Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
- Bjorn’s Corner: New engine development. Part 3. Propulsive efficiency April 12, 2024
Narrowing the 737RE design
While the aviation world is waiting to see what the Boeing 737RE will be, information that has emerged publically from Boeing and information we’ve obtained gives, we think, a reasonable picture of what the airplane will look like.
This information is current as of last week. Boeing is still settling on the 737RE design and things could change, but from what has been said and on what we have pieced together, this appears to be a reasonable assessment. It appears the 737RE will largely come down to this:
Boeing comments on the 737RE
As the aviation world waits for Boeing to define the 737RE, it might be worth taking a close look at the July 27 earnings call discussion relating to the airplane, apart from the topic of where the aircraft will be built—we covered that thoroughly last week.
Our resource is the earnings call transcript as published by Seeking Alpha. As we go through the transcript, we will highlight certain statements and then offer some commentary at the end of the section.
Here is what CEO Jim McNerney said in his prepared remarks.
Also in recent months, a broader customer view has emerged in support of the greater certainty of gaining significant incremental improvement in a re-engined 737 in the near to midterm over the more perfect solution which may be available further down the road. It has always been our view that if it looked like we are putting meaningful market share at risk by waiting to do a new airplane, we would re-engine instead. That combined with our new engine technical production assessment against lead time for new engine decision led us to the judgment that we have made.
We are confident that our re-engined 737 will maintain the value proposition we have in the marketplace today and we expect to see strong demand for this product. It will be the most fuel-efficient airplane in its segment and have the lowest operating cost, while also meeting customer needs for range, payload, standardization, reliability and fleet compatibility.
Over the next several weeks, we will continue our work to finalize the configuration and other details in anticipation of a launch this fall pending board approval.
Comment: As we have talked with our various market sources, one believed Boeing would suffer a market-share drop of at least 20% if it elected to proceed with a new airplane instead of a re-engine. This drop would come because customers would pull back on orders for the 737NG while waiting for the new airplane. Whether this is a valid number might be debatable, but the theory is consistent with McNerney’s comments. Earlier this year, Boeing Capital Corp. held an investor’s meeting in New York and remarks indicated that Boeing was prepared to take a 10% 737 market share drop in favor of a new airplane, figuring it would regain it with an aircraft superior to the A320neo family. Then there is the question of whether Boeing could actually afford a new airplane program, a topic McNerney did not address, in light of the losses on the 787 and 747-8 programs and the billions in cost overruns and delayed cash flow. Finally, there was strong undercurrent that the Board of Directors was not prepared to approve another new airplane program with the 787 and 747 programs in the condition they are in.
FAA funding gap won’t affect 747-8, 787 certification plans
As Boeing pushes ahead toward certification of the 747-8 and the 787, with goals for delivery of the 747-8F and the Dreamliner before the end of this quarter, Congress adjourned without funding the Federal Aviation Administration responsible for the process.
Boeing hopes for certification of the 787 this month; it has not specified anticipated certification of the 747, but with a previously acknowledged “neck and neck” to EIS for the two airplanes, it’s logical to conclude 747 certification is along the same timeline.
Aviation Week has new twist on American Airlines Airbus-Boeing deal
Aviation Week has a story on the Airbus-Boeing deal–and says it isn’t really a firm order, likening it to the Boeing 787 of a few years ago.
Boeing’s CAS works to trim P2F pricing
Boeing’s Commercial Aviation Services is part of the company’s strategy to broaden its business beyond “hardware” into services. CAS, which serves Boeing Commercial Aircraft and Boeing Defense, Space and Security, now comprises 15% of The Boeing Co.’s revenue.
Here is a story we did last week for Commercial Aviation Online looking at only the BCA side.
Explore the Boeing 737
Boeing has a pretty cool photo exploration of the 737 at its New Airplane website here. We found it slow on Firefox but smooth on Chrome.
737 program chief talked about Renton production site
With the rhubarb that emerged from the Boeing 2Q earnings call over where the 737RE production will be, and the contradictory messages to come from Boeing Commercial Airplanes (BCA) in Seattle and Boeing Corporate in Chicago, we thought it might be useful (and certainly interesting) to return to the Boeing pre-Paris Air Show press briefing by Beverly Wyse, the Vice President and General Manager, 737 Program.
During the briefing, the question of potential 737 production rates came up. Boeing has announced a rate of 42/mo from 2014 and even then there was discussion of taking rates to 50/mo. Since the Air Show, BCA CEO Jim Albaugh said the company is studying a rate of 60/mo. It was within this context that the question over production was asked.
Wyse’s comments at the press briefing are noteworthy on a couple of points.
Boeing throws Seattle a curve, doesn’t assume 737RE will be built there
Update, July 28, 6:45am PDT: Gates has expanded his original story with more about the developments through yesterday, plus IAM comments.
Update, 6:00pm PDT: Dominic Gates just sent this message concerning the Boeing statement below:
I just spoke with John Dern. (Dern is a corporate spokesman for Boeing in Chicago.)
Dern said: “I am not saying your report was inaccurate. This is not about your reporting. The statements were inaccurate.”
In other words, Boeing Chicago is disavowing the statements of its own senior PR executives here in Puget Sound.
Update, 510pm PDT: This story gets odder as the day goes on. This just came from Boeing:
The comments delivered this morning by Boeing Chairman, President and CEO Jim McNerney regarding the potential location of final assembly for the re-engined 737 stand as delivered. While Renton, Wash., logically would be our first location considered, no decision has been made, nor would one be made at this point in the program. The decision on where to build the airplane will be made in due course as we move through the process of launching the airplane and evaluating production requirements. The statements in the Seattle Times attributed to company spokespeople made after the company’s earnings call were neither accurate nor representative of the company’s or BCA’s position.
You have to read this carefully to fully understand what has been said here: “the statements” were inaccurate and not representative of the company’s or BCA’s position.
It’s very odd there is a public dispute between Boeing Chicago and BCA.
Update, 11:25am: Boeing Commercial Airplanes back-peddled from McNerney’s comments. Here is Dominic Gates’ story in the Seattle Times, just posted. BCA really steps back from McNerney.
Original Post:
Boeing CEO Jim McNerney threw Seattle a curve on the earnings call: he said the 737 Re-engine could be built somewhere other than at Renton, where the 737 has been built since inception.
His paraphrased comments:
We haven’t made the final decision about where we’re going to produce the RE airplane. After 42/mo, we do run into some challenges at Renton. We have other options and we will study them all as we think this through. We would study Charleston, Renton and compare with another site.
and
Renton is one of the great aerospace factories in the world. Until we have sorted out the milestones associated with the ramp-up, the degree to which we have to modify the airplane, major investments required, but until we sort that out we have to keep this open. Until we study it all, obviously we have to keep it open. There is significant investment required and until we figure it out we have to sort it out.
This will be a locally developing story today.