Boeing should revisit plans for a clean-sheet smaller widebody when it considers how to take on Airbus's growing market share with the A321, according to Steven C. Udvar-Hazy, senior vice-president and chief procurement officer of Aviation Capital Group.

"For a long time Boeing was looking at the NMA, or the smaller widebody segment, but bigger than the A321, and I think Boeing needs to seriously look at that segment again," says Udvar-Hazy.

"They need to look at what could they possibly build as a competitor to an A321 that perhaps is larger, has more range, but I think that would necessitate an all new product. You wouldn't be able to do that with the existing limitations that you would have with the Max architecture, where you simply cannot stretch that fuselage any further than what they've done with the Max 10."

The Boeing 737 Max 8 is "clearly the most favoured popular variant" of the Max family.

"We see most of the interest for the Max 8. It has the largest customer base. Most of the orders are for the Max 8s, so Boeing has a relatively strong competitor to the A320neo."

Boeing is at a disadvantage to Airbus in the A321 segment, he believes.

"The Max 10 is not yet certified. The Max 9 is an efficient airplane, but it's not as big as the A321, so, especially for low-cost carriers, airlines where seat capacity really matters, you're at a disadvantage."

Udvar-Hazy would not be drawn on the timing for certification for the Max 7 and Max 10.

"A lot depends on the US FAA. And what we have seen, certainly following the Max grounding is the entire regulatory review of these certification programmes. That's a question that the FAA and Boeing would have to answer," he says.

Before the pandemic, he says the market was already seeing a trend where airlines were moving away from the very large widebodies in favour of mid-sized widebodies like the 787-9 and the A350-900.

"That trend has only accelerated as a result of Covid," he says. "We're seeing this trend towards more efficient, less risky smaller airplanes with range, like the A321XLR, that are really changing the way airlines are thinking about their longer-term fleets. I think going forward, we're going to really see more of a de-emphasis on the very large widebodies such as the A380 and to some extent with large widebodies such as the 777X."

The main reasons for the shift are yield and frequency. "It is much less risk flying a mid-sized widebody and many airlines operate in seasonal environments, so filling an A380 every day, and with the right yields can be very challenging," he says. "One of the other trends is that business and high-yield travellers value frequency and choices. They would rather have two or three flights a day, connecting major cities, than one with an A380."

China is forecasted over the next 20 years to become the largest domestic aviation market. COMAC is due to start delivering its C919 narrowbody in 2022, but Udvar-Hazy dismisses the Chinese manufacturer as becoming a serious competitor to Airbus and Boeing any time soon.

The "biggest challenge" for Comac will be certifying the aircraft with the FAA and EASA.

"In order to have a viable, long-term business model, having certification with the FAA and EASAis going to be critical, he says. "I think we can see that over the next decade. That's not something that you can just do overnight. That takes time to build that infrastructure throughout the globe. Certainly from a certification standpoint, there is a lot of work to be done."

Udvar-Hazy notes China as a standalone market can sustain a single-aisle aircraft, and very few other countries can do that.

"Russia was trying to do that prior to the Ukraine crisis, but Russia is not as big of a domestic market," he says. "Even if the C919 does not get traction outside of China, it can still generate enough sales to be a viable product just within the China domestic market."

Asked whether China's certification of the 737 Max would help with Western regulatory approval of the C919, Udvar-Hazy says "we'll see".

"I think that the Max will ultimately be certified hopefully in China. Certainly, the Chinese Airlines have a big exposure to the Max. We're all hoping that that happens sooner rather than later."

Inflationary pressure
US inflation data due to be reported on 11 May is expected to show that consumer prices rose at an annual pace of 8.1% in April, down from 8.5% in March. However, analysts and investors worry that disruptions to fuel supplies will continue due to Russia's invasion of Ukraine.

Udvar-Hazy admits he is concerned about higher costs at the original equipment manufacturers due to rising raw material prices, programme delays and certification issues being passed onto leasing customers.
"It is something that we're watching carefully. It is one of the challenges with the global supply chain and inflation, in general, we are seeing very strong inflation pressures in the United States," he says. "That can have ripple effects in escalation because the escalation indices that our OEM partners use are tied to broader indices, where inflation can have it an impact...If it is more expensive to move goods around, then that means it's more expensive to move aircraft parts around to have the global supply chain work in an efficient cost, efficient manner."

Chinese inflation data released on 11 May showed consumer prices gained 2.1% from a year earlier, and the fastest pace in five months, partly due to food prices.