

Boeing and Airbus both forecast that global revenue passenger kilometers (passengers multiplied by distance flown) will keep growing an average of 5% a year for a long time. Boeing also expects Asia alone to add 100 million passengers by 2025. Its market analysis director, James Billing, says today's fleets and aircraft types cannot handle that growth; Boeing is more bullish on the room to grow direct flights between small and mid-size aircraft markets, because existing planes are either too big to break even on the cost of a flight, or too small — short on range, or on seats.

Marty Bentrott, vice president of marketing for the Boeing 787, told Forbes that since 1990 the number of city pairs more than 5,550 kilometers apart served by the world's airlines has doubled, the number of frequencies airlines offer has doubled, and seat-kilometers (seat capacity multiplied by distance) have doubled. None of these trends shows any sign of easing. At the same time average aircraft size has actually edged down, because airlines prefer to use smaller planes to run more frequent direct flights.

Airbus sees it a little differently. It agrees the small and mid-size market has room to grow, but it thinks narrow-bodies carrying around 200 people within 7,000 kilometers are enough for the demand there is now. And if a plane has to fly farther, an existing model can simply be improved with more efficient engines and bigger fuel tanks.

It takes roughly ten years for an aircraft to go from first concept to commercial service. And when a plane finally reaches the market after ten years of development, its life has only begun. Because a product develops in a continuous line, a misjudgment at the moment it enters the market costs the manufacturer and the airlines far more than expected.

Boeing bet right on demand for the 787 but underestimated the engineering, which pushed the program's total cost from a planned $15 billion to $32 billion. “The cost and the risk of developing a new plane are very high, and it is essential to have a good grasp of how much new technology the market can absorb,” Paul Clark told QDaily. For the 797 to succeed, he added, it has to either fill a gap in the market or cut unit operating costs by at least 10% against existing technology; otherwise airlines will not put money into a new plane.

Then there is the pressure from Airbus. Several executives at aviation consultancies told QDaily that Boeing has delayed the 797 mainly on tactical rather than technical grounds: it may be gauging how Airbus will respond, and whether it will further improve a competing model such as the A321XLR. “That will force Boeing to act — either compete for the middle market or give up the chance to take it,” said Scott Hamilton, managing director of the aviation consultancy Leeham News.

Finally, Boeing has to weigh the 797 against its own newer planes. Aengus Kelly, chief executive of AerCap, the world's largest aircraft lessor, argues that packing the 797 with new technology could drive up development costs, and that Boeing should avoid “over-engineering” it and strike a balance between performance and price.

“If you design it too well it will take the 787's market. If you don't, it can easily walk into the Airbus A321neo's market,” Kelly said. Leeham News has reported that although Boeing says publicly that the 797 will not eat into the 787-8's market, the question is already being argued inside Boeing's sales department.

Airlines in different regions may want very different things from the plane, Scott Hamilton said. North American carriers want the 797 to have a range of around 9,260 kilometers; Asian carriers think 7,400 kilometers is enough, but may ask for more cargo space.

Boeing has an excellent record of forecasting demand for a new plane. Developing the 777 in the 1990s, it judged that both the technology and the demand were there for a twin-engine long-range plane that could fly more than 13,000 kilometers nonstop and replace the 747. By one count, 140 new routes appeared with the 777, flying out of New York over the North Pole to Europe and Asia, no longer stopping in Alaska to refuel the way the 747 had to.

With the 787, Boeing decided the market needed a plane with roughly the 777's range but better fuel economy and fewer seats, able to link any two cities about 10,000 kilometers apart. Since the first 787 was delivered in 2011, airlines have used it to open more than 170 new routes. Boeing estimates that about 400 routes now being opened may not be flown by the aircraft best suited to them.

But HSBC, Bridgewater Associates, the Davos economic forum and plenty of other financial and research institutions have already warned that the world economy may fall into recession. That bears directly on airlines' plans to open new routes.

And then there is China. Boeing is bullish on the growth of Chinese civil aviation, especially on international routes — the great majority of domestic routes have no need for range. But that growth has become less certain.

Over decades, aircraft makers and airlines together took civil aviation from luxury to mass transport, and made the plane the safest way to travel in the world. They got there by chasing price to its limit.

The 797 serves that limit. It may simply have arrived at the wrong time.

Data compiled by/Xie Jinping; graphics by/Feng Xiuxia

Cover image/Wikipedia; banner image/aerotime