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Boeing plans to deliver re-engined 737 in 2017

Tags: Airbus, Boeing

Boeing Co (BA-N), moving to counter a competitive offering from rival Airbus, said it will roll out a more efficient version of its best-selling 737 narrowbody with a new engine in 2017.

Boeing cited order commitments for 496 of the new planes from five airlines.

The new model will compete with the revamped A320neo family from Europe's Airbus, a similar model due to be equipped with fuel-saving engines and delivered in 2015.

The Boeing jet will have engines from CFM International, a joint venture between General Electric Co and France's Safran. The board approved the re-engine plan, Boeing said in a statement Tuesday.

The 737 and A320 compete in the market for jets with around 150 seats, the biggest segment of the global jetliner market and estimated to be worth $2 trillion over the next 20 years.

Boeing said its new 737 was expected to have 16 percent lower fuel burn than the current offering from Airbus, 4 percent lower fuel burn than the Airbus A320neo, and lower overall operating costs.

It did not give much technical information about the revamped 737 engine in its statement. CFM said the specifications of the engine, to be used exclusively on the plane, were still being fine-tuned with Boeing.

"The two companies are now working to define the final LEAP-1B engine configuration," CFM said in a statement.

CFM's new LEAP generation of engines has a monopoly on the 737 and competes with Geared Turbofan engines from United Technologies unit Pratt & Whitney on the Airbus A320.

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High oil prices are spurring airlines to seek fuel-saving aircraft, re-charging the market battle between Boeing and Airbus with billions in orders at stake.

Boeing, which last week received U.S. approval to enter its carbon-composite 787 Dreamliner into commercial passenger service, cited "overwhelming demand" for the revamped 737.

The company opted for the quick-fix "re-engining" plan, shelving a longer-term redesign of the single-aisle 737, after Airbus racked up a thousand orders for the re-engined A320neo, which promises 12 to 15 percent fuel savings.

Airbus said Boeing's announcement validated the European company's decision late last year to put new engines on the A320. At that time, Boeing said re-engining would not be attractive to airlines that wanted a redesign.

But the U.S. plane maker switched course when AMR Corp. unit American Airlines ordered 260 Airbus aircraft in July, including 130 A320neos.

Boeing sold 100 737s to AMR and won provisional commitments for a further 100 with new engines pending the Boeing board's decision.

"After more than 1,200 orders and commitments for the A320neo, the decision to follow our strategy and also re-engine the 737 seems more than overdue," Airbus spokesman Stefan Schaffrath said by email.

Analysts said the Boeing board approval, though widely expected after American Air's order, would still be seen as a significant landmark.

"We think new orders on a par with what Airbus has booked for the A320 NEO over the last nine months are possible, and we see this as a potential positive catalyst for Boeing and its aerospace suppliers," RBC Capital Markets analyst Rob Stallard said in a client note.

Aerospace analyst Richard Aboulafia of Virginia-based Teal Group said the availability of two engines on the A320neo could give the European plane the edge as Boeing avoids costly further improvements to the aircraft.

Boeing's ability to put bigger engines on the 737 is limited by the narrow space between the wings and the ground, meaning a costlier overhaul would have been necessary to employ the full thrust available in the latest generation of engines.

"They're seeking to hold on to an equal position in the narrowbody market with a minimal expenditure of company resources," Aboulafia said.

Boeing said Bob Feldmann, who worked in its defense division, would be general manager of the new engine 737 family.

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