Editors' pick: Originally published April 5.

This is the second story in a series about the future of the Boeing 787 Dreamliner. The first story discussed whether Boeing wants the 787-9 to replace the 787-8 as the centerpiece of the program, and how a shift might impact 787-8 production.



Four years into the life of the 787 Dreamliner, Boeing (BA) - Get Report is starting work on the aircraft's third variation.

Last month, major assembly of the first 787-10 began in Nagoya, Japan, where Boeing partner Kawasaki Heavy Industries began installing circular frames into the midforward section of the fuselage.

The first aircraft is scheduled for delivery in 2018. Launch customers are Singapore Airlines and, in North America, United Airlines (UAL) - Get Report .

Unlike the 787-8 and the 787-9, the 787-10 will not be assembled in Everett, Wash. Rather, final assembly of every aircraft will take place at the plant in North Charleston, S.C. This is because the plane's mid-fuselage section, which will be assembled in North Charleston, will be too long to fit into the Dreamlifter cargo aircraft that typically transports sections between North Charleston and Everett.

The 787-10 will be the biggest aircraft in the 787 family, 224 feet long with seating for about 330 passengers. It will also have the shortest range, about 6,430 nautical miles. Boeing began taking orders in 2013 and now has 153 of them.

"The 10 will be an interesting experiment," said Richard Aboulafia, aerospace analyst for Teal Group. "It might be a marvelous performer, so that people won't mind losing 500 to 800 nautical miles. You give up range to have more passengers.

"But at what point do you begin to sacrifice something by making the aircraft too big?" Aboulafia asked. "With the 767-400, we found out."

The development path of the 787 is widely viewed as being similar to that of the 767, a predecessor which in some ways has been replaced by the 787. The 767-200 was introduced in 1982; it first flew for United.

The 767-300, a stretched version with 20% more capacity, was introduced in 1986 and came to account for about two-thirds of all 767 sales. At one point, the 767 flew the majority of the world's trans-Atlantic flights, according to Wikipedia.

The 767-400, introduced in 2000, had 12% more capacity than the 767-300. But it was introduced into one of the airline industry's periodic downturns and didn't do as well.



Aviation consultant Scott Hamilton views the evolution of the Boeing 767 as a roadmap for what will happen to the 787.

"The 767-200/ER was the launch for the program," Hamilton wrote in Leeham News and Comment. "It was eclipsed by the 767-300/ER, which became the mainstay of this popular family. The 767-400 was a sales dud, a further stretch of the -300/ER. Great for seat mile costs, but sub-par field and operational performance," he said.

Jim Haas, Boeing director of product marketing, said the analogy isn't wholly relevant. He said the 767-200 was a successful aircraft. "We have a couple of dozen 200s out there," he noted. As for the 767-300, "almost 500 are still flying," he said. He acknowledged, however, that the 767-400 was "not successful: It came out later and had stiff competition."

"The latter 767s were just stretches," he said. "The difference {from the 787} is that the 8 is a much bigger airplane and very effective at opening markets and it will not be obsoleted by the 9."

As for the 787-10, Haas said, "We went out and talked to customers about the 787, and people wondered about efficiency. When we launched the 787, oil was at $40 a barrel (which) we still see with oil prices where they are today. Not many airlines think they will stay there. So when we talked to customers about the 10, they really saw a huge need for efficiency -- they valued efficiency over range."

Additionally, Haas said, "the 10 can fly 90% of all the twin-aisle markets being flown today. The old thinking that all airplanes have to have the same range, that's obsolete. When you are focused on maximizing network profitability, it is more profitable to have the ultra-efficient 10 flying most of it.

"Customers are looking at having the 10 replace the {Airbus} A330," he said. "It's much more efficient."t

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.