Boeing CEO Jim McNerney has given a rhetorical green light to replace the venerable 737, announcing the airframer intends to build a new aircraft to eclipse the re-engined Airbus A320neo, with a service entry around 2020.
Speaking at the Cowen and Company Aerospace and Defense Conference in New York City, McNerney says: "We're gonna do a new airplane. We're not done evaluating this whole situation yet, but our current bias is to not re-engine, is to move to an all-new airplane at the end of the decade, or the beginning of the next decade."
Boeing has continuously given small hints about its future plans, and McNerney's comments leave little ambiguity that a clean sheet design is in the company's future. But Boeing is officially seeking to temper his comments, saying a 737 replacement is "not a done deal" and is "still being evaluated".
Even though McNerney says entry into service could come earlier than 2020, the convergence of customer demand for a new aircraft, propulsion, systems and fuselage technology, as well as supply chain readiness, fits an end-of-decade first delivery.
McNerney suggests that the A320neo has put pressure on the smaller Bombardier CSeries, which shares a common power plant in the Pratt & Whitney PW1000G geared turbofan platform. While Airbus has focused on its existing customer base McNerney sees a looming threat to the 737: "That doesn't mean that as [Airbus gets] deeper in the development they're not going to approach our customer base. I think they will."
Airbus aims to deliver the first A320neo to launch customer Virgin America in 2016, with a yet undecided engine type. The carrier, in addition to the PW1100G, has a choice of the CFM Leap-X.
Boeing has three potential engines at its disposal for its new narrowbody including the current next-generation offerings from CFM and Pratt & Whitney, as well as the Rolls-Royce 133-445kN (30,000-100,000lb) thrust Advance3 future three-shaft Trent powerplant, which is currently in development and slated for a 2017 or 2018 entry into service.
"We're going to be talking to our customers concretely over the next year or two, very concretely," says McNerney. "I think in part because the re-engined Airbus airplane is out there. We're going to have more concrete discussions a little earlier, I think our customers are going to demand it and we will do it."
While there is a risk to Boeing in firming up plans for a new aircraft nearly eight years in advance of a service entry, McNerney believes that "customers are going to wait for this airplane, in part because they're going to know what it looks like over the next 18 months".
Yet Boeing's chief does admit that the A320neo, "on paper closes the value gap that we have enjoyed on a typical cash on cash analysis, we tend to do better. And I think part of the rationale of the neo is to close that gap. Now, will that put some pressure on our margins? Yes. maybe, but they've got to complete the development".
McNerney adds: "It's our judgment that our customers will wait for us, rather than move to an airplane that will obsolete itself when [Airbus develops] a new airplane. I understand why they're doing [the neo], we haven't seen the need for it yet. I feel pretty comfortable we can defend our customer base, both because they're not going ahead of us, they're catching up to us, and because we're going to be doing a new airplane that will go beyond the capability of what the neo can do."
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