Boeing Guns For More MAX Orders in 2012

December 14, 2011

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Boeing vowed to turn the tables on Airbus next year by winning well over 1,000 orders for its narrow-body 737 jets, following the first landmark order from Southwest Airlines on Tuesday.

Buoyed by a USD$19 billion firm order for 150 revamped 737 MAX and other jets from Southwest, the head of Boeing's commercial division sketched out plans to make 2012 Boeing's year, just as Airbus made headlines in 2011.

Airbus looks set to win the order race for 2011 by a wide margin after agreeing to refresh its 150-seat passenger jet as the A320neo, with fuel-saving engines.

Boeing has been clawing back share after deciding to revamp its competing 737, but until now it has not had firm signatures on its orders while it has scrambled to complete the design.

"We will have 1,300 to 1,400 firm orders by this time next year, certainly," Boeing commercial planes chief executive Jim Albaugh said.

The Southwest order makes it the first airline to place a firm order for the 737 MAX. It also makes the carrier the first operator of the MAX, which will feature a new fuel-efficient engine and is set to enter service in 2017.

"I think next year from an order standpoint again assuming that we don't have a total meltdown in the economy and the financing is still available, next year looks like it's going to be a very good year as well," Albaugh said.

Boeing's order forecast implies that the scales will tip back in Boeing's direction in 2012, barring a fresh surge in demand to the benefit of both manufacturers. But Albaugh said the giant aviation companies would roughly share the largest market segment over time.

"I have full expectation that we will split the market on the MAX and the neo," he said.

Albaugh said Boeing would keep aircraft available for American Airlines, whose decision to defect to Airbus for part of a record order in the summer helped Boeing make up its mind to upgrade the 737 rather than wait for a newer design.

AMR filed for bankruptcy last month, raising questions over how quickly it would be able to confirm its order for 737 MAX passenger jets while in Chapter 11.

Albaugh used uncommonly direct language when he put his European arch-rivals on notice that Boeing would aim to keep up record sales momentum for its 365-seat, long-range 777 mini-jumbo aircraft to exploit a gap left by what he sees as uncertainty over the direction of the future Airbus A350.

Questions over the performance of the larger A350 variants will translate into a "sustained market for the 777," Albaugh said.

Airbus beefed up the design of the A350-1000 in June and said the aircraft would deliver significant improvements compared with the 777 when it hits the market in 2017. But some customers such as Qatar Airways have suggested the changes were not ambitious enough.

"As long as there's disarray in Toulouse, we're going to continue to watch, we're going to continue to keep our powder dry and we're going to continue to talk to our customers about what eventually they're going to need," Albaugh said.

Albaugh said demand for planes is robust in general despite economic pressures that threaten travel demand. This is partly because high fuel costs, which are a major expense for airlines, have forced carriers to reassess their fleets.

"We see playing out here the need to replace the older equipment because of rising fuel prices," Albaugh said.

"Rising fuel prices to an extent don't hurt us," he said. But as fuel prices go too high, it starts affecting the world GDP (gross domestic product) and the world GDP really drives air traffic. So it's a big watch item for us and we are concerned about it, but the market is holding up very well."

Albaugh also said the company was on track to meet its production rate target for the 787 Dreamliner, its long-delayed, carbon-composite aircraft. The company aims to produce 10 787s per month by the end of 2013. But many aviation industry experts believe that target is too ambitious.