Boeing disputes 737 Max development cost report

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Boeing disputes the cost estimates detailed in a recent Bernstein Research note claiming development of the 737 Max will be twice that of the Airbus A320neo, as well as other reports in the note.

"It's a mistake to think that the differences in engine installation dictate significant developmental cost differences between the 737 Max and A320 neo," said Karen Crabtree, spokesperson for Boeing Product Strategy.

Crabtree said Boeing understands the Next Generation 737 "extremely well" and understands "the changes required to incorporate the [CFM International Leap-1B] on the Max."

"Max development to date confirms earlier cost estimates and is well within our expectations when we launched the program in August," she added.

The company cited its history of re-engining aircraft such as the incremental development programmes of the 737 and 777 and most recently the 747-8.

"Boeing has a long history of integrating engines and wings with the latest tools and processes, not to mention an experienced workforce who has just completed two developmental programmes including a new engine and wing on the 747-8," she added.

Boeing contends that Airbus "has not made significant changes since the A320 was certified in 1988, has never re-engined the A320, and must make airplane changes to accommodate two engine types".

While Boeing claims Airbus has never re-engined the A320-100 with a significantly larger engine, the European airframer added the International Aero Engines V2500-A1 in 1989 to create the A320-200 and again in 2007 with the the Pratt & Whitney PW6000 on the A318.

"Wing strengthening is needed on both airplanes," Boeing added. "The neo is a significantly heavier aircraft and will likely require weight reduction changes that add complexity to that programme."

In a comprehensive note issued on 23 January, Berstein compared the Max and the neo and concluded that Airbus has an easier task re-engining the A320 than Boeing does for the 737, and that Airbus could do so at half the cost.

"Development challenges should be manageable for Airbus and Boeing, but we see them as greatest for Boeing," Bernstein wrote. "Because the 737 has less ground clearance than the A320, the nose gear is being extended and the [CFM] Leap engine must move farther up toward the wing (even with a smaller fan size).

"We understand that at this proximity to the wing, important modifications (pylon and fuel tank) were made to address the risk of a blade out potentially puncturing the fuel tank. With a heavy engine positioned in front of the wing, combined with the longer nose gear, we believe that the design is more complex than that for the A320neo, which is mainly about strengthening the wing and wing join (also necessary on the 737 Max).

According to company sources, Boeing will strengthen sections 43 and 44 in the 737's mid-body in the event of an engine rotor burst.

"We expect development costs for the 737MAX to be roughly double those for the A320neo. With a heavy engine positioned in front of the wing, the centre of gravity also shifts forward."

Boeing's Crabtree declined to provide a cost estimate for the Max, but in March 2010, Mike Bair, vice president of business strategy & marketing for Boeing Commercial Airplanes, said in an interview the estimated cost to re-engine the 737 would be $2bn-$3bn, including the portion for engine development contributed by CFM, said an industry source

Additionally, former Boeing CFO James Bell said during the company's second quarter 2011 earnings call, the research and development cost to Boeing to re-engine would be 10%-15% of the cost of a new airplane, which was at the time widely estimated by aerospace analysts to be $10-$12 billion.

Airbus previously said the cost to re-engine the A320 is $1.32 billion (€1 billion). This also represents only the airframe cost, Airbus tells Flightglobal, counting engine development separately.

Crabtree also characterised as "inaccurate" Bernstein's description about the blade-out concerns, but did not elaborate. She did not directly address the centre-of-gravity issue raised by Bernstein.

Additional reporting by Jon Ostrower