In the latest twist to Boeing’s revised new aircraft development strategy to compete with the Airbus A321XLR, the manufacturer now appears to be exploring a large single-aisle design similar in size and dimensions to the 757.
According to an investor note issued by Morgan Stanley Research, suppliers confirm that the most recent design studies are for an aircraft combining aspects of the previous New Midsize Airplane (NMA) and the Future Small Airplane (FSA)—another decade-plus-long design study into replacement options for the 737.
The latest evolution appears to build on revelations earlier this year that Boeing was working with industry suppliers on defining a new variant of the NMA family dubbed the -5X which is thought to be targeting the 250-275 seat size category. Although at the time it was believed the new option retained the twin-aisle configuration identified in earlier studies, this is no longer the case according to Morgan Stanley.
The new aircraft would form Boeing’s long-looked-for replacement for the 757-200/300, but with a range of up to 5,000 nm and significantly improved operating economics. Although earlier studies appeared to show Boeing leaning towards a new all-composite design, the Morgan Stanley report also suggests the manufacturer is again returning to earlier manufacturing and design solutions which included combining a composite wing and aluminum fuselage.
However, even if the market warms to the revised new aircraft strategy, the report also cautions Boeing remains in a weakened position to launch an all-new product. “Due to the 737 MAX grounding issues, 787 grounding issues, and COVID-19, Boeing’s debt load today is the highest in the company’s history with Net Debt of $41.7 billion ($63.6 billion of Total Debt, $7 billion of Cash and Cash Equivalents, and ~$14.8 billion of Short-Term and Other Investments). This debt load and negative free cash flow today could pressure Boeing’s ability to fund a new program,” says the company.
Morgan Stanley also notes that its current Boeing financial forecasts “do not anticipate a new program launch. We currently forecast free cash flow generation of $7-9 billion annually in 2022E to 2025E. We expect this free cash flow to be sufficient in funding R&D for a new program. However, debt paydown leaves limited room for a buffer for cost overruns in early delivery tranches.”
The company also cautions that program delays, cost overruns, and execution mistakes “could trigger the need for an equity raise when a new program transitions from development to production. Even if a program were announced today, the timing of this transition is likely 3-5 years away.”
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