737 Operators Tell Boeing Not To Re-Engine

Airlines that fly the Boeing 737 want the company to develop an all-new replacement, rather than rush forward with re-engining the existing 737NG.

A new survey of “most” of the top 25 737 customers by RBC Capital Markets finds a “resounding preference” for a next-generation replacement and predicts that Boeing’s customers will not defect to Airbus, which plans to bring a re-engined “A320NEO” to market in 2016, at least four years ahead of a potential 737 successor.

“Our findings suggest that Boeing won’t launch a re-engined 737 plane and will likely push for a new narrowbody plane targeting the 180- to 200-seat market,” RBC aerospace analysts Robert Stallard and R. Rama Bondada wrote in a Feb. 2 report.

“Customers want a step function increase in unit cost savings and are unwilling to compromise for a paltry 2-4% savings from a re-engined aircraft.” The report adds that many of the current 737NG operators are low-cost airlines that place a premium on fleet simplicity.

The results of RBC’s survey mirror what Boeing’s top executives have been saying for the past year: that 737 customers have shown little interest in modifying the aircraft with newer engines, a technically challenging proposition that would provide only limited savings in operating costs. But that has not stopped other industry analysts from speculating that Boeing will be forced to respond more quickly to Airbus as its European rival racks up orders for the A320NEO, which was launched two months ago.

RBC’s report concedes that Airbus could win as many as 600 orders for the A320NEO before the Paris air show in June. But Stallard and Bondada believe that while Boeing may lose share to Airbus in the lucrative narrowbody market in the near term, that loss would more than be recouped when a clean-sheet successor arrived.

The two analysts predict that Boeing will announce this summer that it will not re-engine the 737. That would be followed by a launch of a new successor in the 2015-17 time frame, with a service entry between 2020 and 2022.