A new Boeing jet

Dreamliner: The more fuel-efficient 7E7 airliner is Boeing's mid-sized but roomy contender for international flights.

December 17, 2003|By Meredith Cohn | Meredith Cohn,SUN STAFF

Daniel M. Kasper, Battling to maintain global dominance of the skies, Boeing Co. said yesterday that it will sell its first new commercial airplane in more than a decade.

Named the Dreamliner in a public relations contest, Boeing's 7E7 will offer passengers oversized windows and lavatories, and is likely to lead to many more direct international flights. Most important for potential sales, it will offer the battered airlines a fuel-efficient ride.

The new airplanes will fly routes up to 9,500 miles. Tokyo to Chicago or Los Angeles to Paris, for example, are shorter than 6,900 miles, and Boeing estimates that they will make such trips in an hour and 35 minutes less than other wide-body planes with flying times of about 14 hours.

"We've picked the right airplane, and let's go," Harry C. Stonecipher, Boeing's president and chief executive since Dec. 1, told workers at an afternoon meeting in Seattle.

If there are enough orders, he said, the aircraft will be assembled in nearby Everett, Wash., and be ready to fly in 2008.

The announcement yesterday that Boeing's board had approved sale of the 7E7 signals that the Chicago-based company intends to overcome its down-on-its-luck image and make a good, albeit costly, commercial airplane that foreign and domestic airlines want to buy and passengers want to fly, analysts said.

Boeing has recently endured scandal, sagging earnings, a change in leadership and loss of business to its chief competitor, Europe's Airbus SAS. Its military business is now bigger than its commercial side.

Ray Neidl, an airline analyst with Blaylock & Partners LP, said of the 7E7: "This is their whole future."

But building a new airplane is risky. Development costs are estimated by analysts to range from $4 billion to $10 billion. And Boeing is betting that there will be a market for a midsize plane that can hold no more than 300 people.

Airbus has put its money on its A380, a jumbo jet that has more than 500 seats. Airbus has orders for 121 of those airplanes and is to deliver the first in 2007.

Airbus also has in production the A330, a counterpart to the 7E7, and is poised to take over as the largest commercial airplane manufacturer next year.

But Boeing, which scrapped plans for a jumbo jet and a supersonic airplane in the 1990s, is promoting the 7E7 as a winner because of its costs.

It will use parts made of composite materials that are lighter and cheaper. Large pieces manufactured in several international locations will require less labor to assemble. Embedded sensors will target maintenance problems. The company also said new, more efficient engines and aerodynamic design will mean the 7E7 will use 20 percent less fuel than other wide-body planes but fly just as fast.

Darryl Jenkins, an airline consultant based in Washington, pointed out that lower costs for the airlines to buy and maintain the 7E7 could translate into cheaper international flights for passengers.

The airplanes also likely will be used to expand the number of direct international flights, rather than flying through crowded hubs, said Richard Aboulafia, a consultant at Teal Group Corp. in Fairfax, Va.

"They're designing this with that expectation; avoid the dreaded hub-and-spoke deal through [London's] Heathrow and allow all kinds of city pairs," he said.

Americans, who have made low-cost carriers into the fastest-growing U.S. airlines, may be familiar with Boeing products from flying Southwest Airlines. The Dallas-based carrier that dominates Baltimore-Washington International Airport favors Boeing's best-selling 737s, using them for all of its flights.

The new Boeing 7E7s are not meant for those routes, though the 737s account for 195 of 218 orders Boeing has logged this year, according to the company.

It's unclear who will be the first to buy a 7E7, and analysts say the bedraggled state of American airlines after Sept. 11, 2001, mean few will likely line up right away. Rather, in the short run, Boeing has its eye on Asian flying markets, the world's fastest-growing.

Daniel M. Kasper, a managing director for LECG, a Cambridge, Mass., consulting firm, said Boeing will look to sell the planes to U.S. carriers in the future. The 7E7 is expected to remain in production for 20 years, as did its predecessor -- the 757 -- that will be retired next year.

He said Delta Air Lines and Continental Airlines are likely to be the first U.S. carriers to buy the 7E7, but they likely won't be the first customers.

Analysts said the so-called launch partner could be the Japanese carrier All Nippon Airways or a global alliance of airlines that would share the aircraft such as Star Alliance, made up of 15 airlines including All Nippon and United Airlines.

"They will find a ready market among foreign airlines," Kasper said. "But it has to be a bit unnerving when the airlines that have bought hundreds, thousands of your planes over the years can't afford to buy your planes today."

Boeing's shares closed yesterday on the New York Stock Exchange at $39.93, up 73 cents.

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