Boeing Co. is prepared to defend its rainmaker 737 jetliner as competition heats up at the top and bottom of the lucrative single-aisle market, Chief Executive Officer Dennis Muilenburg said.
The threat to the U.S. planemaker was underscored when Delta Air Lines Inc. announced orders last week for Bombardier Inc.’s all-new C Series jets and Airbus Group SE’s largest narrow-body jet. The Airbus A321neo has grabbed 85 percent of orders versus its Boeing counterpart, the 737 Max 9, while the C Series is finally making inroads with its smaller jets.
Boeing is weighing its potential response to the “middle of the market” segment once dominated by Boeing’s out-of-production 757, where the largest narrow-body aircraft overlap the smallest twin-aisle models. Among options: stretching the largest 737 Max and outfitting it with upgraded engines and new landing gear to counter the A321neo.
“We’re going to continue watching the marketplace, having productive conversations with customers,” Muilenburg said at Boeing’s annual general meeting in Chicago on Monday. “If we need to make an additional move in that space, we’ll be ready.”
The urgency has grown as Airbus grabbed a commanding sales lead for its single-aisle jets. Ray Conner, chief executive of Boeing’s commercial airplane unit, told employees in February that he wanted to chart a strategy over the next 12 months.
The challenge is to find a design that justifies renewed investment by airlines without undermining the 737, Boeing’s biggest moneymaker. The workhorse jet, favored by low-cost carriers, accounts for about 25 percent of total revenue, according to Bloomberg Intelligence analyst George Ferguson. The backlog of unfilled 737 orders could be Boeing’s most valuable asset, at about $200 billion, according to Bloomberg Intelligence estimates.
“We’re in a strong position but we also know it’s a competitive marketplace,” Muilenburg said. “We have the right products but we’re going to be relentless on our ongoing productivity and cost efforts.”
Boeing has explored all-new designs that wouldn’t debut for about a decade, including an elliptical frame with twin aisles to speed passenger boarding. Recently, the planemaker has also focused on simpler overhauls that it could speed to market. The manufacturer has approached Max 7 customers Southwest Airlines and WestJet Airlines Ltd., about a redesign that would involve shrinking the frame of the Max 8 to bolster cabin capacity and range.
“We would not be surprised if Boeing were to shift its narrow-body strategy in order to maintain its competitive advantage,” Ron Epstein, an analyst with Bank of America Merrill Lynch, wrote in a note to clients Monday. “With orders from Delta, Lufthansa, and Air Canada and entry into service this year, the C Series is no longer a nuisance. The C Series is a credible threat that is here to stay.”