7E7’s Key to Success May Be Overseas

The first customers for Boeing Co.’s proposed 7E7 passenger jet are likely to be airlines in Asia or the Middle East after interest in the fuel-efficient mid-size aircraft surged in recent weeks with signs of recovery in international air travel.

Singapore Airlines Chief Executive Chew Choon Seng said his airline was considering becoming one of the launch customers for the new airplane.

“It does appear to have application and good use for us,” Chew said during an interview last week at the airline’s headquarters in Singapore. “In principle it is an aircraft that can find a place in our fleet.”

Although Chew said there were still “lots of ifs and buts” before the airline decides to purchase Boeing’s new aircraft, his comments marked the first definitive interest in the 7E7 by an airline.

The decision would be critical to the success of Boeing’s proposed 7E7 project, its first new line of aircraft in more than a decade. Analysts said the 7E7 was the centerpiece of the future commercial aircraft business for Boeing, which last year for the first time delivered fewer airplanes than its European archrival Airbus.

If Boeing builds the 7E7, it plans to assemble the aircraft in Everett, Wash., where it has built larger twin-aisle planes such as the 747.

Analysts estimated that Boeing would spend $6 billion to $8 billion developing the plane.

Singapore Airlines also helped launch Airbus’ new A380 super jumbo jet by committing to be one of the first customers for the mammoth, double-decked 555-passenger airplane. Singapore Airlines’ decision to buy 10 of the A380s -- with a list price of $250 million each -- had a cascading effect and bolstered the sale of the plane to other airlines. Singapore Airlines will be the first to put the Airbus plane into service in 2006.

In recent years Boeing has proposed and then canceled two new aircraft, including a larger 747 and a super-fast Sonic Cruiser. Airlines were initially wary of the proposal to build the 7E7, an aircraft that would use 20% less fuel than other mid-size jetliners.

But the remarks by Chew provided the clearest sign yet that airlines might not be resistant to operating both Airbus and Boeing’s new airplanes, although they are diametrically different in design.

Airbus believes that passengers will continue to rely on the traditional hub-and-spoke system, in which they fly to larger airports where they board larger airplanes, such as the A380, for long-haul flights across the Pacific or the Atlantic.

Boeing, however, insists that travelers prefer a more direct flight on a smaller airplane such as the 250-passenger 7E7, which would be able to take off from smaller regional airports and fly directly to a location in Asia or Europe.

“There is a place for both” types of planes, Chew said, noting that his airline could use the A380 for a flight from Singapore to London and use the 7E7 for flights between Singapore and New Zealand.

Since December, when Boeing’s board approved marketing the 7E7 to airlines, company executives have been on whirlwind marketing trips across the globe. Later this month, they are scheduled to give a presentation in Hong Kong to several key Asian carriers including Singapore Airlines, Cathay Pacific and All Nippon Airways.

Analysts believe that if Singapore Airlines does not become one of the 7E7 launch customers, All Nippon Airways will, because several Japanese subcontractors have agreed to play a key role in building the airplane, providing up to 30% of the parts.

With U.S. airlines continuing to struggle through a downturn in air travel, this week a Boeing executive acknowledged that the first customer for the 7E7 probably would be a foreign airline. It would mark the first time that a Boeing aircraft would be launched without a U.S. carrier lined up as a customer.

If Boeing can line up customers by year’s end, the first 7E7 could be in service by 2008.

Shares of Boeing closed down 12 cents at $44.37 Thursday on the New York Stock Exchange.