Not only does The Boeing Co. (NYSE: BA) have problems delivering its new 787 Dreamliner and 747-8 passenger planes, now the company is getting cancellations on orders for its sturdy 737. Bloomberg is reporting that Dubai Aerospace has canceled an order for 32 of Boeing’s 737s, which could cost the airplane maker some $2.3 billion. The Dubai airline still has 35 of the planes on order.
In the longer run, though, is the venerable 737 getting a little long in the tooth and due for an upgrade? Boeing is still trying to figure out whether or not to update the 737 with a new, more fuel-efficient engine or completely redesign the plane. We noted last month that Boeing is leaning toward a redesign.
The immediate issue for Boeing is how firm are the orders that it has currently booked. Dubai Aerospace came into existence in 2006 as an aircraft leasing firm. When Dubai’s economy collapsed, the company’s market for leased jets also shrunk.
Boeing also reported that it had taken orders for 10 new 737s. According to The Seattle Times, eight of those planes, 737-800s, were booked in June 2010 and counted in Boeing’s 2010 sales totals. If The Seattle Times is right, then Boeing has not booked a single new order for a 737 in 2011.
Now airplanes are not exactly smartphones, so the possible announcement of a new model is not as likely to lead customers to wait for the new model rather than buying the one currently on offer. A replacement for the 737 would not be available for at least 10 years, so orders for the current model are likely to remain decent if not robust.
Through January 2011, Boeing has 2,164 of its various 737 models on backlog, fully 63% of its order book. The company can’t afford to fool around here. Backlog for the 787 Dreamliner totals 847 and for the 747-8 totals 107.
Boeing can’t afford another goof-up here. Airbus is already delivering the new version of its A320 with a new, more fuel-efficient engine. If fuel efficiency is the feature most in demand from buyers, then Boeing needs to replace the 737′s engines and get on with it.
If, however, airlines are demanding a 2-aisle version of the 737, then the company has to decide if it can afford to wait at least 10 years to challenge Airbus.
If your were a Boeing stockholder, which course would you recommend?