Boeing 787 Dreamliner Lets Airlines Fulfill New Market Dreams

CHICAGO ( TheStreet) -- In the past week, three airlines have announced ambitious new routes for the Boeing ( BA)787, a signal that the aircraft is finally starting to realize its potential to break new ground in commercial aviation.

On Aug. 25, United ( UAL) said it would fly a 787 from San Francisco to Chengdu, China, starting in June. On Sept. 3, British Airways said it would fly London-Austin starting in March, and Norwegian Air Shuttle said it would fly from Stockholm to Los Angeles in March, from Copenhagen to Los Angeles in April, from Oslo to Los Angeles in June, from Stockholm to Oakland in May and from Oslo to Oakland and Orlando in May.

"People are gaining confidence in the aircraft and as they do so, they are able to make new route announcements and open new markets," said Richard Aboulafia, vice president of consulting firm Teal Group.

The carriers are each using the airplane in different ways, all of them ambitious. United wants to open new routes in China -- it will begin the first-ever non-stop service between the U.S. and China's fourth-largest city. British Airways will fly non-stop from London Heathrow to a medium-sized U.S. city. Norwegian will be breaking the mold for European and U.S. low-fare carriers, which historically have flown only domestic and close-in international routes.

Aboulafia said the variety of new routes shows the 787's versatility. The United and British Airways efforts are similar, he said, in that they involve "long, thin routes" that could not be well-served with predecessor aircraft. Before the 787, no long-range aircraft was small enough to develop routes that have "thin" or limited traffic.

"The challenge was always to combine range, small size and good economics," he said. "The goal was to get range to migrate downward" to a smaller aircraft. For Boeing, the 767 began the process, he said. An extended range 767 typically has 181 to 245 seats and a range of 5,625 to 6,600 miles. By contrast, the current version 787-8 typically has 210 to 250 seats and a range of 7,650 to 8,200 miles.

United is using San Francisco, the best West Coast hub and the U.S. hub with the most flights to Asia, to open service to Chengdu, but that is just the start of what it can do with the 787 in Asia, said Brian Znotins, United's vice president of network, in an interview. SFO-CTU is about 7,000 miles, a 14-hour flight.

"We're looking deep into China, looking at what the next best destination in China is," Znotins said. "China is full of cities of 6 to 10 million people. With this airplane, we can be a first mover." Delta's ( DAL) 787 order has been deferred to 2020, while deliveries to American ( AAMRQ) are scheduled to begin next year.

United has 216 seats on its 787s, and already uses the aircraft on Denver-Tokyo Narita and Houston-Lagos, which Aboulafia said is "an intriguing idea, (carrying) high-value oil industry (passengers) between Houston and Lagos without a change at Heathrow."

British Airways' London Heathrow to Austin flight would begin in early March, with five weekly flights aboard a 787 seating 214 passengers. "This new route presents an important opportunity for business growth across the Atlantic, particularly in the thriving technology sector," said Sean Doyle, BA executive vice president for the Americas, in a prepared statement. It would be Austin's first trans-Atlantic flight. BA has taken delivery of two 787s and began Heathrow-Toronto service on Sept. 1.

"London Heathrow-Austin seems a great choice," said aviation consultant Sandy Rederer. "Austin is not so small any more, has a strong business sector and is a strong market for American Airlines. Also, hub-to-small-city routes are attractive because the carriers can generate good yields, and there are lots of routes that fit the model from the big international gateway hubs."

On both the Chengdu and Austin flights, the carriers will benefit from their partnerships. British Airways will operate its flight as part of its trans-Atlantic joint venture with American, and the carriers will be able to take advantage of code-shares at both airports, spokespersons for the two airlines said. United will code share with its Star Alliance partner, Air China, which has a Chengdu hub, Znotins said.

Norwegian has taken delivery of two 787s -- as of Thursday, one was grounded in Sweden with a brake malfunction, and the carrier was leasing Airbus A340s to fly in its place. Norwegian had intended to begin flying the aircraft from Oslo to New York Kennedy and to Bangkok, as well as from Stockholm to JFK and Bangkok.

In March, it will begin Stockholm-Los Angeles and Copenhagen-Los Angeles. In May, it will begin Stockholm-Oakland, Oslo-Oakland and Oslo-Orlando. Norwegian is not a hub carrier but it has frequent service in Oslo, Copenhagen and Stockholm, said spokesman Lasse Sandaker-Nielsen.

In an interview, CEO Bjorn Kjos said the 787 is "an incredibly efficient aircraft, with very low operational cost, and we have the possibility to have high utilization. The high utilization definitely can lower the cost." Sandaker-Nielsen said, "Our goal is to utilize the 787 for 18 hours, which is the highest of any aircraft type today."

While United and British Airways will operate 787s with 216 and 214 seats respectively, Norwegian will operate with 291 seats. "We don't have flatbeds (but) we have a business class -- we sell (it) as premium economy," Kjos said. "We go for the leisure market."

Aboulafia said Norwegian's 787 plans are the biggest and riskiest of the three concepts. "It's a surprise, and it's awfully optimistic," he said. "Here you have a low-cost European carrier breaking the mold, operating somewhere between a low-cost carrier and a large network carrier, going far afield."

Currently the 787 operates on about 19 routes. From Tokyo Narita, Japan Air Lines serves four cities -- Boston, Helsinki, Denver and San Diego -- while ANA serves San Jose. From Delhi, Air India serves Birmingham, England; Melbourne and Sydney. From Addis Ababa, Ethiopian serves Washington Dulles. From Doba, Qatar Airways serves Delhi and Bangalore. Norwegian operates the airplane on four routes, United on two and British Airways on two.

"Even before the 787 Dreamliner was launched, we talked about how it would allow airlines to open hundreds of new, more direct routes between cities - particularly what are known as 'long, thin' routes," said Boeing spokeswoman Lori Gunter. "These routes require the distance that had only been possible with bigger airplanes like the 747 or 777 but didn't have the passenger demand to fill one those airplanes and create an economically viable route for the airlines.

"Today, less than two years after it entered revenue service, we are seeing example after example of how this (aircraft) is being used in the market place," she said.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

More from Stocks

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War

Stocks Weaken Around The World as Trump Opens New Fronts in Global Trade War

Stocks Weaken Around The World as Trump Opens New Fronts in Global Trade War

Trump Puts Tech in Trade War Crosshairs With Planned Curb on China Investment

Trump Puts Tech in Trade War Crosshairs With Planned Curb on China Investment

Trump, Trade Wars, General Electric, 'Jurassic World' - 5 Things You Must Know

Trump, Trade Wars, General Electric, 'Jurassic World' - 5 Things You Must Know