Boeing Still Lobbing 'Fragmentation' Bomb at A3XX

Singapore -- Although world air travel is projected to grow at a strong 4.7% per annum over the next 20 years, there still is no business case for building a "superjumbo" transport, according to Boeing.

Recent market liberalization, improved airplane capability, and passengers' strong desire for frequent, non-stop flights will continue the trend to "market fragmentation," according to Randy Basler, VP marketing for Boeing Commercial Airplanes Group. The phenomenon, already well established on North-Atlantic routes, is spreading to trans-Pacific markets as well, he said.

With the move to thinner, more frequent non-stop service, demand for intermediate-size, long-haul jets such as the Boeing's 767 and 777 and the Airbus A330 and A340, will be strong. However, extensive research indicates the need for 747 and larger aircraft will continue to drop, to only 930 aircraft over 20 years, Basler said. Of these, only 360 transports of "superjumbo" size will be required, with only 80 of these sales occurring in the first half that period, Boeing predicts.

Airbus, which is close to launching its 600-seat A3XX, rejects Boeing's argument. The European manufacturing consortium believes there is a market for 1,200 long-haul A3XX transports over the next 20 years, according to Noel Forgeard, Airbus chief executive. Several airlines have said they would buy A3XXs if price and performance were right.

History appears to support Boeing's market fragmentation argument. Prior to market liberalization in the late 1980s, 747s performed 60% of U.S. airlines' scheduled flights to and from Europe. Today, 66% of North Atlantic service by these airlines is operated by twin-engine 767s and 777s and less than three percent are 747s, Basler said. This fragmentation will continue over the next two decades, with 767s and Airbus A330s opening more than 160 North Atlantic airport pairs which did not receive non-stop service in 1998, according to Boeing forecasts.

Market fragmentation also has begun in the Pacific. Governments there are moving to "open skies" agreements with the U.S. and Canada. Carriers such as United, American, China Southern and Korean Air already are using the 777 on certain trans-Pacific routes, including Los Angeles-Guangzhou.

According to Boeing forecasts, by 2018 long-haul 777s and A340s will be operating more than 130 city pairs in North American-Asian markets, accounting for more than 40% of all trans-Pacific flights. Almost half of these city pairs, such as Detroit-Guangzhou or Atlanta-Seoul, will be in markets that do not receive non-stop service today, Basler said. Indeed, 80% of all trans-Pacific flights today stop in Japan. Yet two out of three their passengers continue on to destinations outside that country, Boeing said.

A similar effect will occur in Europe-Asia markets, with 777s and A340s operating almost 170 city pairs by 2018, Boeing predicts. Again, about half of these are markets that do not receive non-stop service now, such as Stockholm-Shanghai, Basler said.

Privately, Boeing officials point out other, less tangible advantages of non-stop flights. These include reduced exposure to takeoff and landing phases of flight by overflying hubs and intermediate stops. Most accidents occur during takeoff and landing. Passenger satisfaction also increases as there is no opportunity for them or their bags to miss their connections.