Analyst: Boeing to replace 737 soon

Boeing could announce a new narrow-body jetliner to replace its popular 737 aircraft by the Paris Air Show in June, a leading aerospace analyst said Thursday.

Airbus recently launched a program to replace the engines on its 737 competitor, the A320 jetliner, in a program called the A320NEO (New Engine Option).

Airbus could announce 500 to 1,000 new orders for A320NGO at the Paris Air Show, wrote Morgan Stanley managing director Heidi Wood in an analyst note.

That "changes the game and could cause (Boeing) to accelerate plans," Wood wrote.

Boeing officials discussed a new airplane by the 2019 to 2020 time frame during a conference call about the company's earnings on Wednesday.

But "we reason the new narrow(-body airplane) has to occur by 2017/18 for (Boeing) to retain its most important customers," Wood wrote.

To compete, Boeing is weighing the option of adding new engines to its current 737 before replacing the current model, or forgoing that step and going directly to a replacement airplane.

Boeing CEO Jim McNerney said Wednesday that he feels the market will wait for Boeing's replacement 737 aircraft.

This year, the company will weigh the options and work through what a new airplane would more precisely look like, McNerney said.

Re-engining the airplane and introducing a new model would put the company's large backlog of 737 orders at risk twice as customers wait for new models rather than buy current aircraft.

That would make sense only if development of a new plane waits until 2025 or beyond, McNerney said.

In the meantime, Boeing is exploring what its customers need and what technologies would be available by the 2019-2020 time period, he said.

The company is "preserving the option, if we're wrong, to re-engine, but I don't think it's going to turn out that way," McNerney said.

The issue is important to Wichita, where Spirit AeroSystems builds the 737 fuselage, pylons and thrust reversers. The 737 program is Spirit's largest.

Last year, Boeing delivered a record number of 737s and is increasing production rates from increased airline demand.

It's boosting rates from 31.5 a month to 35 in early 2012 and again to 38 a month in the second quarter of 2013.

The narrow-body 100- to 200-seat market is important as new competitors enter the segment.

Bombardier is developing a 130-seat C-Series airliner, and China is developing a C919 entrant into the market.