Boeing's Big Decision

The 737 is Boeing’s smallest but most-popular jetliner. But the company faces a major decision about the jet’s future: modify its plane to handle an efficient new engine, or create an entirely new, next-generation aircraft.

It’s a decision with thousands of jobs at stake for Renton, Washington, where the 737s are built.

Pressure is mounting for Boeing to take a next step with the 737, despite a massive order book of 2,000 aircraft that is enabling the jet builder to step up Renton production to 35 aircraft monthly by 2012, up from the current 31.5 monthly.

CEO Jim McNerney is feeling pressure from people such as Mike Van de Ven, chief operating officer of Boeing’s largest 737 customer, Southwest Airlines.

Keeping the existing version of the 737, Van de Ven says, is not an option.

“We need a new airplane to deliver step-change improvements,” Van de Ven said in an interview with the Puget Sound Business Journal. “We need a definitive time line with costs and benefits of those options.”

With fuel prices rising, Southwest needs the greatest possible fuel efficiency to compete, he said, adding that some of the benefits of a new model—possible twin aisles to speed boarding and a composite airframe to reduce maintenance—also would be welcome.

The changes Southwest wants are primarily being driven by increased engine efficiencies, a technology largely outside the control of Boeing and its chief rival Airbus.

For years, those two have enjoyed a duopoly that has resulted in huge order books for each, giving them little incentive to develop a new aircraft in the 737’s size niche anytime soon.

But several upstart aircraft builders—Canada’s Bombardier, China’s Comac, and Brazil’s Embraer—are trying to position themselves as competitors in the narrow-body jetliner market, essentially riding on the capabilities of new and more efficient engines than either Boeing or Airbus now use.

A tipping point for a Boeing decision could come if Montreal-based Bombardier announces at the July Farnborough air show significant new orders for its “C-series” narrow-body aircraft. Despite having won only 90 orders so far, the model is widely seen as a direct competitor to the Boeing 737 and Airbus A320 and a litmus test of the plane’s game-changing Pratt & Whitney engines.

Some local economic boosters say they’d prefer that Boeing redesign the 737 with the new engine rather than face the unknowns accompanying an entirely new model.

“What changes they might envision for the 737 could have pretty big impacts on the Puget Sound supply base,” said Kevin Steck, chairman of the Pacific Northwest Aerospace Alliance.

Whether Boeing decides to re-engine the current 737 or build a new one—and when the company decides—is a game being played on a global chessboard, analysts say.

For more on Boeing's big decision, click here for the full story from the Puget Sound Business Journal (subscription required).

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