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A clean-sheet New Small Airplane would be a complete break from today’s 737, unencumbered by commonality in both parts and pilot type rating, and by its very definition would unlock Boeing’s 737 customer base to disregard switching costs between types as it considered the A320neo against the NSA.

Would the relatively low cost investment by Airbus to develop the the A320neo to provide a 15% improvement in fuel burn give the European airframer the ability to use selling price to flip Boeing customers who have been unlocked from the 737NG? Is this a recipe for loss of market share?

“If we did a new small airplane,” insists Nicole Piasecki, Boeing business development vice president, “We would not do a plan that has us losing market share. We would have a plan that would have us gaining market share. That means that we have to understand with confidence how to keep our exising customer base and grow it.

“And that means, again the NG is going to stay in production for a long period of time and that family is competitive as possible as well. So we will not abandon the NG at the same time we are going through the transition,” emphasizing the 737+ developments for the next tranche of incremental improvements to the narrowbody, will provide a technological bridge to a New Single Aisle.

Though, Boeing Commercial Airplanes CEO Jim Albaugh is unapologetic about the price tag of its narrowbody: “Our view is the 737 should command a higher price and we charge a higher price because of the capability it provides,” adding that a re-engined 737 or an all-new airplane would be no different.

Piepenbrock’s Red-Blue suggests mature markets are battlefields for cost competition. Whether Boeing likes it or not Airbus is playing a cost game while Boeing is playing a value game, prompting price sensitive airlines and lessors to invariably weigh the value of efficiency and fuel burn if its delivered up front as as price cut.

Both UBS Investment Research and Bernstein Research have recently published a reports raising questions about the pace of achieving profitability on 787, recognizing the contractually established supplier costs coupled with the low locked-in aircraft sale price over more than 800 aircraft.

UBS’s David Strauss predicts “flat to progressively worse 787 cash flow over the next several years” as the production system comes down the learning curve, coupled with prices that make 787, says Berstein’s Doug Harned a “victim of its own success. With 787 production sold out until 2019, pricing is largely fixed at prices we believe were set too low in the beginning.”

This page’s own reporting reflects this trend, with an average airframe sale price of $76 million, locked in on at least the first 300 aircraft, a conservative estimate that has not taken into account return buying by the early tranche of customers.

“At this point in time our product development investment decision we are assuming success and progress and momentum on all of that so we’re not constraining our thinking around that,” says Piasecki.

“But as you and I can imagine, if we’re a board member and the company isn’t executing on what it needs to, there are going to be some questions around it. We have to be accountable for getting to profitability on the 87 and the 47-8, no question about it, top priority.”

As Boeing brings into focus the considerations around the cost of making another big leap, the benefits of incrementally improving the 737, weighed against the development requirements for the 787-9 and -10X, as well as crafting a more comprehensive competitive response to the A350 in the 777-8X and -9X, the constrained path forward may point to re-engining the 737.

“There are tradeoffs, I think the re-engine is a very, very attractive option,” says Piasecki. “From a perspective, if you’re looking for minimal disruption to the industry, maximum flexibility to make a move on the 777, and those are all the sorts of things that we’re thinking about as we move through this decision.”

Boeing last deliberation about replacing the 737 Classic with an all-new jet came in the early 90s, in the midst of a constrained environment that focused the organization’s attention toward the development of the clean sheet 777. Out of those constraints the Next Generation 737 was born.

The result, an incremental development strategy that considerably grew the capability of the 737 family, has yielded 3,700 deliveries, a 6% improvement in efficiency since 1997’s first delivery and has brought the company great riches, high production rates and arguably the leanest, most productive supply chain in all of aerospace, that seamlessly joins together a quarter million parts 31.5 times every month.

As it looks down the road to an all-new narrowbody and its all-new production system, then back at its stalwart best-selling product, Boeing is again a company at a crossroads.

“We don’t want to be driven by a date and we also don’t want to be driven by what the competition might be doing. We’re certainly mindful of what they’re doing, but this is a big decision and we’re going to take the time necessary to get it right,” says Boeing Commercial Airplanes CEO Jim Albaugh.

The Legacy of the 707

Looking to history, Boeing’s original leap was a following move and paved the way for all that came after. The 707 was a marvel for Boeing; a fast-follower after De Havilland’s Comet, which was relegated to a place in history steeped overwhelmingly in nostalgia and technical trailblazing rather than longevity and commercial success.

What followed two decades later was the 767, its powerplants halved, jumping forward with a digital flight deck, a 33% reduction in flight crew. The 767-200’s initial range was pegged at 2,000-2,700nm, eventually growing to nearly 6,000nm with its -300ER and -400ER iterations, almost tripling its capability through small adjustments, earning it the title of Boeing’s most profitable jetliner. Its own success was the result of the same incremental strategy employed by Boeing on the 737, as well as the 777.

The same was achieved with the two-crew, two-engine 757, which replaced the three-crew, three-engine 727, and the two-engine two-crew 777 replaced the 747-100 and -200.

The lineage of the 707 is today seen in the 787, the airframer’s first third generation jetliner, representing the mid-size category. Boeing, running out of major levers like crew size and engine count to significantly reduce cash operating costs looked to next generation engines from General Electric and Rolls-Royce and the aircraft’s composite airframe and more-electric systems for the next 20% leap in efficiency.

“We paid billions upon billions in the learning process there,” says McNerney of 787’s development. “We just booted it.”

While a major step-change in efficiency, the realities of the 20% improvement often disregard the fact that each successive leap yields a smaller decrease in absolute fuel efficiency improvement. If 20% saves 2000lbs fuel on the first leap, the second only saves another 1,600lbs, a third only another 1,380lbs. Every time an airframer pulls the 20% lever, the next pull gets smaller.

“As you go to more efficient airplanes, often times the price goes up and that’s because you’re pushing technology and doing things that have never been done,” says Albaugh of the cost to achieve that next 20% jump.

Albaugh says he believes the technologies developed for the 747-8 and 787 will serve as the basis for New Small Airplane, which is today assumed to be a majority composite design: “We’ve learned a lot, and if you take those technologies and apply them directly to the NSA I think we could do it without that exponential jump in cost.”

Though downsizing the composite technology remains an unanswer question for Boeing says Nicole Piasecki, Boeing vice president of business development, “At some point on the scale curve, composites won’t make sense at this point in time,” who points to the Mitsubishi Regional Jet’s transition from composite to aluminum wing as an example, “We’re confident we’re going to have some good [material] choices, but the jury is still out in terms of scalability.”