There is some new speculation and reports that Boeing is now leaning towards a new development aircraft to replace the 737 instead of a re-engine project.  See the Seattle Post Intelligencer blog post HERE.  The best of business cases for a re-engine project are usually fraught with risk and I’m sure that is no different in the case of this aircraft.   Although the 737 dates back to the late 1960’s, current versions date only from the 1990’s and continue to sell very well.

 

There are a few variables at play here.  First, Boeing doesn’t want to hurt its backlog of 737 orders and that’s understandable given the high profitability they provide.  Airbus is in the same position and neither company prefers to blink first.  On the other hand, if Boeing moves forward with a new design, it’s fairly certain that Airbus would blink rather quickly.

 

Airlines want new, more efficient aircraft and they would prefer a leap in efficiency equivalent to what was seen in the mid 1980’s with new models.  Newly developed aircraft at that time were  offering a 35 to 40% improvement in efficiency (cost per passenger seat mile) over the first generation of aircraft still flying.  They would like to see that leap again and, unfortunately, that’s unlikely. 

 

 The curve on engine and airframe technology advancements has reached a point where it is smoother and less steep.   Our knowledge of aerodynamics, engineering on airframes, new materials and, yes, engines, has become more stable.  There is less of a learning curve than there was with our first two generations of aircraft.  That means gains of 15 to 25% are probably what is achievable in the next round and that’s still very, very good.

 

Engine manufacturers are much more confident of their ability to deliver on their end than they were just 2 years ago.  Circumstances have changed and that leads to a company like Boeing examining the future and seeing less risk.  That’s a good thing.  At some point, the risk becomes appropriate and I think they’re approaching that point and realize it. 

 

Boeing has a great deal of new knowledge on using new materials and I suspect that their one challenge in using, say, CFRP for a B737 style aircraft is in figuring out how to scale it down.  Now that the 787 program is in production and testing, they likely see that it is a problem they can solve. 

 

Finally, making a move to build a new aircraft is timely for two reasons.  First, they’re development work on both the 787 and 747 is winding down.  New variants of the 787 will require a fraction of the development staff that the original design required.  They have resources that are freeing up and who could be put to use on new programs.   

 

Second, it would potentially put Airbus in a very constrained position.  Airbus is constrained on resources and money at present.  The A380 program is not earning them money and, if anything, is badly hurting their cash flow.  That program refuses to scale up into planned production and, what’s worse, airlines continue to defer their orders without ordering any additional aircraft. 

 

Airbus also is in the middle of developing the A350 and faces a number of technological challenges there, too.  They’re as new to the CFRP fuselage as Boeing is and it’s taking time to figure out how to build that aircraft right.  While production delays haven’t been announced, there isn’t an analyst out there who believes that this aircraft will show up on time and on budget.  It will most likely have as many challenges facing it as the 787 did and that means another program sucking up resources and money.

 

Finally, Airbus has problems with its military A400M aircraft development and a number of countries are very upset with Airbus performance there as well.  To add more fuel to the fire, Airbus/EADS will be attempting to win the KC-X tanker program at all costs and that requires still more resources that are in scarce supply. 

 

If Boeing announces a new build in the next year, it puts the fire to the feet of Airbus to come up with something in response and makes Airbus react to Boeing instead of the other way around.   Will they announce a new build?  Yes, I think in the next 12 to 18 months we’ll hear of the launch of a 737 replacement program probably taking something on the order of 5 years to complete.

Filed under: Airline Fleets by ajax