Boeing may re-engine 737 if it cannot redesign-CEO

CHICAGO Wed May 25, 2011 5:50am EDT

A model of Boeing 787-8 passenger plane is displayed inside its booth at the Asian Aerospace Show in Hong Kong March 8, 2011. REUTERS/Bobby Yip

A model of Boeing 787-8 passenger plane is displayed inside its booth at the Asian Aerospace Show in Hong Kong March 8, 2011.

Credit: Reuters/Bobby Yip

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CHICAGO (Reuters) - Boeing Co (BA.N) will "retain the ability" to re-engine the current model of its hot-selling 737 narrowbody jet should the company be unable to produce a completely redesigned version, Chief Executive Jim McNerney said on Tuesday.

Speaking at a company meeting with investors in Seattle, McNerney said he expects technological breakthroughs to enable a redesigned version that would be a big improvement over the existing design.

The aviation industry is waiting for Boeing to declare its plans for the next version of the 737. A re-engined plane would offer fuel savings of about 10 percent and could be brought to market around 2016. An all-new version could offer double the fuel savings and be brought to market around 2019.

"We are going to retain the ability to re-engine if this new airplane doesn't come together over the next nine months or so as we think it will," McNerney told analysts at the webcast meeting.

Alex Hamilton, managing director of EarlyBirdCapital, said the company appears focused on strategic production rate increases first and the 737's direction next. But he noted that McNerney's language regarding the program on Tuesday hints that the company is getting closer to making a decision.

"It sounds like they sort of gave themselves a deadline," said Hamilton, who attended the event in Seattle.

Boeing has said its customers are calling for an all-new plane. But rival Airbus has said it would put a new engine in its competing A320 aircraft.

The chief executive of Airbus parent EADS EAD.PA, Louis Gallois, said separately on Tuesday he believes Boeing would have to react to Airbus's revamped A320neo plane. Airbus sales chief John Leahy told Reuters Airbus was still on track to get 500 orders for the A320neo in time for the Paris Air Show in June.

McNerney, who expects a redesign, said Boeing is determining what lessons learned on the 787 Dreamliner program could be applied to the 737.

The 787 is a light-weight, carbon-composite airplane that offers unprecedented fuel efficiency for cash-strapped airlines. Boeing has taken 835 orders for the plane from 56 customers.

The 787 is nearly three years behind its original schedule, partly because of snags in the extensive global supply chain. The company aims to deliver its first 787 in the third quarter of this year and reaffirmed that target on Tuesday.

McNerney said Boeing also is deciding how big the next 737 should be compared with the current model.

"As we think about it right now, it may be modestly bigger," he said.

Boeing has been delaying its decision on the direction of the 737 program, at one point promising an announcement by the end of last year. Some experts had hoped for a decision by the Paris Air Show.

"We're not going to be driven by a date to make an announcement," Jim Albaugh, CEO of Boeing Commercial Airplanes, said on the webcast. (Reporting by Kyle Peterson; Editing by Tim Dobbyn and Gerald E. McCormick)

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