Boeing's 757 Jetliner May Be Nearing End

SEATTLE September 28, 2003; Chris Stetkiewicz wrtinng for Reuters reports that after a two-decade run with more than 1,000 aircraft sold, Boeing Co.'s BA.N 757 jetliner is about to fly off into the sunset, a victim of age, competition and a nasty market slump, industry experts say.

The retirement of the 757, a mid-sized workhorse of the commercial fleet since 1982, would be the first shutdown of a Boeing legacy aircraft program since the venerable 707 ran out of orders a decade ago.

Boeing has not made an announcement and the company's Seattle-based jetliner unit says it is still talking to customers about the narrow-body, twin-engine 757, which seats 200 to 250 passengers.

"We continue to assess the long-term potential for the 757 market. We continue to have discussions with our customers on their fleet needs and their ability to buy new airplanes," said Boeing spokeswoman Sandy Angers, noting China's Shanghai Airlines ordered five 757s two weeks ago.

But during their quarterly earnings briefing in July, company officials raised the prospect of closing the 757 program in the coming year, which would result in a $200 million charge, cutting net profit by about $100 million.

"I don't think anyone would offer that kind of information unless they were looking it in the face," said Byron Callan, an analyst who covers Boeing for Merrill Lynch.

The Shanghai 757 order was the first since December 2001 and the backlog has dwindled to 20, forcing Boeing to cut output at its Renton, Washington, factory to a projected 18 757s this year, matching its lowest full-year total ever and down from 67 in 1999.

And Continental Airlines Inc., which claims 11 of the 20 remaining 757 orders, has said it may cancel or defer those jets. The smaller, cheaper 737 model suits its needs better and is easier to finance.

The biggest 737, the '900' model, seats 177 passengers in a typical, two-class layout and its 3,159-mile range is more than enough for any U.S. domestic flight.

"Boeing did such a great job with the 737 that they made the 757 sort of irrelevant," said William Loh, who runs a consulting business, International Aviation Advisors.

Boeing lists its two 757 models at a range of $73.5 million to $89.5 million per unit, compared with the top price for a 737 of $68.5 million. The prices are strictly for show; customers routinely get crisp discounts from Boeing and rival Airbus.

In addition, Boeing is planning to build a wide-body jet seating 200 to 250 passengers, the proposed 7E7, that will fly further than the 757 on fuel-efficient engines that could appeal to cost-conscious airlines that might otherwise fly the highly efficient 757.

Airbus also offers similar sized aircraft, sporting a backlog of 138 orders for its 185-seat narrow-body A321 and 195 orders for its wide-body A330, which includes a 253-seat '200' model.

737 GOING STRONG

The 737 has held up well, defying an airline slump that forced several carriers to declare bankruptcy and cancel or defer hundreds of jets on order. Hundreds more jets, including about fifty 757s, were parked at desert airstrips for lack of passengers.

Boeing does not publish production rates by model, but people familiar with the Renton factory say the company plans to boost 737 output to 17 a month from its current rate of 14 by November and to about 20 per month by the start of 2004.

Shutting down the 757 would free up space in Renton to handle more 737s, one veteran Boeing watcher said, adding: "I think they would like to be done with the '57 when the rate increases on the '37."

Orders for three other Boeing models have also shrunk to worrisome levels, but the 757 appears to be in the worst shape.

The 106-seat, short-haul 717 has recently seen a flurry of customer interest and the 250-seat 767 will likely get a boost from a U.S. Air Force order for 100 fuel tankers, though critics of the deal have repeatedly delayed it.

And the 416-seat 747 jumbo jet could linger for two or three more years just on its current backlog of 39 orders. Boeing is on pace to deliver about 18 in 2003.

Airlines will continue to fly 757s in commercial service for at least several more years. Charter companies have found the aircraft ideal for packing in holiday travelers at discount fares.

And used 757s could haul commercial cargo for decades to come, with resale prices low enough to entice freight companies looking to replace older DC-8s, 707s and 727 freighters, a market estimated at more than 400 aircraft.