Market reception for the Boeing 737RE remains mixed, with the some customers expressing disappointment that Boeing did not proceed with the New Small Airplane but at the same time relieved that the uncertainty is over. Several airlines quickly expressed interest in the 737RE and Southwest Airlines is already in negotiations with Boeing for the new airplane, according to a competitor.
But the 737RE remains undefined at this point.
We fully expect Boeing to have robust sales for the 737RE once the program is launched and the product design is defined. It appears that in many respects, the detailed design is not quite finished. Over at Leeham News, we posted an item last week about how the design is narrowing.
Last week Steven Udvar-Hazy, CEO of Air Lease Corp, made some critical observations about the 737RE during ALC’s quarterly earnings call. Hazy had urged Boeing to proceed with the NSA. His is a powerful voice. It was following his comments at an ISTAT meeting several years ago (in response to our question, by the way) that caused Airbus to scrap its fourth design iteration of the A350 and proceed with the composite version.
After Hazy’s comments on the 737RE, we reached out to him to ask for more information about what he viewed to be short-comings of the redesign, but Hazy replied these conversations remain confidential with Boeing.
Boeing Commercial Airplanes is presenting the RE to the Board of Directors this month to obtain Authority to Offer the airplane for sale, a kind of odd circumstance since American Airlines announced an order for the airplane already. As regular readers of Leeham News know, the evolution of the 737RE has been a bit of an oddity, with Boeing largely dismissing the idea of re-engining the airplane and favoring a new one, coupled with a dedicated campaign to cast doubt on the Airbus A320 re-engine concept. But with Airbus selling 1,029 airplanes by the end of the Paris Air Show—and then landing American Airlines afterward—as well as shifting priorities in favor of development of the 787-10 and facing the need to enhance the 777, the 737RE became the favored solution.
But ALC’s Hazy wasn’t too pleased. Here is what he had to say on the earnings call.
The program is still in the design definition phase. There is a lot of work yet to be done by CFM on the engine. And it’s really premature…to draw any conclusions as to the competitive economic profile of that aircraft versus the A320 family.
Based on the best information we have, the possible re-engining of the 737 will track much later than the Airbus program. So in terms of timeline, any impact it may have in the future is going to be at a later date.
Personally, I’m disappointed. But I fully recognize and understand the reasons why Boeing is going down this path. You have to remember that they have two very large programs, the 787 and the 747-8 Intercontinental, which have an expensive ambitious project and neither aircraft has been certificated yet, neither aircraft is in revenue service, they’ve both been a tremendous negative cash flow for the company, and we feel until those aircraft are out flying, it would have been very difficult for Boeing to make a $10bn or $12bn commitment to develop a new aircraft.
Now, we continue to work with Boeing very closely on defining a new generation of aircraft, which will eventually replace 737 and the 757. But I think at this juncture, with the implications of the existing programs and the inability to find where this new airplane would be built and how it would be built, and some of the other labor issues Boeing is faced with right now, I think they took sort of a band aid solution. But there are still questions about how competitive that 737NEO engine airplane would be vis-à-vis the A320neo because as you all know, the 737 has dynamic and geometric limitations on the fan diameter of an engine.
So we’re still working and talking with Boeing on a frequent basis to understand how this design will evolve on the 737 re-engining. And all cards are still in the table, I don’t think there’s been any definitive final definitions of the configuration. But certainly they have their work cut out because the airplane is closer to the ground, it’s an older generation airplane, the original design dates back to 1967. So I think Boeing has many, many challenges to overcome to make it an effective airplane.