Boeing 737 is world leader ... what follows ?

The Financial Times reports today that the EU is threatening to reimpose trade sanctions on the US unless Congress eliminates the vestiges of a tax break for US exporters that was ruled illegal on Monday by the World Trade Organisation. The 8 year trade saga relates to the US / EU dispute over subsidies to Airbus and Boeing, the aircraft manufacturers, rather than planning a full-scale transatlantic trade war.

Meanwhile Alan Mullaly Boeing CEO excitedly tells me ( I haven't seen him since the Dubai show) they have just rolled out the 5,000th 737 for the largest 737 operator SouthWest Airlines.(see pic)

The 5,000th 737, a 737-700 painted in Southwest Airlines colors, is the 447th 737 to join the carrier's fleet. Southwest has helped launch three Boeing 737 models -- the 737-300, -500 and the -700.

Alan says with more than 4,100 airplanes in service, the 737 represents more than a quarter of the total worldwide fleet of large commercial jets flying today. More than 541 operators fly 737s into more than 1,200 cities in 190 countries. It is estimated that approximately 1,250 737s are in the air at any given moment, that says Alan means one is taking off or landing every 4.6 seconds.

The Boeing 737 is the best-selling commercial jetliner of all time, with total orders now exceeding 6,000 airplanes. The 737 family -100 and -200 models, entered service in 1968; the Classic -300, -400 and -500 models, entered service in 1984; and the newest members -- the Next-Generation 737-600, -700, -800 and -900ER models, which entered service in 1998.

...this leaves the industry wondering what follows ... the 737 and the Airbus 320 are hard acts to follow.

Randy Baseler VP for marketing recently told me "It is a very high hurdle," ridiculing the notion a 737 replacement program could begin soon after the wide-body 787 enters service in 2008.

The decision is eagerly awaited and will have enormous ramifications in Seattle region. Will it be assembled in Seattle? If so, in Renton or in Everett? (Unclear.)

Initial studies of the issue have produced disappointing results. At an industry conference in January in Dublin, Ireland, Randy showed a slide listing the hurdles that have to be cleared and concluded: "Someday the 737 and [rival Airbus] A320s will be replaced, but so far we have not found a compelling replacement."

Baseler said the speculation about an early launch is fueled by the sales success of the 787 and the expectation that Boeing could simply transfer that jet's technology breakthroughs — its light composite airframe and fuel-efficient engines — to a smaller jet.

Not so fast, said Baseler. He said the main advantage of the lighter 787 airframe is an extra 2,000-mile range, a huge advantage for an intercontinental jet. But 737s are used for shorter routes and simply don't need more range than they have now.

That leaves fuel consumption, operating cost, production cost — and therefore price — as the key areas for gains.

Flight International, citing information from suppliers, said both Airbus and Boeing have found that applying the new technology improvements in the small-jet category would reduce fuel consumption around 4 percent and operating costs 3 percent.... not a good reason to invest possibly $5 billion.

The hurdle is higher because the 737, as well as the A320, are such efficient airplanes. For an airline like Southwest to switch from 737s would require a big infrastructure and training investment. There has to be compelling economic gain.

The 777 succeeded because of the big efficiency advance in moving from four engines to two on a large airplane. The 787 ignited market interest with a promise of 20 percent fuel savings and that extra 2,000-mile range.

What innovation might deliver a similar kick-start for a 737 replacement? Boeing is still looking.

Randy told me that Mulally's recent off-the-cuff remarks about a 737 replacement in Paris last June. He floated idea that because of a shift to production of very large composite fuselage sections, Boeing might offer more than one fuselage size when it next launches a jet.

"We could do three different fuselages. Five abreast; six abreast; we could even do a twin-aisle,"
Flight International calls this the "smoke and mirrors" that both Boeing and Airbus use to obscure their future intentions. Each company discourages speculation that its cash-cow single-aisle medium highly economic jet might soon be terminated.

Recent blogs on same topic here