Boeing Commercial Airplanes provided a program update on the 737 MAX today.  “The 737 is a more efficient, lighter design and requires less thrust than other airplanes in this class, which is important because weight and thrust have a significant effect on fuel efficiency and operating costs,” said John Hamilton, 737 Chief Program Engineer. “With airlines facing rising fuel costs and weight-based costs equating to nearly 30 percent of an airline’s operating costs, this optimized 68-inch fan design will offer a smaller, lighter and more fuel-efficient engine to ensure we maintain the current advantage we have over the competition.”

Of course, compared to the Bombardier CSeries, the 737-7 will be heavier and utilize an engine with 2% less fuel efficiency, as the CSeries is a lighter, all new design.  As is typical, Boeing compares their aircraft with Airbus, and not with the emerging new competition from Bombardier, Irkut or COMAC.  Boeing has previously largely dismissed the new entrants–particularly those from China and Russia–and it remains to be seen how these new designs stack up against yet another refinement of the venerable 737.

Boeing previously said the 737-7 will be slightly less efficient than the CSeries but the Boeing “value” will offset this deficiency.

Boeing announced they now have more than 600 order commitments to date from eight airlines, up from 496 airplanes from five airlines when the program launched in August.  The program is on schedule says Boeing, meeting internal configuration milestones, with continued focus on engagement with customers and partners to optimize the engine core architecture. Firm configuration for the airplane is scheduled for 2013. First flight for the 737 MAX is scheduled in 2016 with deliveries to customers beginning in 2017.

Boeing believes the 737 MAX program, with a 68-inch fan diameter for the optimized engine design will provide the lowest fuel burn and operating costs.  The CFM LEAP-1B engine is expected to have 10-12% lower fuel burn than current 737s and a 7% operating cost advantage over the competition. (We assume they mean A320)

Our estimates do not show that kind of advantage. MAX will likely be 6% better than today’s model, but neo will be 9% better than standard with winglets.  With a 2% advantage, neo gains a lead per our math. Of course Boeing will tout its better weight per seat. But we are talking about fan and engines.

Boeing Commercial Airplanes President and CEO Jim Albaugh said the decision represents a ‘sweet spot’ and provides a sufficiently high bypass ratio without excessive drag. “I think we made the right decision for us,” he added. An interesting way to describe it (Is that engagement with customers?), and if there were no constraints from a low wing, we believe Boeing would certainly have gone with a larger and more efficient version of the LEAP engine.

More than a few wonder about the improved fuel burn claim. Particularly compared with neo which has a ten inch larger fan. A rule of thumb is that for every inch increase in fan diameter provides a 0.5% better fuel burn. So, if that rule holds true, the 72-inch (everything else being equal) could mean a 5% better fuel burn for the bigger fan. Of course Boeing could argue their 737 is lighter to start with and this would make up the difference, but on balance, we don’t believe that will be the case.

Its early days for the MAX yet. Boeing has won orders for more than 9,000 737s to date. That critical mass alone means MAX should sell, regardless of its comparative performance against neo, since customers are inclined to stick with derivatives of models they operate.  But with three new technology competitors entering the market, and the Russians and Chinese relying on key US suppliers to provide reliability and support for western customers, we don’t expect MAX to be the winner in the market, and, based on our economic analyses, MAX could turn out to be the MIN.

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