Two-pronged Boeing strategy to counter A320neo challenge likely

Boeing's response to Airbus's A320neo challenge may likely be two-fold - with a higher-performance 737NG ready for roll-out by 2015 and an all-new, light, twin-aisle aircraft which could probably enter service in 2019 or 2020.

According to an assessment by consultancy, Buckingham Research Group, Boeing's new aircraft will not be a replacement for existing models, as much as an all new aircraft which will address a new market with new capabilities.

In a client report issued following Boeing Capital Corp's aviation finance conference this week, New York-based Buckingham said that Boeing "is considering a range of options for a new aircraft and believes the technology-propulsion, materials, avionics, etc.-will be available to support a service entry in 2019/2020".

However, the firm said the "new aircraft should not be considered a replacement for the 737, 757 or Airbus narrow-bodies … Like the 707, which first replaced turboprops with turbojets, the 747, which first introduced jumbo capacity, and the 777, which first introduced four-engine capacity with a two-engine airplane, Boeing's new aircraft will likely address a new market with new capabilities."

Buckingham acknowledged in its note that a "meaningful number of investors" still thought that Boeing would re-engine the 737NG. "Our view has consistently been that Boeing will not re-engine, but a number of investors acknowledge the possibility that Boeing might re-engine if a major 737 customer defected and ordered the A320neo," it said, noting, "Boeing may be so capacity-constrained [with orders] that it may not have the option to re-engine the 737."

The note adds, "Internally, Boeing appears convinced that the 737NG's projected 2016 performance is competitive with the A320neo ... The finance community and lessors are urging Boeing to wait and leap ahead with a new aircraft versus a derivative."

Buckingham also believes that Boeing may forgo bidding on the upcoming Delta Air Lines RFP for 200 A319-sized aircraft. "We think that Boeing already factors in some near-term share loss as a result of its product strategy and that it expects to regain the market share high ground with a new airplane later in the decade," it stated.