Reports that Boeing is moving ahead on a new airplane design have stirred speculation, but analysts caution investors not to get ahead of themselves, according to Barron’s columnist Al Root.
He cited commentary from Sheila Kahyaoglu, analyst at Jefferies, who noted that while Boeing (NYSE:BA) is interested in future technology, its immediate focus remains on raising 737 Max production, improving its defense unit and completing certification of the 777X. She suggested that a next-generation narrowbody aircraft is unlikely before the mid-2030s.
The company still faces hurdles with the FAA, which has capped Max output at 38 jets a month following a safety issue. Boeing (NYSE:BA) also needs certification for the Max 7 and Max 10 models, as well as the 777X. Chief Executive Kelly Ortberg has said that market demand, financial readiness and new technology all need to align before a new aircraft program can begin, conditions he admits are not yet in place.
Industry observers expect Boeing’s (BA) eventual design to be slightly larger than the Max, potentially carrying 200 to 250 passengers, positioning it against Airbus’s (OTCPK:EADSF) (OTCPK:EADSY) A321neo, which has outsold the Max in recent years.
Richard Aboulafia of AeroDynamic Advisory said Boeing’s (BA) willingness to publicly consider new options is itself notable, with any new model likely to be developed as a family of aircraft, Barron’s reported.
A new program would also trigger a competition among engine makers. GE (GE) and Safran (OTCPK:SAFRF) (OTCPK:SAFRY) are developing the open-rotor RISE design, while RTX (RTX) and Rolls-Royce (OTCPK:RYCEF) (OTCPK:RYCEY) are advancing geared turbofan concepts. Each promises greater fuel efficiency, but design trade-offs could determine which wins Boeing’s (BA) business.
Launching a new jet would require years and billions in investment. For now, analysts view it as a long-term prospect, with Kahyaoglu maintaining a Buy rating on Boeing (BA) and a $255 target, compared with a recent share price near $215, Barron’s reported.