Analysts on Boeing’s 737 move: ‘Followers not Leaders’

The Boeing Co. may have appeased American Airlines with its last-minute decision to re-engine the 737, but it didn’t please some industry analysts.

RBC Capital Markets cut its price target for Boeing to $86 from $90 on Thursday. Under the Boeing Co.’s name, RBC analyst Rob Stallard labeled the company “Followers not Leaders.”

Stallard notes that the case for Boeing re-engining the 737 isn’t clear, while the “vast majority” of Boeing’s customers wanted an all-new aircraft.

“On the flip side, we think the re-engined 737 will be on a par with the A320 NEO – and available three years after the NEO enters service, with only one engine choice,” he noted.

Analyst Scott Hamilton called Boeing’s 737 re-engine decision a “me-too response” to Airbus’s A320 new engine option jet in his latest post on his Leeham Co. blog.

Hamilton likens Boeing’s 737 decision to the old McDonnell Douglas mindset. And he blames the “insidious effect” of 787 development problems on Boeing’s decision not to come out with an all-new aircraft.

Boeing’s original plan was to develop the 787, followed by a 737 replacement and then a 777 replacement. However, Hamilton noted, “having insisted on global outsourcing to spread the financial risk, and then fouling up the 787 program so badly, Boeing’s entire product development program of leadership has been reduced to being driven by Airbus’ A320neo family.”

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