Boeing CEO Open to Shelving 737-10 Amid Political Standoff

Just imagine for a moment if Boeing did not build a 737-10 after all? What would that do to its share of the single-aisle market? How would that affect pricing for the Airbus A321neo, which would be left with a monopoly at the upper end of the narrowbody market, and airline fleet plans? Would it force Boeing to accelerate a new aircraft program? How would investors react?

Those seemingly theoretical questions have gained new weight now that CEO David Calhoun has made it clear that the company has not ruled out the drastic step of shelving the largest variant of the MAX family. At issue: a looming standoff with Congress on whether to extend a year-end deadline that would require changes to the aircraft’s flight deck system. If Boeing cannot certify the 737-10 by then, and a waiver is not granted, the company would have to redesign the aircraft’s flight deck to add an alerting system, eliminating its commonality with the other 737 MAX variants—a key selling point of the family.

“The [737-10] is a little bit of an all-or-nothing,” Calhoun told Aviation Week editors in an interview at the company’s new headquarters in Arlington, Virginia. “I think our case is persuasive enough. . . . This is a risk I’m willing to take. If I lose the fight, I lose the fight.”

• More than 600 737-10 orders from 18 customers at stake
• Analysts: Move would force Boeing into new large narrowbody

The company is pressing on with 737-10 certification, focusing on the process instead of potential roadblocks. If the variant is forced to meet the current alerting requirements, Boeing must ask itself: Is it better to spend time and money changing a design that some customers may reject or to shelve the program?

Calhoun affirms that a cancellation of the -10—which has won more than 600 orders from United Airlines and 17 other customers—has not been ruled out. “We end up having to face right into that question,” he said. “If you go through the things we’ve been through, the debts that we’ve had to accumulate, our ability to respond, or willingness to see things through even a world without the -10 is not that threatening.”

Still, the Boeing chief exuded optimism about the program’s future. “We believe in this airplane, period,” he said. “We believe the intent of the counterparties that negotiated the [flight-crew-alerting mandate] time frame wanted this airplane covered. And I find very few voices that would suggest otherwise.”

Boeing’s original plans did not include the extra stretched model of the MAX family, but it launched the -10 five years ago in response to calls from loyal customers for a Seattle-developed alternative to the Airbus A321neo. Among the model’s challenging requirements were several expensive innovations, including the development of the first major change in the main landing gear configuration since the 737’s much-evolved 1960s-era baseline design.

Canceling the -10 “would be a real blow for the MAX program,” observes Agency Partners aerospace analyst Sash Tusa. “Boeing could no longer compete in all-important segments with the A320neo family.”

With 4,211 orders through May 31, the A321neo has sold far better than the 737-10, with about 640 orders, according to the Aviation Week Network Fleet Discovery database. United Airlines and VietJet Air have the most 737-10s on order, with 253 and 106, respectively. Other notable customers include Lion Air, with 50 orders; FlyDubai, with 44; and Alaska Airlines, with 28. But the -10’s presence has enabled airlines to hold the line on A321neo pricing, Tusa says. Without it, Airbus would have a “free pass” to increase prices—a big negative from the airlines’ perspective.

Tusa says a termination of the 737-10 would bring the launch of a new clean-sheet Boeing model much closer. “Boeing cannot wait another 10 years,” he says. Such an aircraft would likely start at around 200 seats, putting it at the “bottom end of the middle of the market,” Tusa projects.

“Canceling the -10 would force Boeing into magic sooner,” agrees consultancy Avitas Senior Vice President Adam Pilarski, referring to a new aircraft program. “Boeing has to do something. The 737-10 was not very impressive in my view.” Pilarski points to the limited customer base—18 airlines and lessors—and asks: “How important is the program?” Boeing walking away from it would “not surprise me,” he says.

Pilarski also is not as optimistic as Calhoun that the impasse will be resolved by year-end. “I don’t think there is a high chance for an extension” of the regulatory deadline, he says. “The FAA and politicians are still mad at Boeing.”

But a cancellation of the 737-10 “would be a surprise to the market,” says Bank of America aerospace analyst Ronald J. Epstein. “They would have nothing for the large narrowbody segment.” He also thinks Boeing should then develop a new aircraft. “But I’m not convinced they will,” he adds.

That Calhoun is publicly talking about walking away from the -10 increases the political pressure on lawmakers to grant the needed relief. The issue stems from a provision in a December 2020 law that puts a two-year window on the FAA’s ability to issue a type certificate to a transport category aircraft unless the design complies with the latest flight-crew-alerting system regulations. The FAA granted the 737 MAX relief from specific flight-crew regulations introduced during the 737’s lifetime based on Boeing’s contention that complying with the updated regulations would add unnecessary expense and pilot training to a safe baseline design.

The two-year grace period was selected to allow both the 737-7 and 737-10, the only aircraft affected by it, to earn FAA approval. A new, more rigorous certification process combined with Boeing’s inability to meet the agency’s requests in a timely manner have made the law an issue for the 737-10.

Lawmakers are sending mixed signals. Rep. Peter DeFazio (D-Ore.), head of the House Transportation and Infrastructure Committee, opposes any relief. Sen. Maria Cantwell (D-Wash.) has urged the FAA to weigh in, even though the law places the issue in Congress’ hands, not the agency’s.

The issue’s political ramifications mean a decision may not come until 2023. DeFazio, who has helped amplify calls to hold Boeing accountable for its role in two 737 MAX fatal accidents and revamp the FAA, is not seeking reelection this November. His departure, combined with gains by the generally more corporate-friendly Republican Party, would likely make the next session of Congress, which convenes in early 2023, more sympathetic to Boeing—or at least less likely to uphold a symbolic requirement.

Calhoun emphasized that Boeing believes the case to certify the 737-10 without an enhanced crew-alerting system is strong. Among the evidence: Older versions of the 737 have better fatal-accident and hull-loss figures than nearly every other fleet type. The 737-10 also includes new safety-related improvements. Adding a system that affects flight-crew workload to one member of an aircraft family flown by a common pool of pilots could introduce new safety risks.

“We’ll make that case to all parties, and I believe the outcome is going to be favorable and that we’re going to have a [737-10] flying out there, regardless of timing,” he said. “I don’t expect [to cancel the program], and I don’t want anybody to think that. It’s just a risk.”