The Renton (WA) Reporter has this story that Boeing will continue to build the 737 into the 2020 decade, further extending the timeline for a replacement aircraft, says Mike Bair, vice president of Business Strategy and Marketing for the company.
This is highly significant on a number of levels. First, it tends to match the timeline Airbus has already foretold about a replacement for the A320 about 2024. Neither company can really afford to undertake yet another new airplane program, given the cost overruns and customer penalties for their respective A380, A400M, 787 and 747-8 programs. Airbus is also engaged in R&D for the A350, with a price tag of roughly $15bn. With engineering and production resources stretched already, there simply are limitations for Airbus on taking on an entirely new development program.
For Boeing, the situation is compounded. The company also faces what to do about meeting the A350 threat to its successful 777 line. Although Boeing is looking at major derivative upgrades to the airplane, it is also necessary to consider an entirely new aircraft. The last thing Boeing needs is a requirement to develop a successor to the 737 on top of this-especially when decisions have to be made in what will now be the early years of the 787 entry-into-service.
Bair’s revelation that Boeing now looks to the 2020 decade for a replacement 737 also signals, at least to us, the increasing likelihood that Boeing will re-engine the 737 for greater fuel efficiency circa 2015, meeting a requirement sought by Southwest Airlines and other customers. Southwest is Boeing’s largest 737 customer, ordering more of this type since it was formed in 1971 than any other airline or lessor.
Airbus plans to decide by the end of next year whether to re-engine the A320 family. Boeing will certainly match any plan to do so to keep the 737 competitive.
Moving replacement airplanes out to 2024 gives both companies the 7-8 years or more needed to recover R&D costs for a re-engined airplane. Boeing CEO Jim McNerney said a few months ago that a derivative 737 would cost 20%-40% that of a new airplane and that the business case for a re-engined model is better than originally thought.