Boeing still considering new version of 737

Boeing is still leaning toward building a new version of its narrow body 737, and the new plane would outperform Airbus's competing A320neo, Boeing chief executive Jim McNerney said.

"We're going to do a new airplane that will go beyond the capability of what the NEO can do," McNerney said.

He reiterated that Boeing is still making its decision on whether to rebuild its 737 or simply put new fuel-efficient engines on the existing model. A redesigned plane would produce better fuel savings, but would take longer to bring to market.

McNerney repeated that Boeing's major customers prefer to hold out for a new plane, saying it may be possible to bring it to market before 2020, which is earlier than some in the industry had expected.

Boeing has said it aims to have a decision by mid-year.

Boeing rival, Airbus, rolled the dice last year on a re-engined version of its A320, which offers 15 percent fuel savings over the current model.

McNerney said the upgraded A320 would close the value gap between the A320 and the 737, and it may put new pressure on Boeing's margins.

"They're going to want to come out five years later with a leap ahead or a leap-forward product," Wedbush Securities analyst Kenneth Herbert said of Boeing.

Boeing and Airbus are engaged in a poker game for control of a market worth an estimated USD$1.7 trillion over the next 20 years.

The plane makers have occasionally been accused of bluffing in order to wrong-foot their opponent, with Boeing trumpeting a fast passenger jet called the Sonic Cruiser before switching to the 787 Dreamliner in 2003.

But Boeing has spoken with increasing consistency of its preference for a new single-aisle plane while Airbus sales chief John Leahy insisted earlier this week that the European company's preference for a quicker but more modest redesign with new engines was "not a feint."

But not everyone is convinced that Boeing will redesign the 737.

"They have said all along that they will explore all options, re-engine being one of them," said Alex Hamilton, managing director of EarlyBirdCapital. "I think they have to re-engine."

(Reuters)