Boeing CEO: Re-Engined 737 "Low Risk, Low Capital"
By Aaron Karp, ATW Daily News | Jul. 28, 2011
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Boeing Chairman, President and CEO Jim McNerney said the company's decision to re-engine the 737NG instead of developing and producing an all-new aircraft was reached after months of careful consideration leading to the conclusion that there was much less risk in re-engining.
The comments to analysts and reporters came Wednesday while discussing Boeing's US$941 million second-quarter profit, up 19.6% year-over-year. Airlines wanted the "greater certainty" of a re-engined 737NG with EIS by mid-decade rather than waiting for an all-new aircraft by 2019 or 2020, he explained. The re-engining was revealed earlier this month when American Airlines committed to purchase 100 of the revamped 737 model as part of a massive narrowbody order split between Boeing and Airbus.
The re-engined 737NG "will be the most fuel efficient aircraft in its segment," McNerney said, adding that a "conservative" estimate is for the updated narrowbody -- powered by CFM International Leap-X engines -- to provide a 10%-12% fuel efficiency gain over current model 737NGs. "Over the next several weeks, we will work to finalize the configuration in anticipation of a fall launch, pending approval of the [Boeing] board of directors," he stated.
The Boeing CEO sought to counter the impression that the company was hastily pushed into re-engining the 737NG to win a portion of the AA order. "We have been studying the re-engine option to the same degree that we've been studying a new airplane option," he said. "This is not something we came up with at the last minute. Admittedly, our view of the marketplace changed in the last few months."
The changed view, he noted, includes "robust demand" among airlines for a re-engined narrowbody and concerns, particularly internally at Boeing, that building the production system for an all-new aircraft would be challenging and risky. In recent weeks, Boeing has "been somewhat more mindful about [the challenge of] getting a massive production system up and running by 2019...than we were at the start of the process," McNerney said.
It is true, however, that Boeing executives repeatedly indicated their preference for an all-new aircraft over the past year. Their main caution, though, did revolve around production system concerns, particularly in light of the many supply chain issues that have hampered the 787 program.
McNerney said Wednesday that a big factor weighing against the all-new aircraft was "not having all the answers we wanted on a production system." A re-engining is a "low risk, low capital way to access this market demand" for fuel efficient narrowbody aircraft, he commented.
Boeing Corporate President and CFO James Bell, who expressed skepticism about a re-engining in the past, said Wednesday, "Obviously, a derivative airplane is associated with a lot less risk than an all-new airplane."
Photograph: 737-900ER (Courtesy, Boeing)