Boeing exec says new mid-market is 'tough business case'

PHOENIX (Reuters) - Boeing Co BA.N is studying options for an aircraft in the middle of the jet market, but faces a "tough business case," Marketing Vice President Randy Tinseth said.

Visitors talk outside a Boeing booth during the opening day of the Singapore Airshow at Changi Exhibition Center February 16, 2016. REUTERS/Edgar Su

Speaking at the Istat Americas air finance conference, he ruled out reviving the out-of-production 757 with new engines because of the previously high production cost.

The middle of the jet market is widely seen as a “grey space” sitting between workhorse narrow-body jets like the Boeing 737 or the larger and more capable wide-body jets.

Ron Bauer, vice president for fleet planning at United Airlines UAL.N, predicted demand for an aircraft with longer range than the 1980s-vintage 757, a narrow-body jet which has been popular with airlines for its high performance.

“We look at it as a 757 on steroids,” he told the gathering of aircraft financiers.

Boeing is exploring whether to build a new plane, which industry sources say could be a small twin-aisle plane, rejig an existing model or do nothing.

“We are looking at a number of options...but as you look at those you have to have a business case that works,” Tinseth said, adding “it is a tough business case”.

Jeffrey Knittel, president of lessor CIT Transportation CIT.N, said he saw potential demand for 1-2,000 such jets, which could connect New York to secondary European destinations like Barcelona.

But industry experts are debating whether it is a market sweet spot.

“You are at risk that this airplane will start cannibalizing other segments,” said Bert Van Leeuwen, a managing director at Germany’s DVB Bank.

Airbus claims most of the market’s needs can be met by demand for its single-aisle A321. Its own A310 twin-aisle jet in the 1980s was considered a flop.

“There isn’t a clear target,” said Bob Lange, senior vice president for market and product strategy.

As development costs soar, Boeing is looking for a design that can be built affordably and sold at the right price.

“If those things come together you have a business case that works and go forward. We are far from that point now,” Tinseth said.

Experts say expanding the already revamped 737 would require costly engine and structural changes. Putting new engines on the wide-body 767 would compete in size terms with the very jet that was developed at huge cost to replace it, the 787.

Tinseth sought to reassure the industry any project would not clash with a busy slate of developments including new versions of the 737, 787 and 777 in the next 4-5 years.

“We have a lot of things on our plate which means that an airplane like this would come later rather than sooner.”

Reporting by Tim Hepher; Editing by Adrian Croft and Michale Perry