Boeing bears down on 737 fuel-savings target

(Reuters) - Boeing Co on Wednesday put some finishing touches on a make-over of its popular 737 aircraft as the U.S. planemaker battles with European arch-rival Airbus to deliver fuel savings to airlines hammered by near-record oil prices.

The company unveiled several design choices meant to lower weight and wind-resistance for its upcoming 737 MAX. The planemaker said it had decided on an 8-inch nose gear extension to give ground clearance for a larger engine fan.

The world's largest planemakers are revamping their workhorse models with bigger engines to offer double-digit percentage fuel savings in one of the most competitive market battles of the last two decades, affecting a vital source of cash generation at both companies.

"My feeling about it is what they're saying is plausible. And I'll just wait until we see the results," said Hans Weber, president of technology management consultancy Tecop International.

More decisions about the design are expected, and Boeing said on Wednesday that it would have a firm configuration for the plane next year.

Last year, Boeing unveiled plans to put new engines in its existing 737 design, providing fuel savings of up to 12 percent over the current 737. Boeing named the aircraft the MAX and said it would enter service in 2017.

Weber said the announcements shed light on the MAX program and gave clarity to the design. He said he did not expect the decisions to add to the undisclosed cost of the MAX program.

In its 40-year history, the Boeing 737 has become the world's most-sold aircraft and the backbone of airline fleets worldwide. But Boeing has taken several months to finalize the design of the upgraded 737 MAX while juggling engineering considerations, market opportunities and costs.

The airplane will compete with the Airbus A320neo, which also will feature new engines and offer fuel savings of 15 percent over the current A320.

UPDATING A BEST SELLER

Boeing said it would improve the aircraft's aerodynamics by extending the tail cone, update its flight controls and strengthen landing gear, wings and the fuselage to accommodate the weight of the larger engines. Boeing said the decisions were within the scope of the original design goals.

Wednesday's announcement, which had been eagerly awaited by investors and the industry, came after months of deliberations over engine improvements and aircraft design.

Engineering experts said Boeing's response had been hampered by the fact that there was comparatively little space to place the industry's bigger and more efficient engines under the wing of the 737, which was initially designed low to the ground to speed up baggage loading and aircraft turnaround times.

To fit inside the available space, the current engines already have a squashed appearance underneath to give the engine housing adequate ground clearance.

"Based on design work and preliminary testing results, we have even more confidence in our ability to give our customers the fuel savings they need while minimizing the development risk on this program," said Michael Teal, chief project engineer and deputy program manager of the 737 MAX program.

The MAX will be powered by engines made by CFM International, a joint venture between General Electric Co and Safran .

BOEING PUSHES BACK

In 2011, Boeing had 36 percent of new plane sales, while Airbus stacked up record sales of its revamped A320neo.

Now Boeing, based in Chicago, is hitting back with strong sales of its own redesigned narrowbody and is aiming to win the order race in 2012.

Boeing has taken more than 1,000 orders and provisional orders for the MAX since winning its first provisional order for the plane from AMR Corp's American Airlines last year. Southwest Airlines will be the first operator of the plane.

Boeing has reported firm contracts for 451 of the 737 MAX 15 customers. The company said that when provisional orders were factored in, the total exceeded 1,000. Airbus has reached definitive agreements to sell 1,289 A320neos, making what it describes as the fastest-selling new aircraft in history, and reported provisional deals for an additional 266.

Boeing is working to get performance guarantees in place for its MAX customers as it attempts to convert hundreds of provisional orders for the MAX to firm this year.

It is also spotlighting performance of its current 737 as a key selling point. The company illustrates 737 reliability with data showing the 737 family of planes has a higher rate of reliability than the A320.

Boeing's internal data show that 99.68 percent of the current generation of 737 flights are ready to depart within 15 minutes of schedule. That compares to the A320's reliability of 99.35 percent, according to Boeing.

Based on these figures, the company said a fleet of 100 737 MAX airplanes flying five flights a day would have 590 fewer delays and avoid disrupting an estimated 66,600 fewer passengers.

"The reliability of the 737 has always been higher than the competitor," said Beverly Wyse, general manager of the 737 program.

"There's more and more attention in this industry paid to protection of the passenger and passenger rights," Wyse said, noting the cost of rebooking and penalties airlines sometimes must pay customers for delays.

Both Boeing and Airbus routinely claim to have the edge in the crucial 150-seat category. According to the Airbus website, the A320 delivers "unmatched efficiency plus the best in technology for operators".

"No one can reasonably challenge the reliability of the Airbus A320," said Airbus spokesman Clay McConnell. "If you look at similarly sized and similarly aged fleet, the data would not support Boeing's claims."

(Reporting By Kyle Peterson; additional reporting by Tim Hepher; editing by John Wallace and Gunna Dickson)

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