LUV Southwest Airlines Co

Boeing Co. is considering another version of its new single-aisle jetliner to fend off competition from a new Bombardier Inc. passenger jet, according to people familiar with the situation.

The proposed plane would seat around 150 passengers in two classes and replace the smallest version of the Boeing 737 Max, which is due to enter service in 2019. The first model of the Max, an update of the best-selling workhorse jet, is currently being tested and is due to enter service first with Southwest Airlines Co. next year.

Internally dubbed the Boeing 737 Max 7X, the plane would fly significantly further and carry more passengers than the 126-seat model which it would replace, the people said.

Boeing needs to win backing for the plan from United Continental Holdings Inc., which recently purchased 45 current-generation 737s, and Southwest, which is also due to take the first of the smallest model, according to a senior industry executive. The smallest version has only garnered 60 orders.

The proposed new model would include major portions of the 162-seat Max 8, including a shortened version of its fuselage. The concept is a less-expensive option than customizing parts such as the wings. Sharing components lowers development and production costs, which Boeing can use to cut sale prices.

A Boeing spokesman declined to comment, citing company policy.

Mike Van de Ven, Southwest's chief operating officer, said on an investor call that he'd "heard rumors" about a new 737 version.

"Absolutely we'd want to go out and consider different options out there," he said, adding that "there have been no thoughts of adjusting" the 30 firm orders Southwest has for the smallest version of the Max.

Boeing has employed a similar strategy to make a version of the Max with 200 seats. The company has already signed up low-cost carrier Ryanair Holdings PLC for that plane, which is the same size as the Max 8, but includes two new exit doors to accommodate an increase in the jet's cabin capacity.

Reworking its single-aisle jet lineup reflects the traction Bombardier is getting with its CSeries jets. Boeing was forced to offer United steep price concessions to win orders this year in the face of competition from Bombardier. Delta Air Lines Inc. is expected to complete a deal with Bombardier for up to 125 aircraft later this month, according to people familiar with both campaigns.

In addition to being used to court airlines, the design could also serve as a military platform or an ultralong range business jet, said one of the people familiar with the study.

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

(END) Dow Jones Newswires

April 21, 2016 14:45 ET (18:45 GMT)

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