Boeing Takes Names, Still Flying Into Headwinds (BA, EADSY, AIRYY)

The Boeing Co. (NYSE: BA) appears to have a little momentum coming off its big win over EADS (OTC: EADSY) for the new US Air Force tanker. The company has just revealed new orders from two Chinese airlines that give the company yet another boost. There are still a couple one major decision looming for Boeing, however, and it could be more important than all the good news so far this year.

Boeing said that it had received orders for five of its new 747-8 aircraft, the Intercontinental fro Air China Ltd. (OTC: AIRYY), China’s flagship air carrier. The first delivery of the order is expected in 2014.

Boeing also announced that it had signed a memorandum of understanding with the parent of Hong Kong Airlines for 38 aircraft, including six 777 freighters, thirty 787-9s, and two 787-8s. The last two are variations on the 787 Dreamliner. The company will not announce a delivery schedule until the order is firm.

Both the 747-8 and the 787 are years behind schedule, and first customer deliveries are not scheduled until the end of this year.

While these orders are no doubt welcome for Boeing, it needs to answer a still larger question related to upgrading or replacing its workhorse 737. We noted in January that the company is leaning toward a new airplane altogether, probably to be designated the 797 to replace the 737. It could be a two-aisle plane, which makes for easier and faster passenger loading and unloading.

Boeing’s other option would be to strap a new engine on the 737 and make other improvements, which EADS did with its competitor Airbus 320 that the company calls the A320neo.

But there is a new kid on the block, and his name is Commercial Aircraft Corp. of China, or Comac, a start-up that expects to deliver a made-in-China competitor for the 737 and the A320 by 2016. The A320neo is also set for delivery in 2016, and if Boeing builds a new 797, it won’t be available until 2020. A remodeled 737 could probably be available much sooner.

Despite the orders for Boeing’s long-distance planes, China’s largest aircraft purchases are expected to be for shorter haul domestic flights. Comac’s answer is the C919, a 150-passenger regional jet that will compete directly with the Boeing 737 and the Airbus 320.

And even though the C919 is new and untested, the Chinese government is backing the new plane and is directing China’s carriers to place orders for it. Comac claimed 100 orders for the plane back in November. That tilt to the playing field does not work in Boeing’s favor, nor in favor of EADS. China’s large domestic market, plus state directives to buy the plane, virtually guarantee that the C919 will be a huge success in China.

Can Boeing afford to wait until 2020 to deliver a competitive plane to the Airbus and Comac models? Sure, both could have delivery problems, but Boeing’s track record there isn’t so hot either.

If Boeing gives Airbus and, especially, Comac a four-year head-start in China’s domestic passenger market, it could have a really hard time breaking back in.

Paul Ausick