August 29, 2011
Boeing will give an update on Tuesday on its plans to revamp its best-selling 737 aircraft in a bid to fight off challenges from European rival Airbus, according to people with knowledge of the matter.
The US plane maker is set to end weeks of uncertainty for investors, airlines and suppliers over the characteristics of the jet, after securing backing from its board to market a more efficient version equipped with new engines.
Boeing opted for the quick-fix "re-engining" plan, setting aside for now a longer-term redesign, after seeing Airbus grab the larger share of a record order in July from American Airlines -- once an exclusive Boeing customer.
The 737 and Airbus A320 compete in the market for jets with 150-180 seats, the biggest segment of the global jet market and estimated to be worth USD$2 trillion over the next 20 years.
"The 737 is the best-selling airplane ever," said Neal Dihora, a Morningstar analyst. "The neo (A320) came out with 1,000 order commitments within the first seven months, and I think the Boeing decision to re-engine is essentially to stem that tide from market-share losses," he added.
Boeing and its engine maker CFM International, a joint venture between General Electric and France's Safran, have been looking at installing an engine that would provide fuel savings of up to 10 percent compared with the current model, according to aerospace industry sources.
This compares with an advertised gain of 12 to 13 percent on the new engine for the A320neo, which Airbus says would save 15 percent compared to that model's basic version when including the benefits of fuel-saving wingtips.
The gap would be offset by the lower weight of the 737, producing lower proportional costs for each seat on each trip.
CFM has an exclusive agreement to supply engines for the 737 and competes with Pratt & Whitney to provide the new engines for the A320.
Boeing is seen likely to avoid the same CFM engine Airbus chose for the A320neo because it would require costly changes to the landing gear and other parts of the structure.
Originally conceived in the 1960s, the 737 sits lower to the ground than the A320, which is convenient for baggage handling but leaves less room for a bigger engine.
In modern commercial jet engines, the majority of the thrust comes from fan-driven air that bypasses the hottest part of the engine where fuel is burned.
The amount of thrust is therefore tied closely to the fan size.
The cover of the existing engine already has to be flattened to fit it under the wing, giving it a distinctive squashed look on recent models.
The name of the revamped aircraft has not yet been announced but a supplier speculated recently that it could be called the "New Evolution." The current version of the aircraft, introduced in the 1990s, is called the 737NG for Next Generation.
A Boeing spokesman declined to comment.