Industryweek 20732 Boeing595 Max 9 B

Boeing's Largest 737 Max Jet Takes Flight Amid Market Downdraft

April 14, 2017
The latest model in Boeing’s best-selling jet family took wing five days ahead of schedule but faces an uncertain future in a market dominated by Airbus SE’s longer A321neo.

Boeing Co.’s newest and largest 737 Max gunned down the runway and soared over the shore of Lake Washington, south of Seattle, on its way to an almost three-hour maiden flight Thursday.

The latest model in Boeing’s best-selling jet family took wing five days ahead of schedule, during a week marking the 50th anniversary of the first 737 flight. The single-aisle Max 9 faces an uncertain future, however, in a market dominated by Airbus SE’s longer A321neo.

About three-quarters of orders for the workhorse planes favored by budget carriers are clustered around midsized models such as the Max 8 and A320neo. But sales are growing faster for larger narrow-bodies, one reason why Boeing (IW 500/9) is targeting Airbus’s lead with two stretched jets.

“It’s an incredibly important part of our family moving forward,” Randy Tinseth, a Boeing vice president of marketing, said of the Max 9. Boeing has also begun marketing an even larger model, the Max 10X, and expects the two variants combined to eventually account for about a quarter of its narrow-body sales, he told reporters.

The U.S. planemaker is trying to pull off a balancing act with the 737, its largest source of profit. Boeing is mulling introducing as many as five Max models targeting different niches, while ratcheting up the tempo in its Renton, Wash., factory over each of the next three years.

Any stumbles in developing the new jets, a process fraught with delays, could damage Boeing’s bottom line if snarls slow manufacturing at a plant preparing to increase output to 47 planes a month in May -- five more than the present rate. The Max 8, the first of the upgraded 737 models, has completed flight-testing and is slated to begin deliveries in May, months earlier than initially planned.

Year of Many Plane Debuts

The first Max 9 took to the skies with Captain Christine Walsh in command. It is designed to seat 178 travelers in a two-class cabin, about 16 more people than the Max 8, while flying the same distance: as many as 3,515 nautical miles.

The debut is the latest in a year crammed with new planes produced by manufacturers from Brazil to Ukraine. Boeing has already begun to cut metal for the next 737, the smaller Max 7. Meanwhile the company’s 787-10, the largest Dreamliner, took its first flight March 31 -- the same day that Airbus’s A319neo and Antonov’s An-132D turboprop aircraft made their maiden flights.

Sputtering airplane sales raise concerns that the new aircraft are entering the market as the aerospace industry heads into a downturn after more than a decade of growth. That could make it tougher for manufacturers to recapture the billions of dollars poured into engineering, tooling and factories.

The pain won’t be felt equally, however. Boeing and Airbus are cushioned by record backlogs for their upgraded narrow-bodies: 3,703 orders for the 737 Max and 5,056 sales for the A320neo lineup.

“This is why we have a duopoly,” said aerospace analyst Richard Aboulafia, referring to Boeing and Airbus. “Newcomers have a harder time with an ultimately cyclical market, combined with heavy spending on new-product development.”

Pioneer Jet

Boeing shouldn’t have any problem recovering its costs for the 737 Max family, the latest versions of the venerable single-aisle jet that revolutionized low-cost travel and aircraft manufacturing with its moving line. The bulk of Boeing’s orders are said to be for the -8, which seats more travelers than the A320neo, although the U.S. planemaker doesn’t break out sales by Max model.

With the Max 9 struggling to gain sales, Boeing has begun pushing the Max 10X, a longer model. It would seat about 230 travelers in a single cabin and cruise on transcontinental routes flown by Boeing’s 757, which has been out of production for more than a decade.

But potential customers, including Air Lease Corp., fret that the new model will get to market too late, with a planned 2020 debut. That will be a year after Airbus will introduce an A321neo model configured to seat as many as 240 people. Boeing would probably have to discount heavily to cut into Airbus’s lead, Aboulafia said.

“They can’t seem to get the pricing power they had with the NG series,” the analyst said, referring to the previous generation of the 737s that commanded premiums to Airbus jets. “Maybe that will change. But if it does, it will happen on the Max 8.”

But Boeing, for now, may be content to have product offerings that it can hone for 737 operators -- without ceding the top end of the narrow-body market to Airbus, said Ken Herbert, an analyst at Canaccord Genuity.

“The investments haven’t been excessive relative to the broader program,” he said. The Max 9 and 10X will help “keep Airbus pricing in check,” he said. “Part of the benefit is just having something in place and letting the technology mature.”

By Julie Johnsson

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