Aerospace analyst Richard Aboulafia attends the Pacific Northwest Aerospace Alliance conference in Lynnwood on Wednesday. (Janice Posdada / The Herald)

Aerospace analyst Richard Aboulafia attends the Pacific Northwest Aerospace Alliance conference in Lynnwood on Wednesday. (Janice Posdada / The Herald)

Smaller jetliners are the future, says an aerospace maven

Richard Aboulafia thinks Boeing’s next new airplane should be a single-aisle 737 replacement.

LYNNWOOD — Here’s what airline passengers are willing to pay extra for: non-stop rides to their destinations.

Here’s what airlines are figuring out: By flying passengers point-to-point on a mid-sized or single-aisle plane, they can save on operating costs and increase profits.

As a result, demand for larger, twin-aisle airplanes, such as the Boeing 777 or Airbus A330, is falling worldwide. The exception is the 787, aerospace analyst Richard Aboulafia told participants at the Pacific Northwest Aerospace Alliance conference Wednesday at the Lynnwood Convention Center. Aboulafia is considered one of the world’s top aerospace industry experts.

“Airlines can charge more because there’s no changing planes,” said Aboulafia, vice-president of the Teal Group, a consultancy.

In years past, single-aisle aircraft accounted for about 50% of commercial airplane sales, and wide-body planes made up the other half. Now the percentage of single-aisle sales is increasing, reaching 60% to 70% of all commercial airplane sales.

Declining demand for Boeing’s twin-aisle lineup could have consequences for Everett, home to the company’s main wide-body assembly plant. It employs about 40,000.

The Pacific Northwest Aerospace Alliance conference drew more than 300 participants, including representatives from Boeing and Airbus and other airplane makers, as well as regional manufacturers that supply the global aerospace industry with everything from airplane interiors to specialized welding services.

Suppliers were concerned about the shutdown of 737 Max production, built at Boeing’s Renton assembly plant. A show of hundreds of hands in a crowded ballroom revealed that roughly three-quarters of the audience was part of the 737 Max supply chain.

While the return of the 737 Max is on everyone’s mind, suppliers also want to know what the future might bring. Will Boeing launch a much-anticipated New Midsize Airplane, the so-called NMA that has been informally dubbed the 797? Or an alternative — a Future Small Aircraft (FSA), a single-aisle series that would seat 160-220 passengers and cover the bulk of the current 737 market?

“I’ve had my doubts about the new mid-market airplane,” Aboulafia said. The NMA has been widely discussed as a twin-aisle, 220- to 270-seat airplane, the next project on Boeing’s drawing board.

But with demand for wide-body airplanes slipping, it might make better sense to build an FSA.

Aerospace analyst Kevin Michaels, managing director of AeroDynamic Advisory, a consulting firm in Ann Arbor, Michigan, agreed.

Aerospace analysts Kevin Michaels (left) and Richard Aboulafia attended the Pacific Northwest Aerospace Alliance conference in Lynnwood. (Janice Podsada / The Herald)

Aerospace analysts Kevin Michaels (left) and Richard Aboulafia attended the Pacific Northwest Aerospace Alliance conference in Lynnwood. (Janice Podsada / The Herald)

About 50% of commercial aircraft are leased, and the cost to lease a wide-body is getting cheaper, Michaels said.

The demand for a new single-aisle plane is there, both Aboulafia and Michaels said.

Now it’s up to Boeing to respond.

Boeing’s new CEO, David Calhoun, said last week during a conference call that any decision about the NMA is being put on a slower track while the company re-evaluates airline needs.

“That’s OK for now,” Aboulafia said, but if the company doesn’t launch a new airplane program to counter Airbus’ line of single-aisle airplanes, “the consequences are dire.”

Boeing needs to launch a “A320neo-A321XLR killer,” Aboulafia said, referring to Airbus’ bigger single-aisle models and their robust sales.

“Do nothing” and Boeing risks ceding a huge portion of mid- to smaller-sized airplane sales to Airbus, Aboulafia said.

“Calhoun is really in a crucial position at a crucial time,” Aboulafia said.

Bottom line: If Boeing doesn’t make it, Airbus takes it, he said.

Boeing’s 737 Max back orders are about 5,000 from 100 customers. Production of the 737 Max is expected to continue through 2030, Aboulafia said.

The need for a new Boeing NMA or FSA is expected before then.

If Boeing does decide to launch a new plane, where do you build it? Renton, Everett, somewhere else?

How about Everett? There’s a big bay in the factory there that could be empty in two or three years.

Every two months, the Everett assembly plant rolls out a new 747-8. But unfilled orders for the four-engine, 51-year-old jet number just 17, according to the company’s latest Securities and Exchange Commission filing.

That opens a big bay at the plant by 2022 or so.

“Why not” build a single-aisle model in Everett? Aboulafia said after his presentation on Wednesday.

If Boeing builds it, “they’ll get it right,” he said. “I hope they respond.”

Aboulafia was critical, meanwhile, of Boeing’s current investment strategy. Instead of returning billions of dollars to shareholders, it needs to invest money in research and development, he said. Boeing recently borrowed nearly $11 billion and returned more than half of that, $6 billion, to shareholders.

“Chicago seems to have a certain idea of how to run a company,” Aboulafia said. “That needs to change.”

Janice Podsada;; 425-339-3097; Twitter: JanicePods

More in Herald Business Journal

Boeing asks that its big state tax break be suspended

The company hopes the move will resolve a trade dispute involving European rival Airbus.

Boeing finds debris in wing fuel tanks of several 737 Maxs

The company did not say what the objects were found, but one report said they included tools and rags.

Charge: Lynnwood tobacco smuggler dodged $1 million in taxes

The man, 57, reportedly dealt in illicit cigarettes. Tax returns claimed he sold hats and T-shirts.

Some dissent emerges on new engineering contract with Boeing

“This is being shoved down our throats,” said one SPEEA council rep.

FAA faces dilemma over 737 Max wiring flaw that Boeing missed

The vulnerability could lead to an emergency similar to the one that brought down two jets.

Everett’s new passenger terminal gets some national love

Paine Field was voted 8th-best among a selection of small airports, some of which aren’t all that small.

United pushes back expected return of grounded Boeing planes

United, Southwest and American are bracing for a second straight summer without their Max planes.

US manufacturing output hit by Boeing troubles, slips 0.1%

Excluding the production of airplanes and parts, factory production rose 0.3%.

Boeing and engineering union agree on new, extended contract

The board of SPEEA will recommend the proposal to its 18,000 members in the Puget Sound area.

Airbus CEO sees no short-term benefit from Boeing Max woes

The European planemaker’s competing A320 is sold out through 2025.

Virus outbreak in China poses a new problem for Boeing

A number of deliveries are ready for Chinese customers who “cannot come to Seattle to take delivery.”

Boeing wins zero orders and delivers just 13 jets in January

Airbus by comparison had a big order month, winning net orders for 274 commercial aircraft.