Boeing updates 737 for a new era

Boeing's 737 — the commercial jet that made its debut in 1968 and the one you've most likely flown on — is getting a makeover to fit with the new demands of air travel in the 21st century.

The new version, the 737 Max, which is scheduled to make its debut in 2017, is designed with new engines to burn less fuel than its three predecessors, to help airlines pare costs and leave less of a carbon footprint on the global environment.

But at its most basic, the Max will be the same 737 stalwart the traveling public has come to know the last 44 years. It's a single-aisle jet that will ferry up to 215 passengers on both short and cross-country trips, and offer efficiency that's helped make the 737 the best-selling commercial jet in history, with 9,745 sold.

"They're known as the workhorse of the industry," says Mike Van de Ven, COO of Southwest Airlines, which has exclusively bought 737s for its fleet since the airline's birth in 1971.

• PHOTO GALLERY: History of the Boeing 737

"It really beats the competition on fuel burn. It really beats the competition on reliability, and it really had a very effective maintenance program. And they just made that airplane better and better over the last 20 or 30 years."

Southwest, which has the largest fleet of 737s in the world, with more than 550, is reaffirming its faith in Boeing and the 737 by ordering 150 Max jets. American Airlines is sold, too, having ordered 100 Max planes in July before seeking bankruptcy protection in November.

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"There's a lot of interest in our industry and among our customers in the next generation of aircraft," says Virasb Vahidi, American's chief commercial officer. "Customers see it as a better product and younger fleet, and airlines see it as an opportunity to lower our costs."

A cheaper fuel bill could mean that rising airfares may not rise so quickly, say travel industry analysts.

"It hopefully will mean more stable pricing for consumers," says Bryan Saltzburg, general manager of TripAdvisor flights. Lower costs for an airline, he says, "should transfer to the consumer pocketbook."

Outfitted with new engines, the Max will use 10% to 12% less fuel than its most current Boeing peer, the Next-Generation 737, company officials say. That holds particular appeal for airlines, with jet fuel making up 25% to 40% of their costs, and whose profitability is threatened as the price of crude oil stays around $103 a barrel as it was on Friday.

"As an airline, there are several things you can do to combat high fuel prices, but one of the biggest, most important things is just having equipment that is designed to deal with it," says Southwest's Van de Ven.

Despite seeking bankruptcy protection from creditors, American is planning to buy the Max planes as part of its plans to reorganize and replace its older, fuel-guzzling fleet.

It also still plans to buy 130 of the Max's competitor — the A320Neo from Boeing's chief European rival, Airbus.

"It's very much a part of our restructuring plan," says American's Vahidi.

"Obviously, as we lower our cost structure … it would provide us with more flexibility to be able to grow the airline successfully and provide our customers with a more extensive network that flies to destinations that they want to fly to, and times of day they want to fly."

The fuel savings from the Max will be significant, he says. When matching 100 of the new jets to an equal number of the 737-800s that American currently flies, Vihadi says, "It's around $85 million per year in fuel costs that will be saved."

That, he says, "is a really big deal in terms of improving our operating costs."

New jets will cost less to maintain because they're younger, and the updated 737 Max will release a smaller amount of carbon dioxide into the air, airline officials say.

"They're good for the environment," Van de Ven says.

"They're good for the noise footprint, and they're good for our customers, because all of those efficiencies mean lower costs."

Common transport 

If you've ever flown coast to coast or to many points in between, chances are you've ridden on a 737.

Before the Max, there were three versions of the plane: the original that took flight for the first time in February 1968; the Classics, which began flying passengers in 1984; and the Next Generation, which made its debut in 1998 with new wings and engines that enabled it to go farther and faster than its predecessors while burning less fuel.

But all represented upgrades in the original concept of a narrow-body jet with the ability to fly medium to long-haul distances. "They got the design right," says Richard Aboulafia, aviation analyst with the Teal Group.

"Throughout the 737's life, we have been able to offer an aircraft … that has the best operating costs of any aircraft in the single-aisle market, and that is probably the single biggest contributor to its popularity," says Beverly Wyse, vice president and general manager of Boeing's 737 program.

Even with Max, demand remains so high for the 737 that Boeing in January began delivering current model 737s at the unprecedented production pace of 35 a month. It plans to ramp up to 42 a month at the start of 2014.

Driving the continued popularity of narrow-body planes such as the 737 has been the growth of low-cost airlines such as Southwest and Europe's Ryan Air, and now the booming air travel markets in China and India.

"They're seated at the right size, where you can do a lot of frequency between marketplaces," says Van de Ven of Southwest, which makes more than 10 trips a day between Baltimore and Chicago.

"That's one of the reasons I think the narrow body is such a big seller," Van de Ven says. "You can give the consumer many more trips and choices and itineraries because the demand is there to fill up that size of an airplane, and not a 250-seat airplane, 10 times a day."

Demand for 737s and similar narrow-body jetliners has soared with rising fuel prices.

"We're seeing older aircraft be replaced even more rapidly because that fuel-efficient aircraft is so critical to their fleet," Wyse says.

Bigger inside 

The Max will boast a new interior, first introduced in the 737 two years ago, that features bigger luggage bins, a more open feeling in the cabin, and better lighting similar to what's offered in Boeing's wide-body 787 Dreamliner.

But the Max will have competition. It's scheduled to hit the airways two years after Airbus plans to introduce the Neo, the latest version of its own narrow-body A320 jet.

The Neo will burn 15% less fuel than the current A320s, and the jet roared out the gate with 1,289 sold in 13 months, making it the fastest-selling jet program in modern times, says Chris Jones, vice president, North America sales, Airbus Americas.

"I think the market has endorsed the Neo clearly as the leading, most fuel-efficient single-aisle airplane out there," says Jones, who believes that the Neo's popularity pushed Boeing to respond. "I don't think the Max is the optimal solution, but I think the success we've had with the Neo has forced that decision to take place sooner than Boeing would have liked."

Neal Dihora, an analyst for Morningstar, also says that buzz around Airbus' Neo likely led Boeing to launch the Max with its new engines rather than wait to develop a whole new jet.

"I think they still want to do a new single-aisle aircraft," Dihora says. But "I think Boeing had to essentially react to the reality that they were losing a lot of market share. … So my sense is they sat around a room and said, 'Let's have a new engine option, too.' If you can't beat them, follow them."

Boeing disagrees. "It really was more of a question: Did the customers prefer to have the fuel-efficient gain right now, or were they willing to wait a little bit longer for an all-new aircraft?" says Wyse, who added that operating costs for the Max will be 7% lower per seat than the Neo.

A completely new single-aisle plane will arrive eventually. "It's something that we'll definitely do at some point," Wyse says, "at the time the market tells us it's ready for a new airplane."

In the meantime, Aboulafia of the Teal Group doubts airlines will pass fuel savings to passengers in the form of lower fares. But he says the shift in engines will still benefit the public.

Reducing fuel burn "helps everybody," he says. It's "good for manufacturers, good for consumers, good for the airlines. There are no losers in this."

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