Wall Street analysts call American Airlines' order for hundreds of Boeing and Airbus narrowbody jets this week a clear win for Airbus.
Airbus "harried its arch-competitor" into replacing the engines on its workhorse 737 rather than designing an all-new replacement, RBC Capital Markets analyst Robert Stallard wrote in a report.
That "flies in the face of what customers have been asking for," Stallard said.
The order broke Boeing's monopoly as the sole supplier of jetliners for American. It was the first defection of a major Boeing customer to the A320neo, for new engine option.
Never miss a local story.
American CEO Gerard Arpey said the decision to buy from both manufacturers was necessary because neither could provide all the planes it wanted in the time frame the airline desired.
American's order to Boeing included 100 737 Next Generation aircraft, with options for 40 more. It also committed to buy 100 re-engined 737s with an option for 60 more.
The order to Airbus is for 260 single-aisle aircraft, including 130 of the A320 family of aircraft with new engines.
"We view this whole affair as a triumph for Airbus," Stallard wrote.
Separate Boeing teams have been working on a re-engined 737 model and a new small airliner to replace it.
If Boeing had come up with a new narrowbody airplane by 2020 — with a 15 to 20 percent savings in fuel burn versus current aircraft —"that would have had real appeal," he said.
The new plane would have jeopardized the business case for Airbus A320neo beyond 2020, he said.
Now, a re-engined 737 will be available three years after the A320neo.
Boeing's offer to American of a re-engined 737 "looks like an attempt to avoid losing the entire... order to Airbus," Cowen & Co. analyst Cai von Rumohr said in a report.
The decision to re-engine was announced Wednesday along with American's orders. "A strange way to launch an airplane," Stallard wrote.
Jim Albaugh, head of Boeing's commercial airplane division, said the stumbling block for a new plane was coming up with a production system that could handle strong demand estimated at 40 to 60 a month.
Boeing officials have said that the plane would have likely been composites, similar to the 787 Dreamliner, which has had a multitude of production difficulties.
Already, Boeing is moving to building 42 737s a month in the first half of 2014. Airbus is moving to a rate of 42 A320s a month.
Analysts said the decision to re-engine has several advantages for Boeing, however.
Adding new engines — the CFM Leap-X — to the 737 is relatively low cost, requiring an estimated $2 billion or $3 billion to develop, Stallard wrote. That's billions less than to develop an all-new airplane.
It also provides low engineering risk for Boeing, delivers the product in the shortest time and requires minimal disruption for 737 suppliers, Stallard wrote.
The decision also extends the life of the profitable 737 and keeps production lines running in Renton, Wash., and at Spirit AeroSystems in Wichita, where 737 work represents about half of Spirit's revenue.
The re-engined 737 must still gain approval from Boeing's board of directors. The company expects to launch the program sometime this fall.
Boeing had been dismissive of its own re-engining plans and of Airbus' A320neo over the past year, analyst Scott Hamilton wrote in a blog. In that context, "Boeing looks kind of silly," he said.
Airbus was the star of the Paris Air Show last month, with announcements of 700 orders for the upgraded A320. That brought its order book to more than 1,000 orders for the plane.
Airbus CEO Tom Enders took a jab at Boeing during a news conference on the last trade day of the show.
"If after this show our colleagues in Seattle still maintain that the neo is only catching up with their 737NG, I really have to ask myself what stuff these guys in Seattle are smoking," Enders said.
Boeing may have suffered a psychological blow, Hamilton wrote. "But remember: 200 orders and 100 options is nothing to sneeze at. ... It may be the biggest single order by units in Boeing history."
Boeing once had wanted to introduce a 737 replacement in 2012, Hamilton said.
But that was on the assumption that its 787 Dreamliner would enter service in 2008 as originally scheduled, he said.
"This would have been a timeline Airbus would have been unlikely to match and would have sealed Boeing's dominance in commercial aviation for decades to come," Hamilton wrote.
Delays on the 787 have affected Boeing's entire product development program, Hamilton wrote.
Now, "Boeing was reduced to a me-too response to the neo."