Boeing Product Launch Inevitable

Yet another article came out today on a potential

Boeing faces four options. One option entails a modest derivative of the 737 MAX 9--new engines and possibly articulated landing gear--that will cost roughly $2 billion and enter service around 2020. We expect this aircraft to match but not beat the A321neo and A321neoLR’s performance, which are being offered to customers and therefore enjoy a head start. Alternatively, Boeing could pursue a complete MAX 9 makeover, but this will likely require nonrecurring costs of $7 billion-$8 billion for a new wing, center wing box, landing gear, and engines. While the resulting aircraft would be competitive, it would likely be too late (mid-2020s) and only tap a market of around 2,500 aircraft.

Boeing might combine the aforementioned options and develop a simple derivative of the MAX 9, while working on a new aircraft to be introduced later. This path may be a bit more viable because it seeks to address the near-term Airbus threat, simultaneously positioning Boeing with a more competitive product over the longer term. It’s worth mentioning a fifth option: shrinking the 787-8. However, we think this makes its operating costs and price tag unacceptable to most airlines.

Finally, Boeing could do nothing. The A321neo would continue beating the MAX 9 at a rate of 5/1 in orders. In a duopoly with high capital costs, this matters. Although Boeing has no good options, we do not anticipate inaction and investors should view some kind of product launch in the next 12-18 months as a distinct possibility.

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