Boeing refuses to rush decision on 737 upgrades

SEATTLE Sat Jun 18, 2011 6:04pm EDT

A Westjet Boeing 737-700 takes off at the International Airport in Calgary, Alberta, May 3, 2011. REUTERS/Todd Korol

A Westjet Boeing 737-700 takes off at the International Airport in Calgary, Alberta, May 3, 2011.

Credit: Reuters/Todd Korol

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SEATTLE (Reuters) - Boeing Co (BA.N) says it feels no pressure to rush a decision on whether to re-engine or redesign its best-selling 737 narrow-body, despite impressive orders for an upgraded version of the competing plane -- the Airbus A320neo.

Customers will wait for the best, most-fuel efficient plane Boeing can make, and the company cannot risk promising a plane it cannot deliver, said Nicole Piasecki, vice president of business development and strategic information for Boeing Commercial Airplanes told reporters earlier this month.

Piasecki spoke in Seattle at a media briefing Boeing given on the condition that media outlets not publish the information until Sunday Paris time, a day before the start of the Paris Air Show, the aerospace industry's biggest trade show.

"These are big, big decisions," she said. "Until we have confidence we can execute and have the support of customers, we won't bring a plan to the board."

The aviation world had hoped Boeing would issue a decision on the 737 at the air show after Boeing delayed its decision from last year. But the company now says it may not reach its decision by the end of 2011.

Boeing says it is leaning toward a redesigned 737, which is the domestic workhorse of many airlines around the world. But it has not ruled out putting a more fuel-efficient engine in the current design. Boeing has more than 2,000 orders for the airplane on its books and is sold out through 2015. A 737 lists between $56.9 million and $85.8 million.

Re-engining would bring the plane to market faster, but a redesigned plane would offer greater fuel savings.

Boeing says its customers are content to wait for a whole new plane. Boeing's larger rival, EADS EAD.PA unit Airbus, announced last year that it would re-engine its A320 and has already received more than 300 orders for it.

The future of the 737 and the A320 -- the two best-selling narrowbodies -- will be a major topic at the Paris Air Show as plane-makers contemplate a massive market for the planes, estimated at $2 trillion.

737 PRODUCTION INCREASE

Boeing, on Wednesday, said it would increase the production rate for its 737 to 42 per month from the current 31.5 per month starting in 2014 to meet growing demand.

Beverly Wyse, 737 program vice president and general manager, said at a media briefing that Boeing would aim much of its 737 production at Chinese markets, where economic growth has generated big demand for short-haul planes.

Wyse said, however, that Boeing has no plans to put a 737 production line in China.

Current 737 models have an 8 percent operating cost advantage over the A320, which they will lose when the new A320 comes out. Re-engining the 737 would restore that advantage, Wyse said.

Boeing has said it would like to incorporate design elements of the light-weight, carbon-composite 787 Dreamliner. Although it is incredibly popular among airlines, the plane is about three-years past due for its first delivery, largely because of snags in the global supply chain.

The delay has been a persistent embarrassment for Boeing, despite logging more than 830 orders for the plane. Boeing plans to deliver the first 787 to Japan's All Nippon Airways (9202.T) in the third quarter.

"We're going to apply the lessons learned from the 787, the strategic imperatives," Piasecki said. "Certain capabilities we want to make sure we have within the walls of Boeing."

Boeing intends to make a splash at the Paris Air Show by flying two new versions of its iconic 747 widebody to Paris for their international debuts.

Boeing plans to deliver the freighter version of that plane to its first customer this summer. The passenger version of the new 747 -- dubbed the 747-8 Intercontinental -- is set for first delivery in the fourth quarter. The company says flight tests for the freighter are about 90 percent complete.

(Writing by Kyle Peterson; Editing by Anthony Boadle)

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