EVERETT, Wash.—After a year of meetings with potential customers, Boeing Co. is advancing toward developing an all-new jetliner with up to 270 seats that would target midrange flights of up to 10 hours.

The proposed new plane would enter service around the middle of the next decade, but first Boeing executives need to secure board approval by demonstrating it can build the plane at the price dictated by airlines and leasing companies.

"It's coming faster than you think," said Mike Delaney, Boeing's vice president of airplane development, in a presentation to reporters in June. "We have all the things we sort of need to put the airplane together."

The plane is intended to service routes of between 2,900 and 5,000 nautical miles, including trans-Atlantic flights and the fast-growing Asian market, a segment where rival Airbus Group SE has enjoyed sales success

Boeing said it has held talks with 36 airlines and lessors over the past year, and potential customers said it is leaning toward a twin-aisle jet seating between 200 and 270 passengers, with seven-across seating in coach class. Like its 787 Dreamliner, the proposed new plane would have carbon fiber composite wings, said one of the customers.

Boeing hasn't publicly said it would go ahead with the planned new plane. Chief Executive Dennis Muilenburg said at an investor event last month that while an all-new jet might be ready in 2024 or 2025, "that's an if", not a "when" it decides to move forward.

The company is also considering a new larger version of its single-aisle 737 Max with bigger engines and modified wings to seat 250 passengers. The less expensive concept, dubbed the 737 Max 10X, could be ready around 2021, according to a person familiar with its studies. Doing both new planes, says Boeing's marketing chief Randy Tinseth, remains an option.

Boeing's estimates there is demand for 3,000 to 5,000 of the proposed new jets, though as many as 2,000 could be cannibalized from its existing single-aisle and long-range jets. The new plane would replace Boeing 767s and out-of-production 757 jets, which combined generated 2,200 sales.

Boeing wants to replace its 757, the 1980s-era transcontinental U.S. airline workhorse, and offer larger more-efficient jets to China's fast-growing airlines, which face increasingly congested skies and a pilot shortage, allowing them to bypass the congested hubs in Beijing and Shanghai.

Boeing's last all-new jet, the 787 which entered service in 2011, is roughly the same size as the planned new plane—known internally as the New Middle-Market Airplane—but is designed to operate much longer flights of as much as 17 hours.

Mr. Delaney said Boeing is tapping General Electric Co., Rolls-Royce Holdings PLC and United Technologies Corp. unit Pratt & Whitney for a new engine on the jet. Potential customers estimate a new Boeing jet would need a price tag of between $65 million to $75 million after discounts to be competitive.

Boeing says its research and development spending is plotted through the end of the decade and it plans to return $10.5 billion back to shareholders through share buybacks and dividends. Analysts have placed the development price of an all-new jet at between $10 billion and $15 billion.

Target customers would span the globe and airline feedback suggests such a jet would make it a mainstay on the North Atlantic with U.S. and European full-service and low-cost airlines, opening new routes between smaller U.S. and European cities and joining Europe to Africa and the Middle East, as well as flights between North and South America and from Australia into Southeast Asia.

Much of closing the business case depends on first proving out manufacturing costs on its currently planned much-larger 777X jetliner, due in 2020, said Mr. Delaney. Boeing has built a sprawling new factory to fabricate carbon fiber wings using a heavily automated process, complete with automated vehicles moving parts around the factory.

Airbus is already advancing on a medium-size option for airlines, offering its biggest single-aisle A321neo—for new engine option—and besting Boeing's current smaller middle-market offerings with a roughly 70% market share. That model, currently in testing, will eventually seat up to 240 passengers, and deliver at the end of 2016. Airbus could have more than 1,000 in service by the time the new Boeing jet is ready at a price many millions of dollars lower, and Boeing is looking to stave off future buyers with the promise of its own new plane, say industry officials.

Boeing's next move is the continuation of a strategy shift made nearly two decades ago. Boeing bet airlines would move away from ever-larger jets that would connect the hubs in the world's largest cities in favor of flying fewer people directly to smaller cities with super-efficient jets like its 787.

Boeing won more than 1,000 orders for the Dreamliner, but it spent tens of billions more than it anticipated designing and producing the advanced jet. Boeing has yet to begin recovering nearly $30 billion in deferred costs it accumulated building the 787. That enormous hole has left Boeing figuring out a development and manufacturing model for the new jet at a price it and its airline customers can afford.

"We've paid those development costs," said Mr. Delaney. "We now have the pieces from what we did on the 787 and we know where the risks are…and the 787, quite honestly, solved all of the big problems and so now it's a matter of leveraging that investment into something new."

Write to Jon Ostrower at jon.ostrower@wsj.com

 

(END) Dow Jones Newswires

July 01, 2016 10:05 ET (14:05 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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