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The Boeing 797 is a conceptual aircraft by The Boeing Company (NYSE:BA) that has gathered quite some interest from the industry, analysts and investors. It is one of the subjects AeroAnalysis has covered for quite some years, and we even have written an extensive report that has been bought my possible major suppliers of the aircraft. Currently, the launch date of the program seems to be slipping, something which we already expected back in 2017, but there also are some people who think that Boeing should turn the Boeing 797 into a replacement of the Boeing 757 rather than a replacement of the Boeing 767. As we work on publishing a new update to the extensive report, we will also be publishing some small reports on the subject exclusively on Seeking Alpha. In this report, we will explain why we think that the Boeing 797 should not be a pure replacement of the Boeing 757.

Development costs

While aircraft design and manufacturing is a complex business, in essence, it works the same as any other business: In order to justify development costs, sufficient demand should exist to turn a profit on the development. Surely, there are programs, such as the Airbus (OTCPK:EADSF) A380, that are not meeting that simple criterion. The absence of financial success can either be because of high development and manufacturing costs or limited sales.

The development costs for commercial aircraft run in the billions, and that obviously excludes cost of manufacturing. The development costs for the Airbus A350 and Boeing 787 were around $15B. Obviously, these are wide-body aircraft, while a Boeing 797 as a Boeing 757 replacement would be a single-aisle jet development. However, major parts of development costs are fixed, and the nature of aircraft design is complex, so a single-aisle development likely would still cost around $10B.

Sales potential

In total, Boeing received 1,049 orders for the Boeing 757. The Boeing 757 seats between 200 and 240 passengers in a 2-class configuration and can carry passengers over a 3,400-3,915 nautical mile distance depending on the variant. Most of these deliveries have already been replaced, and we don’t consider the number of deliveries to be reflective of the sales potential for a 757-like Boeing 797. Instead, to get to the sales potential, we need to look at the number of Boeing 757s and Airbus A321ceos in service. The reason why we consider the Airbus A321ceo as well is because Delta Air Lines (DAL), one of the biggest operators of the Boeing 757, has configured their Airbus A321ceo in roughly the same configuration as the Boeing 757, while their Boeing 757s operates the majority of flights within the range capability of the Airbus A321ceo and Airbus A321neo.

Our research carried out at the end of January showed the following Boeing 757s in operation, excluding government and executive jets:

Table 1: Boeing 757s in service (Source: Dhierin-Perkash Bechai)

655 aircraft looks like a lot, but it certainly does not look a number that would justify a clean sheet design with associated costs. There are also almost 1,700 Airbus A321ceo and slightly less than 500 Boeing 737-900ER aircraft in operations, which would put the replacement potential at little over 2,835 units for a Boeing 797 that is a successor to the Boeing 757. That number only includes replacement potential. It is expected that until 2037, 56% of the single-aisle deliveries will support growth, which puts the market space at roughly 5,900 units. We should also add demand for freighter aircraft to it. When doing so, we arrive at an addressable market of 6,400 units. What this figure does not include is that part of future demand is already in the order books. If we subtract the A321neo, Boeing 737 MAX 9 and Boeing 737 MAX 10 orders and some of the Boeing 737 MAX 10 orders, we would end up with a sales potential of 3,200 aircraft excluding freighter sales. That’s still a lot of aircraft were it not that Boeing and Airbus compete for the same orders, and in a duopoly, that would boil down to roughly 1,600 for each jet maker. Alternatively, if we incorporate Airbus’s sales target for the Airbus A321LR (long range variant of the A321neo), we would get to 1,155 aircraft for Boeing. We do think that Boeing’s freighter line up is quite a bit stronger than Airbus’s, so we would end up with a sales potential of 1,700-2,140 aircraft.


The big question is how much would Boeing get out of it in profits if it spends an X amount in development costs. If we assume that the Boeing 797 in the role of a Boeing 757 replacement effectively replaces the Boeing 737 MAX 9 and Boeing 737 MAX 10, which is a very optimistic thought, we would get to 1,700 deliveries for the Boeing 797 and ~2,150 in the more positive scenario. If development costs and the initial loss-making products are around $12.5B, we’d expect Boeing to be able to generate profits between $8B and $13.5B. We think that, ideally, Boeing would like to have their program return their R&D roughly twice in program manufacturing profits, once to cover the sunk costs R&D and once to generate the real total profit. Boeing would meet that criterion for the higher sales estimate on the condition that we would split sales almost equally between both jet makers. Given that Airbus has been outselling Boeing 5-to-1 in the segment, there is very little reason to assume that sales would be divided equally. If we assume that Boeing would roughly double its share in the unfilled market space, Boeing would not be able to generate twice its developments costs in profits in either sales potential scenario.

Threat of competition

What we do consider to be a risk are couple of things. The first thing being that freighter sales potential makes up for a quarter to a third of the total sales potential. If that market melts down, it will have a significant impact on the business case for a 757-like development. Secondly, Airbus is pretty comfortable at the high range of the seating bracket for single-aisle jets, and there is no reason to assume that Boeing’s own Boeing 737 MAX 10 won’t capture orders in the same space. Each sale made there is a sale that won’t go to a theoretical Boeing 757 clean sheet replacement.

Key figures

Figure 2: Airbus A321neo (Source: Airbus)

Airbus has an established customer base due to the success of the Airbus A321ceo and seems to be in a good spot to continue expanding at the higher end with sales for the Airbus A321neo and Airbus A321LR (the long range variant of the Airbus A321neo). The pressure doesn’t end there, Airbus has been continuing evaluating design options to counter a possible Boeing 797 development. One such development is the Airbus A321XLR, which seems to be the aircraft that would enter the market earlier than most others. The Airbus A321XLR would further increase the range of the Airbus A321, thereby increasing its attractiveness as a transcontinental aircraft for thin routes. A more forward-looking development that would be able to handle further growth in demand for air travel between transcontinental secondary city pairs would be an Airbus A321neo Plus, which would have its wings redesigned for higher aerodynamic efficiency as well as a lengthened fuselage. Obviously, all of these designs would cost money to develop for Airbus as well, but likely a whole lot less than it would take Boeing to fill in the same space. So, the competitive pressure that Airbus could exert is huge, and that makes it unattractive for Boeing to provide an exact Boeing 757 replacement. If Boeing’s installed base in the segment would have been bigger, the chances of success would have been bigger.


We think that sales potential is certainly there to develop the Boeing 797 as a pure Boeing 757 replacement. At the same time, we do think that there are major risks involved, given the dependency on freighter sales and potential and almost certain competitive pressures from Airbus. With that in mind and the huge developments costs and effort, we think Boeing would be better off staying away from a pure Boeing 757 replacement and focus on a Boeing 797 development that focuses more on the payload-range area placed slightly left (more range) and higher (more capacity) compared to the Boeing 757 moving away from a spot with stiff competition but possibly with sufficient demand as the aircraft should attract the sales from the lower side of the wide-body market and the higher side of the single-aisle market. It’s not an easy spot to serve, but it certainly is an area where Boeing has a stronger installed based than it has with the Boeing 757. In time, we believe market demand could increase for this spot, in the same way demand for single-aisle aircraft is shifting towards the higher side of the seat bracket.