Boe­ing eyes come­back in part of jet­liner mar­ket

The Pak Banker - - COMPANIES/BOSS -

Boe­ing Co. faces only dif­fi­cult choices as it de­cides on a come­back strat­egy for a part of the jet­liner mar­ket it once dom­i­nated, ac­cord­ing to Steven Ud­var-Hazy, a lessor and in­flu­en­tial air­craft buyer.

The U.S. plane­maker un­der­es­ti­mated the ap­peal of Air­bus Group SE's A321­neo against Boe­ing's largest nar­row-body air­craft, which are vari­ants of the 737, Ud­var-Hazy said. The aero­space com­pany's op­tions now in­clude cut­ting prices and in­vest­ing in up­grad­ing the largest 737 Max -- pos­si­bly as a stop­gap while it un­veils an all-new air­plane that wouldn't de­but for an­other decade.

"Or does Boe­ing have to re­sign it­self that it may have a mar­ket share dis­par­ity for a pe­riod of years be­cause it doesn't have a head-to-head com­peti­tor to the A321­neo?" Ud­var-Hazy said Tues­day at the Is­tat an­nual con­ven­tion out­side Phoenix. "Th­ese are ques­tions that in­volve multi­bil­lion-dol­lar de­ci­sions." Air­bus's up­graded A321 has gar­nered nearly four times as many or­ders as the com­pet­ing Boe­ing mod­els this decade as the Chicago-based com­pany has stud­ied its op­tions for re­plac­ing the out-of-pro­duc­tion 757 jet­liner. While Boe­ing has con­tem­plated a news­in­gle aisle model for years, the de­ci­sion is com­pli­cated by the risk of un­der­min­ing sales of the 737, the plane­maker's largest source of profit.

Ud­var-Hazy's com­ments carry weight in the in­dus­try af­ter a four­decade ca­reer that in­cluded found­ing In­ter­na­tional Lease Fi­nance Corp. in 1973, sell­ing it to Amer­i­can In­ter­na­tional Group Inc. in 1990 and then cre­at­ing Los An­ge­les-based Air Lease Corp. in 2010. Dubbed the leas­ing in­dus­try's "God­fa­ther," he once es­ti­mated in an in­ter­view that he had pur­chased more than 2,100 planes.

Boe­ing is still try­ing to find the right bal­ance be­tween what air­lines want and what they are will­ing to pay for in the middle-of-mar­ket seg­ment, Randy Tin­seth, Boe­ing's vice pres­i­dent for mar­ket­ing, said in an in­ter­view Mon­day. "We're in that stage where we're hav­ing ac­tive con­ver­sa­tions" with po­ten­tial cus­tomers, Tin­seth said. "Then you look at the tech­nol­ogy avail­able and what the con­fig­u­ra­tions might look like." Boe­ing ex­ec­u­tives have stud­ied both sin­gle- and twin-aisle mod­els to plug the gap be­tween the largest 737 nar­row-body and small­est Dream­liner wide-body mod­els. The plane­maker could garner about 2,000 or­ders for a nar­row-body jet stretched longer than the 737-Max 9 that boasted new en­gines and the range to fly from Ne­wark to Barcelona, ac­cord­ing to an anal­y­sis by CIT Group Inc.

"It's a tough de­ci­sion. It's not easy," Jeff Knit­tel, pres­i­dent of CIT's trans­porta­tion unit, told re­porters Tues­day. "Build­ing an air­plane is not only hard, it's ex­pen­sive. You'd bet­ter get it right."

As Boe­ing stud­ies whether to de­velop a new air­craft, it would also have to de­cide whether to squeeze any new model into the fac­tory in Ren­ton, Wash­ing­ton, where it churns out 737s. Al­ter­na­tively, it could lo­cate pro­duc­tion in an area with lower la­bor costs, Ud­var-Hazy said, in an ap­par­ent ref­er­ence to the com­pany's new plant in North Charleston, South Carolina.

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