LONDON  —  The new A330-800 and A330-900 will be extremely competitive aircraft from day one. By EIS, as we mentioned in our 787 report earlier this week, we expect the A330-800neo to come within 2% of the seat-mile economics of present day Boeing 787-8s, and the A330-900 to come within 0.5% of present-day.

By the expected EIS of the A330neo in the fourth quarter 2017, we project that Boeing will gain an additional 2.5% worth of incremental fuel burn improvement on the 787-8, and -9 thanks to weight reduction of 1-1.5% and other initiatives. We further project that Boeing will improve the efficiency of its 787 manufacturing processes by 3-4%, which will improve its ability to discount aircraft. Furthermore, as mentioned before, we expect Boeing to pitch the 787-9 versus the A330-800neo, and the 787-10 versus the A330-900neo, which in both cases would allow Boeing to operate from a strong operating cost advantage.

The 787-8, while not quite dead, has grown out of favor with customers, and with the advent of the A330-800neo, we expect the sales center of the 787 program moving forward to continue to shift in favor of the 787-9/10. Airbus will have plenty of space to discount, however a new larger engine (112 inches versus 97), increased wingspan, and A350-style winglets will increase the development costs above those of a basic re-engine program.

In terms of sales, at a briefing before the open of the Farnborough Airshow, Boeing Commercial VP of Marketing Randy Tinseth noted that he thought the market for the A330neo was “no more than 300 or 400 airplanes.” We believe that the market is a bit larger, upwards of 750 frames to be exact.

We project that the A330-900neo will be the larger seller of the two variants, primarily due to ithe popularity of the A330-300 with Asian airlines. The A330-900neo will achieve operating cost parity (excluding capital costs) with the 787-9 out to about 3,000 nautical miles, and will be extremely competitive out to 4,000 nautical miles. The range extension of 400 nautical miles is also a welcome development, as customers of the A330-300 often push that aircraft to the edge of its capabilities. We are skeptical of Airbus’ ability to deliver 14% per seat fuel burn improvement on the A330neo initially, though an expected boost in seating capacity should help. The 787 is sold out for several years, and the superior availability of the A330-900neo should make it a viable option.

Based on the best information available to us, and incorporating all of the projections made above, we are now ready to release operating cost estimates for the A330-800/900neo on a 4,350 nautical mile (5,000 mile – ESAD) route. The price of fuel is taken as $2.94 per gallon as per IATA’s latest North American monitor.

A330-800neo Boeing 787-8 A330-900neo Boeing 787-9 Boeing 787-10
Seats 252 246 305 306 352
Fuel Cost $44,446 $41,477 $50,567 $47,956 $52,959
Crew Cost $12,194 $12,194 $13,457 $13,944 $15,013
Maintenance $9,432 $8,652 $10,097 $9,795 $10,367
Other $8,218 $7,441 $9,149 $9,266 $9,905
TOTAL $74,290 $69,764 $83,269 $80,961 $88,244
Cost per Aircraft Mile $14.86 $13.95 $16.65 $16.19 $17.65
Cost per Seat Mile $0.059 $0.057 $0.055 $0.053 $0.050
Versus A330-800neo Datum 3.8% 7.4% 10.3% 15.0%
Versus A330-900neo -8.0% -3.9% Datum 3.1% 8.2%

These figures represent comparison with our best estimate for 787 performance for new build 787s in 2019, not present day ones. As our analysis clearly shows, even with expected improvements, the A330-800/900neo comes within 3-4% of the operating economics of the 787. When combined with superior availability, it is our view that the A330neo has a clear and viable business case, even if it won’t match the runaway success of its smaller cousin, the A320neo.