Intended to fill a gap in its lineup that Airbus Group SEis exploiting by racking up order after order for its A321neo, Boeing Co. is nearing a decision to build a longer 737 Max targeted for lengthy routes such as Boston to Los Angeles.
Boeing’s newest single-aisle plane can’t come soon enough, for one key customer, Air Lease Corp.
“We’ve recommended 2019,” John Plueger, chief executive officer of the Los Angeles-based lessor, said in an interview. That’s a year ahead of Boeing’s schedule for the Max 10X’s planned debut. “It would have been better to get the first airplane in March 2019, but I don’t think that’s possible,” he said.
In its high-stakes chess match with Airbus for dominance of the single-aisle market, timing and price are two of the critical elements that Boeing must consider. The largest sources of profit for the aerospace titans are the 737 and A320 family aircraft, long favored by budget carriers. The payoff can be thwarted by factors ranging from cheap oil to supplier stumbles and billions of dollars of investment are at stake.
Airbus’s A321neo is grabbing orders from customers like Delta Air Lines for transcontinental flying once handled by Boeing’s out-of-production 757 while Boeing figures out its product strategy and getting antsy is Air Lease, an influential lessor with a track record of shaping Boeing and Airbus product decisions.
“It’s getting a very late start,” said Plueger, who co-founded Air Lease with Steven Udvar-Hazy, nicknamed the “godfather” of aircraft leasing for his role in founding the industry. “The timing is really key here.”
The Boeing product was dismissed by Airbus sales chief John Leahy. “They are spending money to improve a product but not be equal to us,” he said in an interview. “So you’d say, ‘Well, why would I buy that?’”
“There is always the possibility of trying to get an extra seat row in,” Leahy said. “A lot depends on what they decide to do with the 737 Max 10.”
Airbus has faced delays and angry customers as United Technologies Corp’s Pratt & Whitney division struggles to ramp up production of a new engine tailored for the A320neo family, which began commercial flights last year even while it has grabbed the bulk of single-aisle sales since introducing a more efficient version of the A320 in late 2010.
Including a combustor liner that is degrading faster than anticipated in harsh environments, the engine-maker recently acknowledged some durability issues affecting the geared turbofan. Gregory Hayes, chief executive officer of United Technologies, said on the most-recent quarterly earnings conference call that Pratt is also working with a supplier to resolve premature failures of an oil seal, which should be fixed by May.
Plueger said that this year, Air Lease expects to take delivery of eight Pratt-powered A320neo aircraft. But more pressure is being put on the division as operators are asking Pratt to provide a greater number of spare engines as insurance. He said that the challenge was to “Meet the revised quantity they have agreed to provide Airbus, but also ramping up so they have enough spare engines to cover the installed fleet.”
(Adapted from Bloomberg)