With the recent announcement by Boeing that the aerodynamic changes are done on the Boeing 737 MAX, any further gains in fuel efficiency must come from the engine and architecture improvements still to come.
Boeing hopes to have the architecture changes—whatever they are—completed by the third or fourth quarter of this year. We presume at least some of these will be geared toward weight reduction (as was the fly-by-wire spoiler change) to offset at least in part the weight gained from heavier, new technology engines, and improvements to the flight system.
Officials claim the new “Boeing Advanced Technology Winglets” (BATW) add up to 1.5% in reduced fuel consumption depending on the length of the flight on top of the advertised 10%-12%.
Window has passed for GTF option
Prior to the addition of the BATW, Boeing was still short of meeting the goal; market sources claim CFM is still working to meet the targeted savings on the engine design of the LEAP 1B, a task observers say will occur by the time the 737 MAX enters service in 4Q 2017, more than five years from now.
The uncertainty over CFM’s current ability to meet Boeing’s desires means Boeing has evaluated adding the Pratt & Whitney GTF as an engine choice. The chances today of GTF powering the MAX appear slim. On the 1Q 2012 earnings call, Boeing CEO Jim McNerney said that “right now,” the company is focused on proceeding with CFM and at the PW Media Day call, PW CEO David Hess said that he doesn’t see an opportunity to put the GTF on MAX.
We believe that as Boeing closes in on the goals, the need to offer the GTF declines. We believe the opportunity has passed.
Still waiting for order conversions
Although Boeing is narrowing the definition of the MAX—final design won’t be done until next year—there remains enough ambiguity that at least some of the customers who have signed “commitments” for the MAX aren’t ready to convert these to firm orders.
“They still don’t know what the airplane is,” one customer says.
Boeing acknowledges that it continues to talk with customers to further define the MAX. Boeing says the plane will have the same passenger capacity and a bit more range than today’s 737NG, but the final weights and range remain unclear. Boeing continues to evaluate how close it can bring the 737-9 to 757 capabilities. Boeing acknowledges freely that no matter how much more range is added to the 737-9, it won’t match the 757’s maximum range/capacity of about 3,200nm. Current, preliminary indications are that the -9 “standard” (our term) has a range of about 2,000nm. A 737-9 HGW (High Gross Weight, also our term) has a maximum range/payload of about 2,500nm. Range goes up as payload goes down in both cases. While the 757 with winglets is used on trans-Atlantic routes and Hawaii, even the 737-9 HGW falls short on trans-Atlantic routes with maximum payload but appears to be able to do some Hawaiian service. The 9 MAX appears to be able to make some trans-Atlantic routes under payload restrictions.
With continuing ambiguity on fuel burn, weights and range, how can Boeing have provided guarantees to those customers who have placed firm orders and convince those with commitments to convert?
According to customers, Boeing offered contracts with a tiered set of provisions. First, it is important to understand that guarantees offered by any OEM are within ranges rather than absolutes. With this in mind, customers tell us that MAX contracts have been structured as follows: If performance falls within one range, then the price is X. However, if the performance falls within a different, sub-optimal range, then the price is a lower Y, thus making up for the short-fall in performance.
This concept is hardly new. Commercial terms are often structured to offset higher operating costs with lower price. Boeing routinely claims that Airbus sells more A320 family members than what it claims is the more efficient 737 by cutting price. Airbus rejects Boeing’s underlying claim (that the NG is 8% less costly in cash operating costs than the A320) and therefore the larger assertion, but the point is made and plenty of industry participants validate the thesis that aircraft and engine OEMs will offer commercial terms that may offset underlying performance disadvantages.
Expectations for Farnborough Air Show
Boeing has about 1,000 orders and commitments for the MAX, with 451 of these confirmed orders. This leaves around 550 commitments to be converted to firm orders. (The oft-reported anticipated order for 100+100 737 NGs/MAXes from United Airlines is over and above the previously announced number.) We believe Boeing will be ready to announce conversions for perhaps 400 of the commitments to firm orders, possibly more. Five of the biggest leasing companies all have commitments: GECAS, ILFC, CIT Aerospace, Air Lease Corp and Aviation Capital Group, which is the only one to publicly announce its commitment. ALC reportedly is talking about 60. GECAS will likely be a big number and we would expect ILFC to be hefty. Not all may be prepared to convert their orders by Farnborough.
We also expect some airlines to be ready to convert their commitments.
Despite the addition of BATW and commitment conversions, we believe Boeing and CFM still have a fair amount of work to do. We also believe that the two OEMs will “get there.”
Nice summary about the ongoing MAX development. IMO Farnborough is crusial for the project. The false start with the mercy order from AA, the alarming prices Southwest apparently negotiated, the amazing large Im-Ex financed Lionair and Norwegian orders. Time for some regular, non political orders from mainstream airlines with average disounts.
Adding up all improvements sofar I have the feeling the 737 MAX is approaching a 10% improvement over the 737 NG. Southwest is deffering NG “4 yrs” after 2013. A first sign of airlines starting to avoid receiving the last current generation NB, with quick economic write-offs. Airbus and Boeing are trying to downplay this while promoting their new ones. Dancing on ice..
Thank you for these numbers
One that is striking me is the OEW
737-800 listed on boeing (ACAPS) 91300 lbs,
and you quote 100080 lbs that’s a very big gap ? THY’s 737-800 are between 94 and 95000 lbs (real life with crew and catering)
Where does it came from ?
The data is Boeing’s.
So i’m lost !