Boeing vows to put up fight from Bombardier but noncommittal about new plane

By Ross Marowits, The Canadian Press

MONTREAL - Boeing vows to put up a fight to preserve its share of the mid-size aircraft market, but is noncommittal about introducing a new airplane to fend off competition from Bombardier's (TSX: BBD-B.TO) CSeries or other upstarts.

"We have not put any lines in the sand or eliminated any options," Drew Magill, Boeing's director of marketing for commercial airplanes, said Wednesday. "It is an important market for us. We have a lot of our customers in that area and it will continue to be a growth market in the future."

Boeing forecasts demand for 29,000 new planes worth US$3.2 trillion over the next 20 years.

The regional jet market is expected to shrink as airlines seek larger planes. Demand for single aisle aircraft is forecast to represent two-thirds of all orders, worth US$1.42 trillion.

Industry observers expect Boeing and Europe's Airbus will introduce new fuel-efficient small single-aisle planes by 2020.

One study suggested the world's largest aircraft manufacturers could see their dominance in the category broken by several new players from Canada, Brazil, Russia, China, Japan and elsewhere.

The Air Insight report suggested Boeing and Airbus' 88 per cent share of the 100-to 200-seat market could be halved in the next 10 to 15 years.

Bombardier has only received firm orders for a total of 50 planes from Lufthansa airlines and Irish leasing company Lease Corporation International so far.

Magill declined to comment on the Air Insight report, but said Boeing is focused on updating its popular 737 family of 110 to 180 seat aircraft by improving navigation systems, fuel efficiency and passenger comfort.

Airlines love the standardization that comes from the four versions of the 737, he said. So any new offering would require significant benefits, including improved fuel efficiency, high reliability and lower maintenance costs.

Calgary-based WestJet Airlines Ltd. (TSX: WJA.TO) operates a fleet of 81 737 aircraft with plans to add 54 more through 2016.

The CSeries, set to enter into service in 2013, promises nearly 20 per cent reduced operating costs and substantially lower noise and environmental emissions. Much of the benefits come from Pratt & Whitney's geared turbofan engines, along with the use of lightweight composites.

But Boeing appears skeptical.

Instead of being sidetracked by competition, Magill said Boeing is focused on meeting customer needs.

"We've always found a way to be competitive in the past and it has always come back to the customer and having those strong relationships with customers and understanding what their needs are going forward."

Analyst Jacques Kavafian of Research Capital doesn't believe Boeing is yet thinking much about the threat from Bombardier.

"They're so busy with bigger fish," he said, referring to ongoing problems with Boeing's 747-8 freighter and 787 Dreamliner that have caused the company to take US$3.5 billion in third-quarter writedowns.

Boeing has 850 firm orders for the 787, including 37 from Air Canada (TSX: AC-B.TO), but 74 cancellations.

But Kavafian said Airbus and Boeing will each eventually introduce a new plane with at least 150 seats - the sweet spot in terms of customer demand.

Whether Boeing will adopt some of the lessons learned from developing its composite 787 to a single aisle plane remains uncertain, but Magill acknowledged Boeing has its work cut out regaining its reputation after a series of production delays.

"It is really hard for us right now," he said, adding the first step is finally delivering the planes.

Despite facing a cyclical downturn, the airline industry should rebound by 2011, Boeing said.