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Boeing appears to be nearing a final decision on the fan size of the re-engined 737, settling on a powerplant that will not require any modification to the aircraft's landing gear, confirm company and industry sources.

 

As the airframer moves closer to a vote by the board of directors later this month, a 167cm (66in) CFM International Leap-X fan is gaining consensus internally as the final configuration of the re-engined jet, which is likely to enter service in 2016 or 2017.

 

Further, the updated aircraft is expected harmonise the type's brand in line with the 787 and 747, changing the 737-700/800/900ER to the 737-7, -8 and -9.

 

Boeing declined official comment on fan size deliberation.

 

The updated jet is also expected to feature external nacelle chevrons for noise reduction, similar to those featured on the 787 and 747-8, and detailed assessments are underway to incorporate a revised tail cone, natural laminar flow nacelle and a hybrid laminar flow vertical stabiliser for additional drag and fuel burn reduction.

 

Boeing is seeking to strike a balance with its design, delivering 10-12% fuel burn improvement from the updated engine without changing the 737 too significantly to break fleet commonality with its current models, in turn giving existing customers the flexibility to evaluate the Airbus A320neo without consideration of the switching costs.

 

While Boeing's 167cm fan will have a lower bypass ratio and higher specific fuel consumption (SFC) than the 198cm (78in) Leap-X and 205cm (81in) Pratt & Whitney PW1100G engine options for the A320neo, the smaller engine will weigh less and create less drag on the 737's airframe.

 

According to one industry assessment of the engine's performance, the SFC improvement of a 66in fan places its SFC improvement around 13-14% over the 155cm (61in) CFM56-7B engine that powers the 737 today, and once integrated onto the aircraft would deliver a fuel burn benefit of 10-12%.

 

The consideration of a 167cm fan for the re-engined 737 was first reported by Leeham Co. in an 10 August posting.

A design shelved earlier this year, designated the 737RE, featured a 177cm (70in) fan, which required an 8in nose gear extension to meet the required 43cm (17in) engine nacelle ground clearance to avoid hitting taxiway lighting.

 

The 737 could have accommodated up to a 170cm (67in) fan before requiring any changes to the landing gear.

 

According to that now-defunct plan, the longer nose landing gear would have prompted a redesign in the lower lobe of the forward 41 section, requiring Boeing to modify the electrical equipment (EE) bay to find new routing for wiring and equipment racks.

 

The changes would have also likely necessitated widespread changes to the aircraft's empennage and fuselage.

 

Boeing is seeking to avoid repeating the troubles it encountered when developing the 747-8 freighter and Intercontinental, which began its design life as a "simple" re-engine with General Electric GEnx-2B powerplants.

 

The mounting of the 747's engines and stretching of the fuselage, prompted significant changes to the aircraft's wing and flight control systems that caused a ripple effect across the jumbo's design. In turn, this drove up the extensiveness and cost of the change required to deliver on the jet's performance targets.

 

Once Boeing receives the go-ahead to offer the 737-7, -8 and -9 to customers, it will be able to begin taking orders for the updated narrowbody, including firming a commitment for 100 of the type from American Airlines, announced on 20 July.

 

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Yes, right now Boeing got its hands really full with the B787 and B747-8 projects. Once these are completed, they will need to look at the B737 and B777 replacement models.

Edited by flee

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If Boeing decided on 167cm (66in) engine which have a lower bypass ratio and higher specific fuel consumption (SFC) is unlikely to have lower CASK than A320neo and Boeing may be forced to proceed with totally new replacement earlier than expected.

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More details have emerged on the likely configuration of the powerplant for the re-engined version of Boeing's 737, ahead of expected board approval for the programme.

 

As well as a 167cm (66in) fan on the CFM International Leap-X engine - increased from 157cm on the CFM56-7B, which powers the 737NG - the updated jet is also expected to feature external nacelle chevrons for noise reduction, similar to those featured on the 787 and 747-8.

 

A fan of the proposed size would remove the need to modify the design of the landing gear, although Boeing declined official comment on the deliberations on fan size.

 

Detailed assessments are under way to incorporate a revised tail cone, natural laminar flow nacelle and a hybrid laminar flow vertical stabiliser for additional drag and fuel burn reduction.

 

The airframer's board of directors was due to meet at the end of August to vote on giving a green light to the project.

 

Boeing is seeking to strike a balance with its design, delivering a 10-12% fuel burn improvement from the updated engine without changing the 737 too significantly and breaking commonality with its current models.

 

This potentially allows a way in for Airbus to offer its A320neo.

 

While Boeing's 167cm fan will have a lower bypass ratio and higher specific fuel consumption (SFC) than the 198cm Leap-X and 205cm Pratt & Whitney PW1100G engine options for the A320neo, the smaller engine will weigh less and create less drag on the 737's airframe.

 

According to one industry assessment of the engine's performance, the SFC improvement of a 167cm fan would offer around 13-14% over the 155cm CFM56-7B engine that powers the 737 today. Once integrated on to the aircraft it would deliver a fuel burn benefit of 10-12%.

 

A design shelved earlier this year, designated the 737RE, featured a 177cm fan, which required a 20cm nose gear extension to meet the required 43cm engine nacelle ground clearance, to avoid hitting taxiway lighting.

 

The 737 can accommodate up to a 170cm fan before requiring any changes to its landing gear.

 

According to that now-defunct plan, the longer nose landing gear would have prompted a redesign in the lower lobe of the forward 41 section, requiring Boeing to modify the electrical equipment bay to find new routes for wiring and equipment racks.

 

The changes would have also likely necessitated widespread modifications to the aircraft's empennage and fuselage.

 

Boeing is seeking to avoid repeating the trouble it encountered when developing the 747-8 freighter and Intercontinental, which began its design life as a "simple" re-engine with General Electric GEnx-2B powerplants.

 

The mounting of the 747's engines and stretching of the fuselage prompted significant changes to the aircraft's wing and flight control systems, which subsequently caused a ripple effect across the jumbo's design.

 

In turn, this drove up the extent and cost of the change required to deliver on the jet's performance targets.

 

Once Boeing receives the go-ahead to offer the 737-7, -8 and -9 to customers - as it harmonises the range in line with the 747 and 787 - it will be able to begin taking orders for the updated narrowbody, including firming a commitment for 100 of the type from American Airlines, announced on 20 July.

 

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- Will deliver improved fuel efficiency and lowest operating costs in single-aisle market

- Customers expressing overwhelming acceptance for new airplane

- Feldmann to lead new program; Teal named chief project engineer

 

6am1_med.jpg

6am2_med.jpg

 

SEATTLE, Aug. 30, 2011 /PRNewswire/ -- The Boeing (NYSE: BA) Company's board of directors has approved the launch of the new engine variant of the market-leading 737, based on order commitments for 496 airplanes from five airlines and a strong business case.

 

"The re-engined 737 will allow Boeing to continue to deliver the most fuel efficient, most capable airplane with the lowest operating costs in the single-aisle market," said Boeing Commercial Airplanes President and CEO Jim Albaugh. "This, coupled with industry leading reliability and maintainability, is what customers have told us they want. As a result, we are seeing overwhelming demand for this new and improved version of the 737. We are working with our customers to finalize these and other agreements in the weeks and months ahead."

 

The new 737 family will be powered by CFM International LEAP-1B engines optimized for the 737. It will have the lowest operating costs in the single-aisle segment with a 7 percent advantage over the competition. Deliveries are scheduled to begin in 2017.

"Customers tell us they want to improve profitability and fuel efficiency while reducing their environmental footprint," said Albaugh. "This solution meets all three of those needs."

 

When compared to a fleet of 100 of today's most fuel-efficient airplanes, this new model will emit 277,000 fewer tons of CO2 and save nearly 175 million pounds of fuel per year, which translates into $85 million in cost savings. The airplane's fuel burn is expected to be 16 percent lower than our competitor's current offering and 4 percent lower than their future offering.

 

Boeing has named Bob Feldmann vice president and general manager of the new engine 737 family. With 35 years of aerospace experience, Feldmann most recently led the Surveillance and Engagement division within Boeing Military Aircraft, a unit of Boeing Defense, Space & Security that includes several commercial derivative programs based on the 737 platform. He has been instrumental in leading the successful development of complex programs such as the EA-18G Growler and the P-8A Poseidon.

 

Michael Teal has been named vice president, chief project engineer and deputy program manager. Teal's most recent role was vice president and chief project engineer on the 747-8 program, where he was instrumental in managing the airplane's configuration and integration, performance, safety, test and certification.

 

The Boeing 737 is the world's most popular and reliable commercial jet transport. The 737 family has won orders for more than 9,000 airplanes.

The Next-Generation 737 program has continuously improved the products, features and services that provide increasing value to customers. Today's Next-Generation 737s are up to 7 percent more fuel-efficient than the first airplanes delivered in 1998. Boeing forecasts global demand for more than 23,000 airplanes in the 737's market segment over the next 20 years at a value of nearly $2 trillion.

 

Source

 

So new 737-7, -8 and -9 will have chevrons and 787-style tailcone.

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And not to forget; the aircraft designation is also changed as well:

 

B737-700: B737-7

B737-800: B737-8

B737-900: B737-9

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Will MH have the option of converting existing orders or options to the 737RE?

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Will MH have the option of converting existing orders or options to the 737RE?

 

737RE EIS is 2017. I don't think they want to wait until 2017 to receive their 737-400 replacement. But they have 10 more options, which they might want to exercise for 737RE.

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Wonder how Boeing will juggle their customer specific designations in future

For eg the incoming MH birds are 737-8H6's

Should MH in future opt for the 737-8 ? Possibly 737Max-8H6 ?

Irrelevant trivia really :pardon:

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I think that with MH, we can no longer assume that they will continue with 737s after the completion of delivery of their 35 orders. Khazanah has mentioned AK's good relationship with Airbus more than once.

 

There is a likelihood that MH might wish to leverage on the economies of scale of AK's huge A320 fleet. So, MH might be looking to buy A319/320/321 NEOs in future to replace the current B737 fleet.

Edited by flee

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Boeing narrows 737 Max engine fan size options to two

 

Boeing has narrowed the fan size on the CFM International Leap-1B engines which will power its newly-launched 737 Max family to two options - 168cm or 173cm (66in or 68in).

 

"There are some advantages to 66 [inches] that we like and there are some advantages to 68 [inches] that we like and we're doing the final trades right now and we'll make a decision in the next several weeks," said Boeing Commercial Airplanes chief executive officer, Jim Albaugh.

 

"Right now we're looking at two different sizes, a 66in and 68in fan blade. In either case we remain very confident that it's not going to require a lot of modifications to the gear," he added.

 

At the time of its initial announcement on 20 July, Albaugh said Boeing had narrowed its choices to four options. With this latest move, a 168cm fan allows Boeing to maintain a 43cm (17in) ground clearance beneath the aircraft's nacelles to avoid contacting taxiway lighting.

 

"Certainly with the 66 [inch] there's no modifications, and I think even with the 68 [inch] there's a very low probability we'll have to touch the front gear.

 

"What we're trying to do is optimse the integrated design of the airplane and we believe the sweet spot for that integrated design solution is going to be 66 or 68 inches."

 

Albaugh said the 2017 entry into service allows for both options to be given full consideration.

 

"We have that built into our reserve for the development of this programme and we have it built into the reserve for the schedule," he said of the 173cm fan.

 

Albaugh says weight, drag and efficiency are all factors that must be considered when determining the final fan size for the 737 Max.

 

"Clearly with the heavier engine, you'll have to do some changes to the wing, some changes to the side of body join, some localised stiffening of the airplane," said Albaugh.

 

"But what we tried to do with our decision on the engine is maximise what this airplane can do. Yeah, with a bigger fan you get more efficiency because of the bypass ratio. But also what you find with the bigger fan is what you find is you get more weight and more drag."

 

Albaugh said the Leap-1B is 10-12% more efficient than the 156cm (61in) CFM56-7B that powers the Next-Generation 737 family today.

 

The three model 737 Max family, replacing the Next-Generation 737 with the 737-7, -8 and -9, was launched by Boeing yesterday.

 

Click here to see images of the new 737 Max aircraft.

 

Source

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Boeing aims to minimise 737 Max changes

 

With the development of its re-engined 737 Max, Boeing aims to limit the scope of work to changes directly related to the integration of the CFM International Leap-1B engine.

 

"There are a lot of things we could do with the airplane, but what we want to do is limit the scope of work," said Boeing Commercial Airplanes chief executive officer Jim Albaugh.

 

"And we're going to limit the scope of work associated with the engine. I've told my team I don't want to hear 'simple' and 're-engine' in the same phrase," he added. "But we're going to make this the simplest re-engine possible."

 

Albaugh said in addition to the new engine, Boeing will offer a new auxiliary power unit tail cone for drag reduction.

 

Boeing's renderings of the 737 Max also feature reshaped flap fairings, as well as APU tail cone lights similar to those on the 787.

 

Albaugh also said Boeing plans no changes to the 737 Max's flight deck: "The one thing we do want to make sure we have with this airplane is compatibility with the NG, compatibility with airplanes we've already delivered. What customers have told us is don't touch the cockpit, and our plans are not to do that."

 

Additionally, Albaugh anticipates limiting the amount of re-certification work required on the 737 Max: "Those are some questions we're going to have to work with the FAA, our expectations is that there will be a certification issue, but it will have to do with the engine and nothing more."

 

However, while Boeing intends to work to limit the scope of work on the 737 Max, Albaugh said the airframer plans to introduce limited fly-by-wire for the narrowbody for the first time, a traditionally costly undertaking both in dollars and certification requirements.

 

"There are a couple of things we're going to make a more fly-by-wire than they are today, but very minimal things, very minimal," he said.

 

Product development plans for the 737 have indicated a move toward fly-by-wire spoilers that industry sources speculate could be used for manoeuvre load alleviation to increase the aircraft's maximum take-off weight.

 

The three-model 737 Max, replacing the Next-Generation 737 with the 737-7, -8 and -9, was launched by Boeing yesterday.

 

Source

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Boeing's marketing chief Randy Tinseth expects the 737 Max family to rack up "hundreds" more orders in the coming months as the airframer works to firm the configuration of the new narrowbody.

 

The airframer launched the new family in August with deposits from five undisclosed customers - known to include American Airlines - for 496 commitments.

 

These deposits were taken despite the fact that the aircraft is relatively undefined "because our customers understand the aircraft today, they understand the work statement we're talking about and they know where we're going," said Tinseth, who is Boeing Commercial Airplanes vice-president marketing.

 

Tinseth said details of the 737 Max's performance specification are still being finalised with range, weights and engine fan diameter still fluid. He expected the firm configuration would be achieved in "the next weeks and months to come".

 

However, Tinseth is confident 737 Max sales will quickly accumulate.

 

"We have those 500 commitments from five airlines, and as we go forward in the next months I expect that to increase by hundreds," he said.

 

The order boast comes after John Leahy, chief salesman at rival Airbus, poured scorn on Boeing commitment claims.

 

"I hear from my competitor that he's got 496 potential commitments. I can't for the life of me figure out where they are - other than American Airlines," he said.

 

A decision key to the 737 Max firm configuration effort is the engine's fan diameter, with 66in (1.68m) and 68in being evaluated, compared with 61in on the current models. "I expect we'll decide this sooner rather than later," said Tinseth.

 

He added that the fan size could also have a knock-on effect on the engineering of the landing gear.

 

"We're looking at a potential modification to the nose gear to make it a bit longer - a 66in fan diameter reduces that risk and there may be a chance we don't have to [touch the gear] with whichever fan size we go for," he added.

 

http://www.flightglobal.com/articles/2011/09/23/362480/hundreds-more-737-max-orders-soon-boeing.html

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Being decides on engine fan diameter

 

SEATTLE, Nov. 3, 2011 /PRNewswire/ -- Boeing (NYSE: BA) announced today that the 737 MAX program has selected a 68-inch fan diameter for the optimized engine design that will provide the lowest fuel burn and operating costs in the single-aisle market.

 

The 737 MAX continues to receive overwhelming acceptance from customers with more than 600 order commitments received to date from eight airlines, up from 496 airplanes from five airlines when the program launched in August.

 

The program is on schedule with internal configuration milestones of the new jet, with a continued focus on engagement with customers and partners to optimize the engine core architecture. Firm configuration for the airplane is scheduled for 2013. First flight for the 737 MAX is scheduled in 2016 with deliveries to customers beginning in 2017.

 

"The 737 is a more efficient, lighter design and requires less thrust than other airplanes in this class, which is important because weight and thrust have a significant effect on fuel efficiency and operating costs," said John Hamilton, 737 Chief Program Engineer. "With airlines facing rising fuel costs and weight-based costs equating to nearly 30 percent of an airline's operating costs, this optimized 68-inch fan design will offer a smaller, lighter and more fuel-efficient engine to ensure we maintain the current advantage we have over the competition."

 

The new 737 family will be powered by CFM International LEAP-1B engines. The new-engine variant will have 10-12 percent lower fuel burn than current 737s and a 7-percent operating cost advantage over the competition. The airplane will have the capacity for increased range while providing better fuel efficiency than today's already-efficient 737.

 

When compared to a fleet of 100 of today's most fuel-efficient airplanes, this new model will emit 277,000 fewer tons of CO2 and save nearly 175 million pounds of fuel per year, which translates into $85 million in cost savings. The airplane's fuel burn is expected to be 16 percent lower than our competitor's current offering and 4 percent lower than their future offering.

 

The Boeing 737 is the world's most popular and reliable commercial jet transport. The 737 family has won orders for more than 9,000 airplanes.

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Boeing completes initial review of 737 Max configuration

 

Having completed a recent review of requirement, configuration and certification plans for its 737 Max, Boeing plans to fly the first re-engined narrowbody in 2016. It now holds commitments from eight customers for more than 600 aircraft with "hundreds more" on the way.

 

John Hamilton, Boeing 737 chief programme engineer, in a briefing to media last week said the company will fix the configuration of the updated aircraft in 2013. It has already disclosed the aircraft will feature a 173cm (68in) fan on its CFM International Leap-1B engines.

 

Boeing has definitively frozen the length of the fuselage and the door configuration, maintaining the dimensions found on today's 737-700, -800 and -900ER, though Hamilton says the nose of the Max will ride higher than the Next Generation models.

 

"We can put a 68in fan on the airplane without changing the nose gear, but we allowed our designers to remove that constraint to see if they can further optimise the engine on the airplane," said Hamilton. "We believe there's a little better optimisation that can occur when we allow the nose gear to float up a little bit."

 

Boeing Commercial Airplanes CEO Jim Albaugh said the nose gear extension would add 15-20cm (6-8in), though Hamilton declined to commit to that figure, saying there is "squishiness" on the final length.

 

"We haven't finalised exactly how much we need to grow the nose gear," said Hamilton, who said only "minor changes" to the nose landing gear well would be required to relocate components to accommodate the longer strut.

 

Hamilton added that the engine will ride further forward relative to today's CFM56-7BE engine.

 

Hamilton confirmed that Boeing will employ fly-by-wire spoilers on the 737 Max, the first such implementation of a digital flight control system on the narrowbody's design "to save weight on the airplane, improve the production flow, and allow us to improve stopping performance of the airplane."

 

Conceptually, the 737 Max's hydraulic system redundancy will be based on a scaled-down version of the larger 757, which can be simplified by only applying fly-by-wire to the spoilers, he said.

 

Other features of the Max committed to by Boeing included a reshaped tail cone to clean up aerodynamic performance, widespread structural strengthening, a new nacelle and pylon for the Leap-1B, and fuel, pneumatic systems and updated engine software.

 

The aircraft may also incorporate technologies that will be added to the Next Generation 737 ahead of the Max's deployment. Boeing plans 2012 tests for its EcoDemonstrator programme with American Airlines - the only disclosed customer for the Max - which will evaluate a mini-split flap, variable area fan nozzle, adaptive trailing edge technology, flight trajectory optimisation and regenerative fuel cells.

 

Beyond the disclosure of select details, Hamilton emphasised that many key attributes of the Max are still undefined, including the configuration of the engine's "custom core", wingtip devices, thrusts and weights based on customer requirements, which he said will be established "later next year."

 

The Leap-1B's "custom core", which will anchor an 11-12% improvement in fuel burn and 7% operating cost improvement on the aircraft, has evolved from its initial concept to bolster the powerplant's performance.

 

Hamilton said of the design: "With development programmes, you start with one engine and you start to refine it. The initial engine that CFM proposed to us probably had a lot of commonality with the C919 and [A320neo], but that was kind of our starting point. But we're going to continue to work with CFM every day on this and continue to customise the engine so that it is unique for the 737."

 

"We haven't finalised all the details of the engine, but we've dialed it in enough now, we know that we can get much better performance than what" was known when the evaluations first began with the baseline engine configuration, said Hamilton.

 

With its 2017 service entry planned, Boeing aims to certify the new 737 variant under an amended type certificate rather than a full-scale recertification.

 

Hamilton gave no specific timeline for the firming of the more than 600 orders and will be contingent upon establishing the performance of the aircraft, which will enable Boeing to provide contractual guarantees to its customers.

 

http://www.flightglobal.com/news/articles/boeing-completes-initial-review-of-737-max-configuration-364297/

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Southwest Airlines has placed a firm order for 150 Boeing 737 Max aircraft - valued at $19 billion at list prices, the largest firm order in Boeing's history - and will become the launch customer for the re-engined narrowbody.

 

The carrier is the first customer to place a firm order for the 737 Max.

 

The Dallas-based airline, which was also the launch customer for the Boeing 737 Next Generation series, will take delivery of its first 737 Max in 2017.

 

Alongside the firm order for 150 737 Max aircraft, Southwest has also firm-ordered an additional 58 737 Next Generation aircraft. Of these, 25 were existing options.

 

The new orders increase Southwest's firm orders with Boeing to 350 aircraft, scheduled for delivery between 2012 and 2022.

 

Southwest has substituted 737-800s for all 737-700 deliveries scheduled for 2012 and 2013, in addition to a portion of its 2014 deliveries. It has also taken 150 737 Max options, the carrier said.

 

Its Max order includes the flexibility to accept the -7 or -8 variants.

 

"Today's environment demands that we become more fuel-efficient and environmentally friendly, and as the launch customer of the Boeing 737 Max, we have accomplished both," said Southwest chief executive Gary Kelly.

 

Boeing said 13 customers have now ordered more than 900 737 Max aircraft. On 12 December it set a list price of $77.7 million for the 737 Max -7, $95.2 million for the -8 and $101.7 million for the -9 variant.

 

Source

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Southwest, gaining cost efficiencies from 737 MAX order, now looks to improve labour costs

 

There was a lot of talk about Christmas coming early for Southwest during yesterday’s announcement about its order for 208 Boeing aircraft, but things have been going Southwest’s way all year.

 

In addition to the 150 firm orders for the 737 MAX 7 or MAX 8, scheduled to begin delivery in 2017, Southwest increased its order for 737NGs by 58, which will be added to the 142-aircraft order book now in delivery. Consequently, the airline is set to receive 350 aircraft between 2012 and 2022. The additional order for 58 aircraft includes the firming of 25 options the airline already had with Boeing.

 

The deal includes a USD4.7 billion order for CFM LEAP-1B engines that promises 16% more fuel efficiency than current competitor aircraft models, according to Boeing.

 

For Boeing, according to president Jim Albaugh, the Southwest order is the first definitive order it has received of the 948 commitments for the MAX airplanes. He pointed out that number was up from only a couple of weeks ago and was expected to rise to between 1400-1500 by the end of 2012.

 

Southwest, with 699 aircraft at the end of the third quarter, is scheduled to take 33 737-800s in 2012 to replace retiring aircraft. Boeing recently increased its monthly production rate for the 737 to 35 and is upping it again to 38 in 2Q2012 and 42 in 2013.

 

However, the order also includes 242 options (150 for the MAX and 92 for the NGs) set for delivery through 2027 that would provide for growth “to take advantage of the market opportunities that present themselves”, according to COO Mike Van de Ven. Initial deliveries will be for fleet replacement, of which Southwest is accelerating.

 

Good year for the airline, more ahead

 

Southwest acquired AirTran in May, affording it the ability to go international earlier than thought possible given its IT issues. It even inked a seniority integration deal between the Southwest’s 6000 and AirTran’s 1700 pilots, a major hurdle that will allow it to squeeze out all the cost and revenue synergies the merger promises, probably before US Airways and United-Continental can, given their contentious labour issues.

 

It is also expected to be the prime beneficiary in the expected capacity cuts American will make as the result of bankruptcy. American is expected to shrink from its current domestic footprint at 21% to as little as 15% during bankruptcy. In addition to benefiting from cutbacks at Dallas, Los Angeles and Chicago, Southwest also has AirTran’s Atlanta integration to look forward to since it fills what otherwise was a white space on Southwest’s map. It will also increase business traffic although doubts are already circulating as to whether its conversion of the Atlanta hub from connecting to point to point may cost it traffic.

 

AirTran also brings hot consumer markets in Mexico and the Caribbean into its revenue stream, which means it will likely benefit from any cuts in American’s position there as well. Southwest could also spring-board off the Mexico/Caribbean service to tap one of the world’s hottest markets in Latin America. The ETOPs clearances AirTran has could speed up introduction of Southwest’s own Hawaii service which seems to have been put on the back burner.

 

Hopefully in 2013, it will have its long-awaited IT upgrade choosing between Amadeus and Sabre CRS offerings, which will increase not only its ability to field ancillary products but increase ancillary revenues as well. It has already integrated some Sabre upgrades in the interim.

 

AirTran prompted the delay to the IT makeover but changes to accommodate the new consumer regulations have also taken their toll. This is a huge problem since a new system is long overdue and critical to maximising the benefits of AirTran and growing ancillary revenues. The Passenger Service System has stalled international expansion prior to the AirTran acquisition and is said to have been behind Southwest’s popular bags fly free policy (its reservation system could not handle checked bag fees), which serendipitously lead to a share shift as bag fees rose at legacies.

 

Still Southwest lags in ancillaries and thus has a revenue problem since ancillaries are the key to future industry profitability. In the third quarter, Southwest passenger revenue per available seat mile rose 6.4%, compared with 10.1% for United and 10.9% for Delta owing to its ancillaries lag.

 

During earnings calls, Southwest has often discussed the 2014 sunset of the Wright Amendment at Love Field limiting the service radius around the airport. Once that is gone, it becomes a prime growth market for the carrier and could offer nearly USD500 million in additional revenues.

 

In addition, it could follow in the JetBlue/WestJet/Alaska model of codesharing with all comers at international gateways which has been lucrative for all three airlines.

 

It has played the spoiler in three of the 18 industry-wide fare increase attempts and a change in that policy could spell more revenues in 2012 for the entire industry.

 

While it may have lost the LaGuardia/Washington National slot contest to JetBlue, it did not want to pay what JetBlue did for the slots, because it knew it would lose money. Even so, it will have more than enough on its plate integrated another golden opportunity in its system, Atlanta.

 

Those events provide a counterpoint to the unusual loss in the third quarter that was the first indication the airline was set to do something about its costs. Always costs conscious, the airline was one of the first catalysts for the complete restructuring of the US airline industry. But the order provides a long-term strategy for cost cutting that will address one of its two major cost centres, fuel.

 

Mr Kelly indicated the MAX will be 10-11% more fuel efficient than the 737-800NG on top of the 6-7% achieved by replacing the classic with the -700NG more efficient than the classics.

 

Even so, the order, according to Mr Kelly, means it will be able to keep its 15% pre-tax return-on-invested-capital target although margins in the last several months have been half that.

 

The order also keeps capital expenditure over the life of the order at an average of about USD1.2 billion annually.

 

The order also puts Southwest in the cat bird seat on the development of the program as Boeing said several times its intent was to ensure the MAX was everything Southwest needed.

 

The question was raised about the AirTran 717s that Southwest has already said it wants to shed. However, Mr Kelly would only say the company is obligated to operate them throughout the leases which expire between 2017 and 2024. However, he added Southwest is working with Boeing to see if they can reach a deal on retiring them much sooner. The betting is that the 717s come out of the fleet early, especially since Mr Van de Ven added “if we have to” to the company’s commitment to honouring the leases.

 

The order

 

The order for 150 737 MAX jets not only is a record for the Boeing company in terms of aircraft numbere (208 aircraft worth USD19 billion at list prices – seven aircraft more than Lion Air's recent 737 order, but USD2 billion less at list prices since Lion Air ordered more expensive -900ER models). Southwest will be the launch customer for the 737 MAX, as it was for the 737-300, -500 and -700. It is also substituting 737-800s for its 2012-2013 737-700 deliveries.

 

The order also gives Southwest a leading fleet sooner than its rivals given its intention to accelerate its fleet replacement plans. Finally, it means Southwest is expecting to cut fuel burn by 15-18%, according to the latest promises from Boeing about the aircraft. This comes at a time when CEO Gary Kelly has been voicing growing concerns about rising costs at the carrier.

 

It was clear that the tipping point in the Southwest negotiations was its desire for fleet commonality but Mr Kelly said the company did its due diligence on the Airbus neo with its Pratt & Whitney GTF engine, which, Mr Kelly said, he really likes. However, the company said its requirement for short-field capability for such airports as Chicago Midway was very much part of the mix in the aircraft choice. In addition, Mr Van de Ven indicated the primary factors were the fleet commonality and that the 737 MAX-8 would be lighter and have better mission flexibility for the airports served by the carrier.

 

The airline also needs the MAX to, at least, fly the same mission as the NG with the same payload and range, “if not better.” 737 Chief Project Engineer John Hamilton said Boeing was now working with airlines to understand what the market requires in terms of payload and range. The company plans to “dial in” the exact payload and range needed.

 

However, Mr Kelly also cited the history of the CFM Leap 1B engine that will power the jets compared to Pratt’s PurePower engine. Mr Van de Ven again echoed him saying Southwest views the aircraft as a package including engines. He also cited the LEAP 1B’s max fuel burn and the fact it has millions of flight hours to its credit.

 

While the company has not changed its fleet strategy, the order, said Mr Kelly, positions the airline for future growth.

 

Mr Van de Ven and Boeing’s John Hamilton responded to a questions about whether the final parametres of the jet would meet Southwest’s needs by saying that while the final configuration will not come until mid 2013, the configuration is well enough known that it gave Southwest the confidence to go forward with the deal.

 

Now that Southwest has addressed its number one cost centre, it is turning to other costs, including labour, although it was quick to tell employees that increased productivity and the elimination of waste will preserve pay rates.

 

Competition now stronger thanks to bankruptcy

 

The move is an important one because there has been an increasing drumbeat suggesting Southwest has peaked, given its recent slow growth rates which are expected to continue next year and the fact that its overall costs as well as labour costs costs are higher than peers.

 

Southwest unit labour costs rose 22% between 2002 and 2009 even as United’s dropped 34%, Delta’s 26%, Continental’s 7%. Even at American it dropped 11%. Its pilots, in 2009, earned 20-40% more than pilots at other airlines. Much of that is balanced by better productivity but clearly the airline needs more. The increase for AirTran pilots is expected to create another cost headwind for the company.

 

Mr Kelly also addressed labour rates saying they are the highest in the industry thanks to bankruptcy adding, “we can’t have lower overall operating costs if our labour costs aren’t lower and we can’t have lower labour costs if we aren’t more productive." He was probably referring to the companies more restrictive work rules compared to AirTran.

 

After American became the last major airline to enter bankruptcy, Mr Kelly sent a missive to employees about costs frankly noting that it is looking for productivity gains as it enters negotiations for new pilot and other contracts next year. While CFO Laura Wright was quick to say the company is not asking for concessions, Mr Kelly pointed out that its cost advantage has been halved as competitors emerged and thrived post-bankruptcy and the same is expected from American.

 

That means that it no longer has the wherewithal to enter and stimulate markets as was its model in the past solely because the fare differences with what Mr. Kelly called the New Airline competitors, have narrowed significantly. Meanwhile, competition from ultra-low-cost carriers such as Spirit and Allegiant is making themselves felt.

 

“The sloth-like industry you remember competing against is now officially dead and buried,” he told employees. “We fought against them and won. Now our enemy is our own cost creep, our own legacy-like productivity and our own inefficiencies.”

 

That cost pressure will only increase as Delta and American take their new generation aircraft. Both have made their narrow-body bids, leaving only United to cut a narrow-body order, expected next year.

 

Mr Kelly also pointed out that the "New Delta" and "New United" were no longer the weak, unprofitable carriers of the past but were now stronger with better profit margins than Southwest in the third quarter despite the gains Southwest has made in increasing revenues in the past few years. Indeed, its revenue increases, he said, outpaced peers but did not make up for the cost challenge the company faces. He said the new legacy profitability puts them in a position to grow.

 

The aircraft order, coupled with AirTran, definitely puts Southwest on an upward trajectory but it still must regain its former position as the low-cost airline and, as the legacies have discovered, that is easier said than done.

 

Source

 

Southwest press release

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Boeing Makes 737 MAX Design Decisions

 

Boeing has made a series of design updates to the 737 MAX to further optimize the new-engine variant's performance.

 

Those design decisions include:

 

• Aft body aerodynamic improvements: The tail cone will be extended and the section above the elevator thickened to improve steadiness of air flow. This eliminates the need for vortex generators on the tail. These improvements will result in less drag, giving the airplane better performance.

 

• Engine installation: The new CFM International LEAP-1B engines will be integrated with the wing similar to the aerodynamic lines of the 787 Dreamliner engine with its wing. A new pylon and strut, along with an 8-inch nose gear extension, will maintain similar ground clearance to today's 737 while accommodating the larger engine fan. The nose gear door design is altered to fit with this revision.

 

• Flight control and system updates: The flight controls will include fly-by-wire spoilers, which will save weight by replacing a mechanical system. The MAX also will feature an electronic bleed air system, allowing for increased optimization of the cabin pressurization and ice protection systems, resulting in better fuel burn.

 

Other minor changes to the airplane include strengthening the main landing gear, wing and fuselage to accommodate the increase in loads due to the larger engines. Boeing will continue to conduct aerodynamic, engine and airplane trade studies as the team works to optimize the design of the airplane by mid-2013.

 

Airlines operating the 737 MAX will see a 10-12 percent fuel-burn improvement over today's most fuel efficient single-aisle airplanes and a 7 percent operating cost per-seat advantage over tomorrow's competition.

 

To date, the 737 MAX has more than 1,000 orders and commitments from 16 customers worldwide.

 

Source - Air NewsM

 

More reading: http://www.sacbee.co...-decisions.html

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