Boeing hits Airbus with US$30b order plan for longer 737

[PARIS] Boeing Co received more than three dozen pledges to buy the planned Max 10 on the first day of the Paris Air Show, as the US company stretches its 737 workhorse to challenge Airbus SE's sales lead for the largest single-aisle airliners.

Boeing expects to win 240 orders or expressions of interest for the new model valued at roughly US$30 billion from at least 10 different carriers during the industry event this week, the company said at the Max 10's launch announcement on Monday. Including other models and conversions of earlier contracts to Max 10s, Boeing's Paris show order tally at the end of the day exceeded US$37 billion, versus US$12 billion at Airbus.

"We think the timing's just right" for the Max 10, Chief Executive Officer Dennis Muilenburg said in an interview with Bloomberg Television at the show. "Max 8 and Max 9 continue to be at the heart of the market. The Max 10 is going to add" to a portfolio that boasts a production backlog of seven years.

Chicago-based Boeing is confident the Max 10 will stem customer defections to the Airbus A321neo, which has racked up a considerable order lead since its introduction three years ago. Airbus fired back Monday, downplaying the Boeing plane's capabilities and securing orders worth about US$12.3 billion at list prices from lessors GE Capital Aviation Services and Air Lease Corp for Neo planes, including the smaller A320 version. Boeing's Toulouse, France-based rival has also mulled further improvements to the A321neo variant.

The Max 10 will seat as many as 230 passengers, roughly matching its European rival, while burning 5 per cent less fuel thanks to a lighter construction, Boeing says. SpiceJet Ltd of India signed an agreement for 20 new orders for the largest 737 variant and converted existing commitments for the same number of smaller Max 8s. Tourism group TUI AG converted 18 orders to the new plane. BOC Aviation Ltd and China Development Bank's leasing arm signed memoranda of understanding for the purchase of 10 Max 10s each.

In addition to signing a contract for 100 Airbus planes, Gecas converted 20 orders for current Max versions to the larger variant. United Airlines and Indonesia's Lion Mentari Airlines PT are also expected to place contracts at the Paris expo, people familiar with the negotiations said earlier this month. Airbus executives said the big 737 poses a bigger threat to other Boeing models than to the Neo.

"Do we see the 10 as a competitor of the A321? I think if you look at the numbers, the answer is no," Airbus's chief salesman, John Leahy, said Monday, adding that the Neo version has 10 more seats and can fly over 10,000 miles farther. "Put that all that together and we think the 10 is a competitor to the 9, and I think that's why you're seeing a lot of people converting."

At least one potential Max 10 customer also voiced reservations. Norwegian Air Shuttle ASA CEO Bjorn Kjos wasn't convinced the plane's range is compatible with the discount carrier's strategy of plying the North Atlantic with single-aisle aircraft.

"I'm not sure the price is giving us the right bottom line," Mr Kjos said at the Paris expo. "It may be perfect inside the US, but not for us."

The Max 10, which will be Boeing's first new model since the unveiling of the 777X series at the Dubai Air Show in 2013, will be 1.68 metres longer than the US$119.2 million Max 9, currently the biggest member of the re-engined 737 family, which was launched alongside the Max 7 and 8 in 2011. Boeing said demand for single-aisle planes as well as wide-bodies remains buoyant despite concerns about economic and political turbulence in the Middle East and low fuel prices serving as disincentive to invest in more efficient aircraft.

"We are continuing to see strong energy in the marketplace," said Mr Muilenburg, predicting that new orders should roughly match deliveries this year. "I think there's a little upside here this week" at the Paris show.

The stretched version of the 737 will be achieved by adding a 102-centimetre segment in front of the plane's wings, and a 26-inch plug behind them, with the wings themselves slightly modified to reduce drag at lower speeds. In order to carry the extra payload, the Max 10 will be equipped with larger, higher-thrust engines. The engines' position on the wings will be moved to affect the aircraft's centre of gravity.

The plane will also get taller landing gear to help resolve balance and tail-skid issues that cropped up with the 737-900ER, Keith Leverkuhn, general manager of the Max program, said in an interview at the show site at Le Bourget Airport on Sunday. The longest earlier-generation model is prone to tipping up if baggage isn't balanced carefully in the hold.

The cumulative changes, which Boeing reckons it has achieved on a shoestring budget, are resonating well with customers, Kevin McAllister, who heads Boeing's commercial-airplanes arm, said Sunday.

The US planemaker projects that the Max 9 and 10 will together capture 25 per cent to 30 per cent of 737 sales over the next 20 years. The mid-sized Max 8 - ordered by carriers including Southwest Airlines Co - will remain the "core" offering and account for the bulk of demand.

Airbus is also considering a response and could stretch the A321neo should demand be sufficient, sales supremo Mr Leahy said in Mexico earlier this month, while dismissing the new Boeing plane as "very marginal".

"I can understand how our competition is upset," said Randy Tinseth, a Boeing marketing vice president. The Max 10 "has the same capacity as our competition, flies a bit further, has better economics. I think over the next few days our customers will stand up and say it's a good airplane too."

BLOOMBERG