Boeing approves upgrading 737 after 496 order commitments

Chicago-based Boeing Co. approved development of an upgraded 737 with more fuel-efficient engines after winning 496 order commitments from five airlines for the latest variant of the world’s most widely flown jetliner.

Deliveries are set to start in 2017, Chicago-based Boeing said today after its board confirmed plans to build the plane. It will use modified Leap-1B engines from CFM International and offer 7 percent lower operating costs than rivals, Boeing said.

“Customers tell us they want to improve profitability and fuel efficiency while reducing their environmental footprint,” Boeing Commercial Airplanes President Jim Albaugh said in a statement that didn’t identify any of the buyers. “This solution meets all three of those needs.”

The 737 upgrade makes up half of the 200-jet order Boeing won from American Airlines in late July. The Fort Worth, Texas- based carrier split its purchase of 460 aircraft between the U.S. company and Airbus SAS, which began offering more fuel efficient engines on its competing A320 narrow-body in December.

American’s order from Airbus broke an exclusive arrangement with Boeing dating to 1987, compelling the planemaker to shift from its stated preference to build an all-new jet rather than outfit the 737 with improved engines.

Demand for the 737 upgrade should be similar to that for the new A320neo, Boeing’s business-development chief, Nicole Piasecki, said in an interview Aug. 26. Airbus racked up more than 1,000 orders and commitments for the plane within seven months and plans to start deliveries in 2015.

Fuel consumption on the upgraded 737 will be 16 percent less than the existing A320 and 4 percent less than the A320neo, said Marc Birtel, a Boeing spokesman.

Boeing climbed 36 cents to $64.96 at 10:05 a.m. in New York Stock Exchange composite trading. The gain was the largest among the 30 companies in the Dow Jones Industrial Average.

--Editors: Ed Dufner, James Langford

To contact the reporters on this story: Susanna Ray in Seattle at sray7bloomberg.net; James Langford in New York at jlangford2bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufnerbloomberg.net