Saturday, October 21, 2017

Will Boeing Build More 767s?

Two major Asian carriers have said this week that they plan to spend a combined total of about $19.5 billion on new passenger jets from Boeing. But those deals could pale if Boeing decides to restart production of its 767-300ER.

According to a report at Leeham News, Boeing is considering restarting production of the largest version of its 767 family due to discussions with customers interested in taking 50 to 60 of the aircraft. The last passenger version of the 767-300ER rolled off the line in 2014.

The 767-2C is the basis for Boeing’s KC-46A Air Force tanker, and the company posted a total of 38 in its order backlog for the plane.

The current list price for the 767-300ER is $201.4 million per copy, but when Boeing sold the last copies in 2014, the planes were selling for $70 million or less, Leeham News noted. The 767-300 freighter costs $203.5 million and the company had a backlog of 63 at the end of September.

Boeing continues to study its so-called new mid-range aircraft (NMA), sometimes called the 797, as a replacement for the 767 in a range segment that the company’s current models don’t cover. The 787 Dreamliner is too much airplane and the 737-10 is not quite enough.

Boeing sees a market for 2,000 to 4,000 NMAs over the next two decades, but market consensus is at the lower end of that scale. If a 797 were greenlighted next year, it would take about seven years to get the plane into service, say by 2025. Boeing could conceivably begin kicking out 767s in as little as three years.

Getting a 767-300ER back into production could happen sooner at lower cost than building a brand-new aircraft and put Boeing back in competition with the Airbus A321neo and the A321LR, both of which address the market for a passenger jet with a range of around 4,000 to 5,000 nautical miles.

Restarting production of the 767 does not kill Boeing’s prospects for a new 797. The economics of the 767 only work if the plane is sold a significant discount to its list price because the operating costs are higher than Airbus aircraft with new, more fuel-efficient engines.

Having a competitive plane until the 797 is ready gives Boeing a story to sell to customers looking at an Airbus alternative. There is substantial value to Boeing in just that aspect of resurrecting the 767.

(Paul Ausick - 24/7 Wall St)

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