Analyst: Boeing will build 737s for ’15-20 years’

Boeing and Airbus both will likely decide in the next year or two to put new engines on their competing A320 and 737 single-aisle jets, Leeham Co. analyst Scott Hamilton predicts in his annual look at the aerospace industry.

That engine upgrade — in conjunction with other improvements Boeing plans for the 737 — will likely keep Boeing building the jets in Renton for nearly another two decades, he projects.

“We see the A320 and 737 families being around for another 15-20 years,” Hamilton said. “The 787 and 747 may be sexier and the 777 is a solid performer, but it is the 737 that is purchased in the greatest number and sustains the cash flow more than any other 7-Series airplane.”

Hamilton’s comments echoed statements made by Mike Bair, the Boeing Commercial Airplanes vice president of strategic planning, back in November. Bair told the Renton Chamber of Commerce that he expects Boeing will be building 737s into the 2020s.

He also echoed District 751 President Tom Wroblewski, who noted last summer that the 737 has been “an incredibly profitable plane for the company for decades.” It’s also the plane that has the most Union labor going into it, he noted. “I don’t think that’s any coincidence.”

Boeing plans to update the 737 this year with a new “Sky Interior” inspired by the 787. It will follow that with aerodynamic improvements and a new CFM-56 Evolution engine in 2011, a combination that promises to save airlines 2 percent on their fuel bills. But Boeing will probably have to decide this year whether to adopt a wholely new engine for the 737, Hamilton said. The company is likely to do that, and have one or two new engines (still in development) ready for customers by 2015 or 2016.

Hamilton’s 2010 outlook takes a program-by-program look at Boeing’s other commercial jets:

  • Despite weak sales, Boeing will push ahead with the 747-8 program, Hamilton said, if for no other reason than cancelling the program would cause “too much collateral damage to customers and suppliers, as well as Boeing’s already-tattered reputation and balance sheet.” He believes we’ll see more orders for the 747-8I passenger plane this year, but added that they’ll likely be cut-rate deals offered as compensation to airlines that are still waiting for their long-delayed 787s. (Hamilton believes Korean Air’s recent order for five Intercontinentals falls under this heading.)
  • The 767 line in Everett is going to move at some point, to the back of the factory, making way for the second 787 surge line. When it does move, Boeing plans to upgrade the production process that’s been in place since the ’80s. The venerable ‘Six-Seven continues to snag orders, and District 751 members are churning out about one a month — which Hamilton believes will increase to two a month by 2011. The program’s long-term future very much depends on whether Boeing lands the U.S. Air Force tanker deal.
  • The 777 is “a superb airplane,” Hamilton says, but its end may already be nearing. The proposed Airbus A350-900 — due into service by 2013 — already is putting serious pressure on the 777-200 and -200ER, leaving only the niche -200LR without a challenger. And if Airbus can develop its proposed A350-1000 stretch by its planned entry date of 2015, that could also eat into the market now dominated by the 777-300 and -300ER. Boeing will need to respond, and Hamilton said he expects executives will decide in 2011 whether that response should be in the form of a significant upgrade to the 777 — or a whole new airplane.
  • Boeing faces real challenges with 787 flight testing, if it’s to get the first deliveries to All Nippon Airways by the end of September, Hamilton said. “If all this comes to pass, there will be a huge sigh of relief worldwide.”

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