Aviation

Customers: Replace, don't re-engine 737

A survey of Boeing's biggest customers found they have a "resounding preference" for a replacement for the company's 737 single-aisle jetliner, rather than a re-engined airplane.

The survey was performed by RBC Capital Investments.

"If Boeing follows the pattern of the 787, and listens to what its customers actually want, then we expect to see a formal decision not to re-engine the 737 this summer," wrote RBC Capital aerospace analyst Robert Stallard in a report.

He said he expects Boeing to formally launch a 737 successor in the 2015-2017 time frame, with an estimated entry into service in 2020 to 2022.

Putting new engines on the 737 would be difficult to engineer, Stallard wrote. That would require significant changes to the nacelles, wings and forward landing gear, he wrote.

In December, Airbus announced plans to re-engine its A320, its competitor to the 737. The move adds pressure on Boeing to make a decision on the 737.

Boeing CEO Jim McNerney has said the company is leaning toward replacing the 737 with a new plane, rather than changing the 737's engines.

The 737 is important to Wichita, where Spirit AeroSystems builds the fuselage, struts and thrust reversers. About half of Spirit's revenue comes from the 737 program. Local subcontractors also work on the program.

Boeing has been making continuous improvements to the 737. And last year, Boeing delivered a record number of the narrow-body jets.

Adding to the complexity of Boeing's decision on the 737 is its future plans for the 777, Stallard wrote.

By 2015, the 777 will have been in service for 20 years.

"Boeing has learnt a lot about a wide body development with the 787 program that could be applied to a 777 replacement, whilst Airbus is developing the A350-1000 which could be a 777 'killer,' " Stallard wrote.

On the other hand, the 777 has an "attractive sales window" over the next couple of years, and Boeing won't want to develop two new aircraft at the same time, he wrote.

Boeing could launch a 777 replacement in 2012 or 2013 and have the majority of the work completed before launching a 737 replacement sometime from 2015 to 2017, Stallard wrote.

The analyst remains positive on Boeing.

The aerospace cycle is working in Boeing's favor, with airline traffic, capacity and profits on the rise along with orders for new airplanes.

Boeing is increasing production of its 737 and 777 aircraft.

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