EVERETT, Wash.—After a year of meetings with potential
customers, Boeing Co. is advancing toward developing an all-new
jetliner with up to 270 seats that would target midrange flights of
up to 10 hours.
The proposed new plane would enter service around the middle of
the next decade, but first Boeing executives need to secure board
approval by demonstrating it can build the plane at the price
dictated by airlines and leasing companies.
"It's coming faster than you think," said Mike Delaney, Boeing's
vice president of airplane development, in a presentation to
reporters in June. "We have all the things we sort of need to put
the airplane together."
The plane is intended to service routes of between 2,900 and
5,000 nautical miles, including trans-Atlantic flights and the
fast-growing Asian market, a segment where rival Airbus Group SE
has enjoyed sales success
Boeing said it has held talks with 36 airlines and lessors over
the past year, and potential customers said it is leaning toward a
twin-aisle jet seating between 200 and 270 passengers, with
seven-across seating in coach class. Like its 787 Dreamliner, the
proposed new plane would have carbon fiber composite wings, said
one of the customers.
Boeing hasn't publicly said it would go ahead with the planned
new plane. Chief Executive Dennis Muilenburg said at an investor
event last month that while an all-new jet might be ready in 2024
or 2025, "that's an if", not a "when" it decides to move
forward.
The company is also considering a new larger version of its
single-aisle 737 Max with bigger engines and modified wings to seat
250 passengers. The less expensive concept, dubbed the 737 Max 10X,
could be ready around 2021, according to a person familiar with its
studies. Doing both new planes, says Boeing's marketing chief Randy
Tinseth, remains an option.
Boeing's estimates there is demand for 3,000 to 5,000 of the
proposed new jets, though as many as 2,000 could be cannibalized
from its existing single-aisle and long-range jets. The new plane
would replace Boeing 767s and out-of-production 757 jets, which
combined generated 2,200 sales.
Boeing wants to replace its 757, the 1980s-era transcontinental
U.S. airline workhorse, and offer larger more-efficient jets to
China's fast-growing airlines, which face increasingly congested
skies and a pilot shortage, allowing them to bypass the congested
hubs in Beijing and Shanghai.
Boeing's last all-new jet, the 787 which entered service in
2011, is roughly the same size as the planned new plane—known
internally as the New Middle-Market Airplane—but is designed to
operate much longer flights of as much as 17 hours.
Mr. Delaney said Boeing is tapping General Electric Co.,
Rolls-Royce Holdings PLC and United Technologies Corp. unit Pratt
& Whitney for a new engine on the jet. Potential customers
estimate a new Boeing jet would need a price tag of between $65
million to $75 million after discounts to be competitive.
Boeing says its research and development spending is plotted
through the end of the decade and it plans to return $10.5 billion
back to shareholders through share buybacks and dividends. Analysts
have placed the development price of an all-new jet at between $10
billion and $15 billion.
Target customers would span the globe and airline feedback
suggests such a jet would make it a mainstay on the North Atlantic
with U.S. and European full-service and low-cost airlines, opening
new routes between smaller U.S. and European cities and joining
Europe to Africa and the Middle East, as well as flights between
North and South America and from Australia into Southeast Asia.
Much of closing the business case depends on first proving out
manufacturing costs on its currently planned much-larger 777X
jetliner, due in 2020, said Mr. Delaney. Boeing has built a
sprawling new factory to fabricate carbon fiber wings using a
heavily automated process, complete with automated vehicles moving
parts around the factory.
Airbus is already advancing on a medium-size option for
airlines, offering its biggest single-aisle A321neo—for new engine
option—and besting Boeing's current smaller middle-market offerings
with a roughly 70% market share. That model, currently in testing,
will eventually seat up to 240 passengers, and deliver at the end
of 2016. Airbus could have more than 1,000 in service by the time
the new Boeing jet is ready at a price many millions of dollars
lower, and Boeing is looking to stave off future buyers with the
promise of its own new plane, say industry officials.
Boeing's next move is the continuation of a strategy shift made
nearly two decades ago. Boeing bet airlines would move away from
ever-larger jets that would connect the hubs in the world's largest
cities in favor of flying fewer people directly to smaller cities
with super-efficient jets like its 787.
Boeing won more than 1,000 orders for the Dreamliner, but it
spent tens of billions more than it anticipated designing and
producing the advanced jet. Boeing has yet to begin recovering
nearly $30 billion in deferred costs it accumulated building the
787. That enormous hole has left Boeing figuring out a development
and manufacturing model for the new jet at a price it and its
airline customers can afford.
"We've paid those development costs," said Mr. Delaney. "We now
have the pieces from what we did on the 787 and we know where the
risks are…and the 787, quite honestly, solved all of the big
problems and so now it's a matter of leveraging that investment
into something new."
Write to Jon Ostrower at jon.ostrower@wsj.com
(END) Dow Jones Newswires
July 01, 2016 10:05 ET (14:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
GE Aerospace (NYSE:GE)
Historical Stock Chart
From Aug 2024 to Sep 2024
GE Aerospace (NYSE:GE)
Historical Stock Chart
From Sep 2023 to Sep 2024