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:: March 2001 Newsletter ::

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Dear Soon-To-Be Trans-Sonic Clients,

Greetings! Let’s talk about jetliners this month. Specifically, what does Boeing’s new line of semi-trans-sonic jets mean? Project Yellowstone, The TwentySomethings, The Sonic (PT?) Cruiser, whatever the nom du jour is, the proposal is being touted as the first real, practical breakthrough in air transport since the widebody, or since the airborne lavatory. The idea calls for a series of 100-300 seat jets with totally new configurations, and offering costs only slightly higher than the current subsonic planes.

Obviously, the new planes are aimed at Airbus, but specifically at A380. If there is a 300-seat Mach 0.95 machine with 5,000 nmi range and only slightly higher costs, you’ll hear a great sucking sound. All the First class, Business class, and high-end Economy class types will be drawn into the new machines, leaving behind the cheapskate backpackers and other low-yield types to play shuffleboard on the A380’s leisure deck. Airbus’s customers would be left with a low-margin behemoth suitable only for Hajj duty in Saudi Arabia. Airbus, Rolls-Royce, and Europe would be left with over $12 billion in unpayable bills. European industry would lose an entire generation, returning Airbus and EADS to Square One.

Needless to say, the Boeing planes’ capabilities would generate tremendous demand, making a market analysis irrelevant (so Teal Group won’t even try to sell them one). One media report even quoted some pinhead airline executive, who said Boeing hadn’t even asked airlines (or perhaps, his airline) for their view of this product’s utility. If the planes can really do what Boeing says they will, the major airlines will have no choice. They can buy them, or they can become a coal-hauling cargo operation. Of course, the Japanese are interested as customers and industrial partners, which helps preserve Boeing’s power base in that country, and thwarts any Airbus initiatives there.

In addition, the planes serve to emphatically reinforce Boeing’s view of the world, which revolves around deregulation and fragmentation. Boeing is stating clearly that it is only developing new products that conform to that world view.

Boeing is also turning the A380 argument on its head. Airbus says the 747 is old, and the world needs a new technology jumbo. Boeing is responding by saying: “why does your new technology jumbo look just like our old technology jumbo? Why haven’t you accomplished something truly new?” In short, these new Boeing planes are the perfect response to the A380 program.

But perhaps the new planes, as a response, are a little too perfect. As Lt. Cdr. Montgomery “Scotty” Scott used to say, “You can’t change the laws of physics!” Typically, as you get closer to supersonic, costs increase almost geometrically, not incrementally. Boeing claims that it has identified several technologies that will allow the new planes to be only slightly more expensive to build and operate than the current generation of subsonic planes. But when did they identify these technologies? Boeing Commercial’s independent R&D spending has declined in recent years, and it’s difficult to believe that they’ve been able to really do groundbreaking research (or even the necessary comprehensive feasibility studies). Besides, a lot depends on propulsion. Our current high bypass turbofans could prove inadequate for high speed, high altitude flight. Why haven’t the engine guys said anything?

This whole effort could easily be a calculated and artificial effort to hurt the A380. Boeing wants the world to think this is an ambush—Airbus commits to A380, Boeing clobbers them with these planes. But the timing is highly suspicious. The 747-X, which we are not sure ever existed, has run its course, with few remaining customers left to justify its development. But now, Boeing needs something else to pressure A380 pricing and industrial partnerships. These fast planes may prove far more effective at this than the 747-X.

Or, perhaps the whole thing can be regarded as a verbal war of air transport fantasies. Boeing wants you to travel at high speed at improbable prices. Airbus wants you to travel in a bloated airborne cruise ship at improbable prices.

But there’s no mistaking the bottom line: Boeing’s announcements, disingenuous or not, could be devastating to Airbus. Even if there’s only a 10% chance that these planes will materialize, that’s an unpleasant level of risk for anyone involved in building, financing, or buying the A380. It is now incumbent upon Boeing to show us proof of its research.

Next month: JSF! The Brits came over and endorsed the idea, offering $2 billion towards EMD. The new administration responded with deafening silence. We remain fearful, but still maintain that this is the only hope for sustaining US fighter market leadership. Other reports will include T-45, Mirage 2000, Bell’s 206/407/427, and others. Call with requests, and enjoy your spring.

Yours, Until The Phrase “Artist’s Rendering” Automatically Evokes Laughter,

Richard Aboulafia
 

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