Boeing's board has approved building a version of its 737 with a redesigned engine in an effort to quickly match growing competition from rival Airbus.
Boeing’s board has approved plans to build a new version of the 737 with a more fuel-efficient engine rather than create an entirely new single-aisle jet.
The formal decision came after months of internal debate, and after one big customer split a large, crucial jet order between Boeing and rival Airbus.
The company said Tuesday its new offering, dubbed 737Max, has commitments for 496 airplanes with the new engines from five unidentified airlines. Boeing’s stock rose more than 2 percent Tuesday.
The decision to revamp rather than replace the 737 was spurred by American Airline’s big jet order in July that broke Boeing’s exclusive grip on the country’s third-largest airline. Operated by Dallas-based AMR, the airline said it would order at least 460 new jets, split between Boeing and Airbus.
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On the question of whether the plane will be assembled in Renton alongside Boeing’s current single-aisle jets, Boeing Commercial Airplanes CEO Jim Albaugh said at a news conference Tuesday that “we’re looking at all the options,” including a new site elsewhere.
The first 737Max will be delivered in 2017, the company said. Albaugh said “chances are very, very high” that American will not be the first airline to fly the new, re-engined version.
The Chicago-based manufacturer, a massive company that typically plans years in advance for planes it will build for decades, made a lightning-fast turnaround. A growing number of orders for a competing plane from Airbus — capped by American’s willingness to place a big order — forced Boeing’s hand.
Boeing had been weighing whether to make the design changes necessary to accommodate a new, more-efficient engine on its 737, or to build an all-new plane. As recently as May, Boeing said it was leaning toward a new plane, a longer and more costly project.
In July, it surprised observers with the announcement that it would re-engine the 737 instead, assuming its board gave the go-ahead.
Tuesday’s news formalizes the decision with board approval. The Max will come in 737-7, -8 and -9 versions comparable to Boeing’s current models.
The engine-replacement option is faster and poses less risk for missing a delivery deadline.
The company is more than three years behind schedule in delivering its new 787 Dreamliner, the first of which is scheduled to go to Japan’s All Nippon Airways in September.
“Given our recent track record, we’re being very prudent and disciplined,” said Nicole Piasecki, vice president of business development and strategic integration.
Boeing claims operating costs for the new 737 will be 7 percent lower than for Airbus’ comparable single-aisle jet, the A320neo, which is scheduled for first delivery in 2015. That differential includes maintenance, fuel and other costs.
Boeing should be able to command a premium for the new version, Albaugh said, declining to comment further on pricing. The average 737 has a catalog price of $78 million, though big discounts are typical.
The 200-jet order Boeing won from American Airlines in late July included 100 commitments for the re-engined 737, the companies said at the time.
The nearly 500 commitments for the 737Max are “a very positive indicator of demand for what has been viewed as a ‘me too’ offering by Boeing,” Robert Spingarn, a New York-based analyst with Credit Suisse, said in a note to clients. They “may signify Boeing’s ability to take some share from Airbus.”
Both manufacturers’ single-aisle planes are already in such high demand that their makers are boosting production to 42 planes a month — Boeing in 2014, Airbus by early next year.
“We’re looking at whether we can go higher than 42,” Albaugh said Tuesday.
He expects to have a decision about the site in the next six to eight months. Renton, with its experienced 737 workforce, is a contender for final assembly of the Max but isn’t assured of the work, Boeing officials have said.
The 737Max will use engines from CFM International, the partnership between General Electric and France’s Snecma, which already dominates the single-aisle jet market.
The revamped plane will not incorporate the new flight-deck design developed by Boeing for its 777 and 787.
Albaugh said the feedback from operators of the existing single-aisle jet was “don’t touch the cockpit,” so that pilots can switch easily from one version to the other.
Overseeing the 737Max program will be Bob Feldmann, vice president and general manager, who most recently led a division within Boeing Defense, Space & Security that includes several derivatives based on the 737, including the P-8A Poseidon.
Michael Teal, previously vice president and chief project engineer on the 747-8 program, will have that same role on the 737Max.
Boeing shares rose $1.43, or 2.2 percent, to close at $66.03.
The Associated Press and Bloomberg News contributed to this article.
Melissa Allison: 206-464-3312 or firstname.lastname@example.org