ATLANTA/PARIS (Reuters) - Boeing Co (BA.N), moving to counter a competitive offering from rival Airbus, said it will roll out a more efficient version of its best-selling 737 narrowbody with a new engine in 2017.
Boeing cited order commitments for 496 of the new planes from five airlines.
The new model, named the 737 MAX, will compete with the revamped A320neo family from Europe’s Airbus EAD.PA, a similar model due to be equipped with fuel-saving engines and delivered in 2015.
The Boeing jet will have engines from CFM International, a joint venture between General Electric Co (GE.N) and France’s Safran (SAF.PA). The board approved the re-engine plan, Boeing said on Tuesday.
Chicago-based Boeing said the 737 MAX is expected to have 16 percent lower fuel burn than the current offering from Airbus, 4 percent lower fuel burn than the Airbus A320neo, and lower overall operating costs.
“We believe very strongly that this is an airplane that’s going to allow us not to just maintain the market share that we have but one that’s going to allow us to grow the market share,” Boeing Commercial Airplanes Chief Executive Jim Albaugh told a media briefing.
The 737 and A320 compete in the market for jets with around 150 seats, the biggest segment of the global jetliner market and estimated to be worth $2 trillion over the next 20 years.
Shares of Boeing were up 2.6 percent, or $1.65, to $66.25 in afternoon trading.
“We see the new engined version of the 737 as putting Boeing back on competitive footing with Airbus in the narrowbody market,” Standard & Poor’s equity analyst Richard Tortoriello wrote.
CFM said the specifications of the engine that would be used exclusively on the plane were still being fine-tuned with Boeing.
“The two companies are now working to define the final LEAP-1B engine configuration,” CFM said in a statement.
CFM International’s new LEAP generation of engines has a monopoly on the 737 and competes with Geared Turbofan engines from United Technologies (UTX.N) unit Pratt & Whitney on the Airbus A320.
High oil prices are spurring airlines to seek fuel-saving airplanes, re-charging the market battle between Boeing and Airbus with billions in orders at stake.
Boeing opted for the quick-fix “re-engining” plan, shelving a longer-term redesign of the popular single-aisle 737, when AMR Corp AMR.N unit American Airlines — which had been an exclusive Boeing customer — ordered 260 Airbus aircraft in July, including 130 A320neos.
The U.S. company sold 100 737s to AMR and won provisional commitments for a further 100 with new engines pending the Boeing board’s decision.
Boeing, which last week received U.S. approval to enter its 787 Dreamliner into commercial passenger service, cited “overwhelming demand” for the 737 MAX and said it would likely carry a price premium to the current 737 NG (Next Generation) version. Many airlines that have committed to the new narrowbody are outside the United States, it added.
Airbus sales chief John Leahy said the new Boeing offering would not outperform the A320neo in the air or in the market.
“Once again, Boeing is in denial,” Leahy told Reuters. “The re-engined 737 cannot possibly match the fuel efficiency and maintenance cost savings of the A320neo family. We’ll see the real world results in our order books.”
Airbus has racked up a thousand orders for the re-engined A320neo, which promises 12 to 15 percent fuel savings.
Aerospace analyst Richard Aboulafia of Virginia-based Teal Group said the availability of two engines on the A320neo could give the European plane the edge as Boeing avoids costly further improvements to the aircraft.
Boeing’s ability to put bigger engines on the 737 is limited by the narrow space between the wings and the ground, meaning a costlier overhaul would have been necessary to employ the full thrust available in the latest generation of engines.
“They’re seeking to hold on to an equal position in the narrowbody market with a minimal expenditure of company resources,” Aboulafia said.
Boeing said Bob Feldmann, who worked in its defense division, would be general manager of the 737 MAX family.
Reporting by Karen Jacobs in Atlanta and Tim Hepher in Paris; editing by Dave Zimmerman, John Wallace and Gunna Dickson