Boeing’s decision of the decade: Does it build the 797?

Bloomberg

Boeing Co. executives are closing in on one of their most important decisions of the decade: whether to plow an estimated $15 billion into a new jetliner family.
The aircraft nicknamed the 797 would feature Boeing’s first all-new design since the 787 Dreamliner’s unveiling in 2004, while shoring up its product line against recent Airbus SE advances. The European plane-maker’s incoming boss, Guil- laume Faury, says he’s waiting for Boeing to tip its hand before revealing counter moves. That sets up a likely showdown at the Paris Air Show in June.
Designed for economical flying on mid-range routes, the Boeing jet would have the potential to transform air travel by spawning a new breed of longer-distance budget carriers — think new flights from Chicago to Berlin, or more economical hops from New York to Los Angeles. But the decision on whether to move forward hasn’t been easy. A misfire would cannibalize sales of the 787 Dreamliner and endanger the cash bounty that has made Boeing a darling of Wall Street.
“Every single other Boeing jet has been pretty much a guaranteed home run, even if it wasn’t clear at the time,” said aerospace analyst Richard Aboulafia. “This is different. They’ve got to be careful with this.”
Boeing’s board is expected to review the case for the new program by the end of March, according to people briefed on the matter. For now, the team spearheading the concept, led by former 787 program head Mark Jenks, has been meeting monthly with Chief Executive Officer
Dennis Muilenburg and Chief
Financial Officer Greg Smith.
The sales force has been fine-tuning the design with airlines for at least five years, creating a “will it or won’t it?” drama around the decision on whether to make the plane, known internally at Boeing as the NMA, for new, middle-of-market airplane.
“With some planes, the technology is the ‘moonshot’; with this, it’s the business case,” Aboulafia said. The word “moonshot” is the term Boeing uses for quixotic gambles that it has vowed to avoid after loading
the 787 Dreamliner with groundbreaking technology and an unproven production system—then losing money on the first 500 or so planes after extensive delays. For Boeing and Airbus, committing to an all-new aircraft is a once-in-a-decade event. Costs are prohibitive, delays are the norm and payoff can take years to materialize. Boeing could easily spend more than $15 billion on the NMA, according to Ken Herbert, analyst with Canaccord Genuity, and Airbus may be forced into a clean-sheet design if sales take off.
Airline entrepreneur David Neeleman underscores the potential rewards, and risk, for Boeing. The NMA seems tailor-made for the networks he is weaving together between the Americas and Europe with affordable, yet comfortable flights that skip congested hubs.
“I had a briefing from Boeing and I thought it was great,” Neeleman said during a recent visit to Chicago to tout Portugal’s TAP airline, one of his holdings. That’s noteworthy, coming from an executive who has mostly favored Airbus jets at startups such as JetBlue Airways Corp., Brazil’s Azul SA and Moxy, the code name for his latest US project.