MIAMI — Now that Airbus has launched an extended range version of its A321neo, AirwaysNews takes a look at the prospects for the aircraft in four key regions around the world — but not including the United States. Airbus launched the aircraft in a move to solidify its dominance at the upper end of the narrowbody market, which puts increasing pressure on rival Boeing to launch a clean-sheet Boeing 757 replacement.
Announced at Airbus’ year-end press conference by Airbus CEO Fabrice Bregier, the new A321LR will see an increase in maximum takeoff weight (MTOW) to 97 tons from the current 93.5 tons, allowing the aircraft to carry a load of 206 passengers in a two-class configuration with bags across a distance of 4,000 nautical miles. Airbus also says that the aircraft will offer 30 percent lower fuel burn than the Boeing 757-200W, and claims that there is a market for more than 1,000 aircraft with the operating capabilities of the A321LR, roughly 500 to replace 469 passenger Boeing 757-200 aircraft still in service, and 500 in new markets (see graphic below).
New Markets are the Key
Much of the focus in terms of market potential after the A321LR was revealed in October of last year and confirmed last month has been on U.S. airlines, and rightly so, as the three largest carriers — American, Delta and United — are by far the dominant users of the 757 on routes longer than 3,000 nautical miles (the target market for the A321LR).
But in reality, the key growth markets for the A321LR are going to be South America, Africa, the Middle East and South Asia. The trans-Atlantic market between the U.S. and Europe, even taking into account growth and the superior economics of the A321LR, won’t number more than 100 aircraft. Even if U.S. airlines buy additional A321LRs to use on domestic routes that can use the extra payload, 300 aircraft wouldn’t necessarily be enough to drive the launch of the aircraft.
But, taking Airbus’ capability figures, adjusting for the removal of the fourth extra tank and adding in the specific fuel consumption (sfc) improvement for the Pratt & Whitney Geared Turbofan (GTF) engine in 2019, we will, for the sake of argument, treat the A321LR as having a range of 4,000 nautical miles (nm).
This range, coupled with the operating cost reduction of the A321LR and economic growth in the developing world, yields some incredible results. Beginning in the United States, the A321LR allows nonstop service from South Florida (far and away the most important market) to every relevant South American destination.
And in the trans-Atlantic space, not only would more European destinations come online, the A321LR makes large swaths of Northern and Western Africa accessible from New York JFK. Despite the recent collapse in oil prices, African nations are strong and growing centers of air travel demand, in particular in premium cabins.
Even outside the North American market, the A321LR’s range and operating economics would offer several opportunities for long and thin routes. For example, consider the following maps of the A321LR’s range out of Johannesburg, South Africa, and Addis Ababa, Ethiopia, respectively. Out of Johannesburg, an airline could serve the entire African continent, most of the Middle East, and even a portion of India (including Mumbai, Bangalore and Chennai). Meanwhile, in more centrally located Addis Ababa, the A321LR would allow Ethiopian Airlines to serve the entire African continent, all of Europe, all of the Middle East, India, much of Southeast Asia, and even a large swath of western China.
But the most important potential market, especially in the long run, for the A321LR, could in fact be India. Out of India’s natural hub (and largest international travel market) at Delhi, the A321LR would enable service to almost all of Europe (except Lisbon), much of Africa (though it would miss critical markets in Nigeria and South Africa) and all of Asia.
Much ink has been spilled about the abject strategic ineptitude of Indian airlines and the manner in which that market has come to be dominated by the Middle East Big Three (MEB3) carriers, but the A321LR and its capabilities could be part of a strategy that allows India to capture a role in global aviation commensurate with the size of its home origin and destination (O&D) market.
Indeed India, and South Asia as a whole, might be the critical market for the A321LR’s longer run success. East Asia will also play a role, but as the South Asian region taps into its economic and demographic potential, the ability to serve O&D markets, as well as connecting ones with the A321LR, will be a powerful draw.
Overall, we expect Airbus to sell roughly 500 copies of the A321LR over the next 15 years, contingent on a Boeing 757 replacement from Boeing for entry into service (EIS) in the 2030 timeframe. An earlier launch of this new small airplane (NSA) by Boeing would alter our sales projections by roughly 100 frames, highly contingent on the size of the aircraft and its capabilities.
Even at the smaller order figure of 400 airframes, the A321LR is clearly worth it for Airbus because it will boost sales of the A321neo, where Airbus already holds a significant advantage over the Boeing 737 MAX 9. Thanks to commonality, and the ability to rotate the 97 ton A321neo onto domestic routes with higher capability requirements (perhaps hot and high airports or routes with heavy cargo demand), the A321LR will clearly increase the relative value of the A321neo over the 737 MAX 9.
Solving the 757 Replacement “Problem”
For all the press that it receives as a long-haul narrowbody aircraft, the actual Boeing 757 replacement problem that can only be solved by the A321LR and not the A321neo or 737 MAX 9 is relatively small, perhaps 15-20 percent of the overall worldwide Boeing 757 operation.
Moreover, this figure is only arrived at by considering an overly expansive view of the A321LR’s mission: international routes longer than 2,000 nautical miles. Indeed, our analysis, using schedules from the ch-aviation.com database, found 91 distinct routes that meet this criteria. Those routes are presented in the table below, and a summary is shown in the map below that.
Based on our cursory analysis using our model, on a 3,200 nautical mile, the A321LR would burn 24.2 percent less fuel, assuming a seating capacity of 160 passengers ( 16J / 40 Y+ / 104Y ) versus 169 for the 757-200 ( 16J / 45Y+ / 108Y) for a United style airline. This yields a 17.6 percent reduction in fuel burn per seat for the A321LR, a substantial improvement in operating economics.
In terms of payload-range capabilities, our analysis concluded (as hinted above) that the A321LR cannot quite match the 757-200’s revenue capabilities, as for any given breakdown between economy class, premium economy, first class, and international business class, the 757-200 will hold a higher number of seats. However, for the 757-200s that the A321LR will be replacing on long-haul routes, the bulk of the profitability comes from the business class seats up front, which means that the A321LR can likely deliver 97-98 percent as much revenue as the 757-200s, with at least 15 percent better trip costs. And on a payload-range basis, the A321LR can match the 757-200’s ability to carry a certain economic payload at pretty much every range.
Airbus Pressures Boeing to Launch 757 Replacement
We have gone on the record in the past noting that we believe that Boeing will launch a clean-sheet Boeing 757 replacement, and our thinking on the subject has not changed substantially since then. The same competitive dynamics that are driving the A321neo’s dominance over the 737 MAX 9 (758 firm orders versus 217 at last glance) are still in place. And given the launch of the A321LR, the real question is not whether Boeing will launch a 757 replacement but rather when.
Under the management of current CEO Jim McNerney, the answer has likely been 2030, 13 years after the EIS of the Boeing 737 MAX. But between the A321LR, and the potential for new leadership at Boeing since McNerney has reached the mandatory retirement age of 65, we believe that the timeline of Boeing’s NSA is moving up rapidly towards EIS in 2025 or 2026, with program launch by 2018 (soon after MAX EIS).
Details on this NSA are obviously hazy at this point, though we do believe that the family would be centered on a 200-seat airplane (either single or twin aisle) with enough range to fly between 4,600 and 5,000 nautical miles nonstop (comfortably surpassing both the 737 MAX and A321LR). Further family offshoots would include 175 seat and 225 seat variants, with the former timed to EIS around 2030 (allowing the fast-selling 737 MAX 8 at least 13-14 years worth of sales). The aircraft’s efficiency would surpass that of the A321LR due to wing and fuselage improvements as well as engine technology, and would likely cost at least $10 billion to develop.
And we believe Boeing is likely to pull the trigger internally on this project soon, driven in part by the launch of the A321LR. In the end, the requisite cash outlay may end up being the most valuable strategic effect for Airbus from launching the A321LR, surpassing the sales of the aircraft itself.