Boeing Mulls 737 Replacement With 787 Missteps Still Haunting Once-Confident Company

 

Boeing is currently deciding on whether to upgrade the 737 (pictured) or launch a brand new plane.

There has been a lot of speculation over the past few months regarding the future of the Boeing 737 and whether the company will upgrade the plane or replace it completely. CEOs from Delta to Southwest have chimed in, most expressing frustration over Boeing’s lack of direction on what it plans to do with the popular plane. Boeing gave reason to believe on Wednesday that it is strongly considering developing a new plane.

With Airbus making the A320 more fuel efficient and Bombardier offering airlines an attractive alternative with the C Series, Boeing CEO Jim McNerney suggested during the company’s fourth-quarter earnings conference call that Boeing is planning on launching a new aircraft by 2020 to replace its narrow-body 737 altogether The Wall Street Journal reports. According to McNerney, Boeing believes that the airlines would rather see a brand new plane than an upgraded 737 with improved engines.

Mr. McNerney said Boeing was “leaning towards” a 737 replacement for its best-selling narrow-body jet, rather than simply updating the plane with new engines…

“We think our customers will wait” for an all-new 737, Mr. McNerney said.

But such a move presents several risks for Boeing as airlines are demanding that today’s planes be increasingly more fuel efficient with oil prices continuing their general trend upward. By standing pat on the current 737 and waiting for a new plane while Airbus elects to improve the existing A320 with the re-engined A320 NEO, Boeing could risk losing orders over the next decade as demand increases and the 737 becomes a less and less attractive option.

An entirely new plane could, however, prove to be a home-run for the Chicago-based company as airlines seem excited to see recent improvements made in the wide-body market applied to the narrow-body market as well. Hanging over Boeing’s head as it wrangle’s with the future of its narrow-body fleet is the company’s current struggles with the last plane it decided to build from scratch.

When it launched over seven years ago, the 787 Dreamliner was the first commercial plane to use primarily composite materials, making it lighter and more fuel efficient with a range comparable to its larger counterparts. The 787 was met with tremendous excitement, with Boeing pulling in over 800 orders for the plane before it even made its maiden voyage. It was a plane that caused most people who follow the aviation industry to believe that Boeing was ready to re-take the title as the world’s largest commercial aircraft manufacturer back from Airbus who has been delivering more commercial planes than its American counterpart every year since 2003.

But thanks to a string of multiple delays, outsourcing problems, labor disputes, and

Despite its initial popularity, the 787 Dreamliner has yet to be delivered to launch customer All Nippon Airways, which expected to receive the plane more than three years ago.

technical glitches, Airbus has nearly caught up to the 787, reaffirming its dominance in the commercial airline industry in the process. After three and a half years of delays to the 787, Boeing will launch the plane only two years before Airbus launches its comparable A350 (Although, considering the problem’s Boeing has experienced with the 787, this certainly isn’t a guarantee). Airbus will have suffered very little despite giving Boeing a five-year head start.

And this seems to be precisely the reason why Boeing doesn’t appear exactly sure of what to do with the 737. Does it stick with its most popular plane? Or, does it jump head first into a brand new project with the embarrassing mishaps of the 787 still very fresh in the company’s mind?

If Boeing were to launch a new plane and not upgrade the existing 737, it would need to be confident that it could deliver that plane as close to on-schedule as possible or else face losing orders over the next nine years to Airbus and the improved A320 NEO, and then allowing its rival to catch up once it decides to launch a new plane of its own. Considering the enormity of the market, it’s a gamble that Boeing seems to almost be ready to make if its recent suggestions that it won’t tinker too much with the existing 737 are true.

The next decade appears to be prime for tremendous growth in air travel as the world’s richest countries pull out of economic downturn while developing nations such as China, India and Brazil, continue experiencing explosive growth. Boeing itself predicted in 2009 that there will be 30,900 commercial aircraft delivered by 2030 with nearly 70 percent of those being narrow-body planes like the 737 (currently the company’s only narrow-body plane still in production). If Boeing were to launch a new plane and experience the kind of delays that have hindered the 787, it could very well miss out on a fast-growing market that may not have the patience to wait much further beyond 2020, the year that McNerney hinted would be Boeing’s target for delivery.

With the advancements made in airplane technology in recent years that have included a shift toward light-weight composite materials and even the possibility of planes running on biofuel, the prospect of a new airplane in the highly sought-after narrow-body market is very exciting. For a company to be able to start completely from scratch would certainly allow it to take full advantage of the most up-to-date advancements.

A hint of what a new boeing plane might look like was provided back in September when FlightGlobal published a patent application submitted by Boeing that details an aircraft with a seating capacity similar to a 737 but is wider in the interior than it is tall, giving it the ability to sit as many as seven passengers across instead of the traditional six on most narrow-body planes. The patent application may simply be the result of curious engineering minds at Boeing bouncing around ideas but it shows that the airplanes of the future don’t necessarily have to be restricted by the conventional thinking of the past.

For now, what Boeing plans to do with the future of its narrow-body fleet remains purely speculation. The company’s short term goal is to focus on increasing productivity on its 737 line which has a backorder of over 2,000. Such a healthy backorder should give the company confidence that if it does launch a new aircraft, it should be delivering 737s from now until the new plane is ready to debut.

All of these factors are almost certainly weighing on Boeing as it makes a decision on whether to go forth with a new aircraft. The company has seemed to lack confidence in recent years. The 747-8 Intercontinental, Boeing’s response to the A380, has been met with lukewarm reception so far, the 787 has yet to be delivered to a single customer and lately, some of the company’s closest allies have been threatening to look elsewhere due to the the indecision on the 737.

 

Boeing elected to re-invent the mid-size wide-body plane with the 787, while Airbus chose to invest in developing the world's largest commercial plane, the A380 (pictured)

Ten years ago, Boeing and Airbus looked at the future of the aviation industry and decided to go in two very separate directions. Airbus went big, literally, with the A380 and found success that surprised many analysts. Boeing decided to keep it lower-key and re-invent the mid-size wide-body plane. It also found great success.

Sure, Boeing came out with the 747-8 to counter the A380 and Airbus has been racking up orders for its 787 equivalent, but the last decade will be remembered as the decade that brought us the 787 and the A380.

But the last decade will also be remembered as one where air travel remained stagnant thanks to the 9/11 terrorist attacks at the beginning and ending with the Great Recession. With the outlook finally looking positive, even with oil volatility, the next decade looks much more promising for commercial aviation and Boeing and Airbus are aware of this. Sooner, rather than later, decisions are going to have to be made and they will both have to do what they always do: Look at the numbers, listen to their customers and then grab the dice and do a little gambling.

And the one who gambles correct, will likely own the skies for many years to come.

 

Editor’s Note: This is the first “feature” story I’ve done so far. Airports and Airplanes is primarily a news blog but from time to time I’ll add some of my own thoughts. Feel free to share your feedback in the comments below!
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7 Responses to Boeing Mulls 737 Replacement With 787 Missteps Still Haunting Once-Confident Company

  1. Pingback: 1,000 A320 NEO Orders in 6 Months? | Airports and Airplanes

  2. Ed says:

    Good article. What I wonder, is what will happen to those all the aircraft orders if the oil supply cannot keep up with demand over the next 10 years. No body seems to be writing about that possibility.

  3. Ryan says:

    It’s just really hard to answer because of the speculative nature behind predicting oil prices. Air demand is going to increase unless there is a massive shortage and costs go way too high. But if that happens, I think the industry will be looking for a game-changer from Boeing, Airbus or whoever is willing to come up with something that would dramatically alter how planes use fuel (i.e.- biofuel or something significantly more efficient than what is currently available)

  4. Mike says:

    Nice article. Good luck with the blog.

  5. William Thompson says:

    My guess is that there will still be a large demand for an upgraded version of the current 737 long after a new composite 737 model goes into production. Build the first new composite 737 production line in Charleston since there is no more room in Renton and keep the conventional 737 under production as long as there is a demand. It’s a win win.

    • Ryan says:

      I agree with that for the most part but I think Boeing’s main concern is to avoid redundancy. It would take a lot of R&D to re-engine the 737 and then launch a brand new plane only 5 years later. And they would also have to be worried about the potential that if they were to re-engine and come across some problems or delays then they would be very far behind as they would still need to launch a new plane at some point regardless of if they choose to upgrade or not. You make an interesting point though- Why not do both? Boeing was able to essentially launch the 777 and have it in production in about 5 years. You could re-engine now, have that ready by 2014/2015 and then launch a new plane to enter around 2020 or 2021. But with so many current 737s backordered I think Boeing is going to go for the home run ball and keep pumping out 737s now while it positions itself to launch a brand new airplane that takes advantage of the newest technology that really impresses customers (much like they did when they originally launched the 787, a plane that blew a lot of people away when first announced).

  6. Pingback: Earnings Recap: Part 2 | Airports and Airplanes

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