This Airplane Leasing Titan Wants a New Plane From Boeing

By Markets Fool.com

It's no secret that aerospace manufacturers talk to their customers before building a plane, but Air Lease CEO Steven Udvar-Hazy is going out of his way to push for a new Boeing plane.

Continue Reading Below

But Boeing has yet to make a decision. I'll examine the clues and break down Boeing's options.

Hazyliner
When Boeing delivered its last Boeing 757 in 2005, it ended the run of a plane that had sold over 1,000 units and since then speculation has continued over what Boeing will do next.

But while Boeing is still working on a decision, Steven Udvar-Hazy has already taken his position and wants the manufacturer to build an all-new plane to fill the market left by the Boeing 757. The Wall Street Journal notes that he has been so committed to this position that some people are beginning to refer to this potential new plane as a "797 Hazyliner."

American Airlines Boeing 757. Source: Wikimedia Commons

Continue Reading Below

There aren't many people outside Boeing who could have much of an influence over aircraft development but Udvar-Hazy is a rare exception. After building aircraft leasing company International Lease Finance Corporation (ILFC) and selling it to American International Group, he stayed on at ILFC before departing shortly after the AIG bailout.

Following his departure, he founded Air Lease and has rapidly built the company into one of the largest aircraft leasing companies in the world. With over 360 aircraft on order, Air Lease is a big customer and finding favor with it is a positive for any aerospace manufacturer.

Although Udvar-Hazy is still pushing for an all-new replacement for the Boeing 757, The Wall Street Journal noted that he is willing to accept the original 757 being brought back with new engines.

Boeing's options
Boeing has yet to commit to which way it wants to go with the Boeing 757 and its associated market. So far, four main ideas have been discussed by analysts including:

  • leaving the 757-type market
  • filling the slot with an extended capacity Boeing 737 or modifying a similar existing plane
  • bringing back the original 757 with updates
  • developing an all-new jet for the 757-type market

Leaving the market
Since Boeing has not made a final decision here, it's always possible that Boeing will decide that the market formerly occupied by the Boeing 757 is not worth developing a plane to capture. But Boeing's archrival Airbus is working on a long range version of its Airbus A321.

If Boeing declines to develop a plane for this market, it would pit the judgement of Boeing to abandon the market against the judgement of Airbus to expand into it. With Airbus moving into this market and Udvar-Hazy pushing for a plane here, I think it's unlikely that Boeing will completely abandon this market; however, the question remains how Boeing would approach it and how hard the company will fight for this market over others.

Stretch Boeing 737
Among commercial jet aircraft, the Boeing 737 easily comes out on top for most total sales. Much of this success can be owed to Boeing modifying the 737 for a wide range of airline demands. Between the Boeing 737-700, -800, and -900ER, customers can choose various cabin lengths and get a seating capacity that suits a wide range of needs.

More recently, Boeing has developed its 737 MAX series to bring another round of updates to a plane that saw its original version take to the sky in the 1960s. And the 737 has grown in size as well since its beginnings. The 737 MAX 9 will be able to seat 180 passengers in a two class layout or 192 passengers in a single class layout, while the 737 MAX 200 will be able to seat 200 passengers in a single class layout.

Boeing 737 MAX 9. Source: Boeing

These numbers begin to approach the Boeing 757 from a passenger capacity perspective although the 757 was still larger with room for 200 passengers in a two class layout or 228 passengers in a single class layout. (For the purpose of this comparison, I am using the characteristics of the 757-200 since it accounted for about nine out of ten 757 deliveries.)

In addition, the 757 also exceeds the range of the 737 MAX 9 with a range of 3,900 nautical miles compared to 3,630 nautical miles for the 737 MAX 9.

To effectively compete with the Airbus A321LR, Boeing would need to extend the 737's range closer to the 4,000 nautical miles Airbus expects from the A321LR. Aviation Week notes that the A321LR would hold 206 passengers in a two class configuration although it could theoretically hold 240 passengers in a tight single class layout. So to match the A321LR, Boeing would need to make the 737 even bigger or modify another one of its planes to be more in line with the 757.

For now, Boeing pitches the 737 MAX 9 as a 757 replacement, but it does not meet all the characteristics of the 757 lagging in range and passenger capacity. Here, investors should watch to see if sales of the A321LR pressure 737 MAX 9 sales, which could potentially push Boeing to develop a plane closer to the 757.

New engines
Adding new jets to existing aircraft is quite popular in the aerospace manufacturing industry. Airbus has been doing this with their neo series of aircraft and new engines have been a key part of Boeing updated versions of older aircraft models.

But while Udvar-Hazy has suggested that Boeing bring back the 757 with new engines, Boeing itself seems less positive on this idea. On Feb. 11, Boeing noted that it's not studying replacing the engines on the 757. Reuters noted that Boeing's vice president of marketing for Boeing Commercial Airplanes said the updating of the 757 has been studied "a couple of times." He further added, "That airplane had a very unique production system. It was relatively expensive to build."

Although it cannot be completely ruled out, Boeing definitely seems to be leaning against bringing back the original 757.

All-new jet
This is Udvar-Hazy's opinion of what Boeing should eventually do but for all the aircraft demand he controls, he is not actually part of Boeing. At this point, there is only speculation on what this type of jet might be and vague analyst estimates tend to figure this plane, if built, would be released in the mid- to late 2020s.

Boeing 787-9. Source: Boeing

With the costs of developing a commercial airliner from scratch running into the tens of billions of dollars, this would be a major investment for Boeing, possibly on par with that of the 787 Dreamliner which The Seattle Times estimated cost over $15 billion to develop.

As I am not an aerospace engineer, I will not try to speculate on what technolgies may find themselves on board this potential 757 replacement, but what I can say is that if Boeing does go ahead with the development of an all-new jet, it should get plenty of attention. The question will be whether this attention will translate into sales and whether it's worth the massive development cost.

The bottom line
During its production, the Boeing 757 was quite a successful plane and since production ended speculation has continued to exist over how Boeing will approach this market. Airbus and Udvar-Hazy see something to this market and with Air Lease being the launch customer for the A321LR, both are putting their money where their mouths are.

Followers of the aviation industry should pay close attention to comments from Boeing regarding the 757-type market as well as orders for the A321LR, which could provide clues for demand in this market.

The article This Airplane Leasing Titan Wants a New Plane From Boeing originally appeared on Fool.com.

Alexander MacLennan owns American International Group warrants and shares and options on American Airlines Group. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.