Key plane buyer wants new Boeing jet, not revamped 737

PARIS — Steven Udvar-Hazy, the airline world's most influential player, said Sunday in Paris that he's ready to be Boeing's launch customer for an all-new narrowbody jet to replace the Renton-built 737.

He said Boeing should resist doubters who are urging it to follow Airbus' lower-risk strategy in the narrowbody jet market and just outfit the 737 with new engines.

"We're ready to sit down (with Boeing) and make a deal on a new airplane, that's how strongly we feel," said Udvar-Hazy, who runs Air Lease and previously built International Lease Finance Corp. into the industry's most powerful buyer and lessor of jets. "We're ready to be a launch customer, provided it meets what we think are the needs of the airlines."

Udvar-Hazy also said Boeing needs to make key decisions about how and where to build the jet even before it announces the go-ahead.

He suggested that locations for a high-volume final-assembly plant could include a new site in Washington or elsewhere.

But he cited the cost of blue-collar labor in Washington as a disincentive to locate in the state.

And he said Boeing may need more than one assembly plant for the project, suggesting the possibility of one in the U.S. and a second overseas.

Boeing Commercial Airplanes chief Jim Albaugh has said he expects to decide by year-end between re-engining the 737 and launching a "new small airplane," as it is now referred to within Boeing.

Udvar-Hazy, taking a break from a Father's Day gathering with his grown children in a Paris hotel on the eve of the air show, said Albaugh must think long term.

He said Boeing shouldn't be distracted by the success of Airbus' re-engined A320, dubbed the "neo" for New Engine Option.

"I'm looking ahead," Udvar-Hazy said. "It's necessary not just to have something competitive with the neo, but to build a family of aircraft capable of serving the global airlines for the next three or four decades."

He said Airbus will potentially stack up as many as 1,000 new orders for the neo this year, putting pressure on Boeing. And if Airbus can win over a major airline now flying 737s, "that certainly will raise the emotional level in Seattle to do something on a more expedited basis," he said.

"There's a lot of psychology here," Udvar-Hazy added. "But we don't believe these decisions should be based on the outcomes of one or two sales campaigns. They should be based on the long-term needs of the industry."

With Boeing forecasting a worldwide narrowbody market over the next 20 years of more than 23,000 jets, Udvar-Hazy thinks Boeing can shoot for a production run of as many as 10,000 of the new planes.

Because of competition from new entrants into the market, including China, Udvar-Hazy said the jets will have to be manufactured at very high volumes — 40, 50 or even 60 per month — to make sense economically.

That's why he thinks that before committing to the airplane, Boeing must know how it will be manufactured: what material it will be made from, what suppliers will provide sections, and where the resources will come from.

"It's not just designing an aircraft," Udvar-Hazy said. "You have to build it."

This echoes recent comments by Albaugh, who told an investor conference last month that the company must "design an airplane and a production system together."

As a major lessor, Udvar-Hazy said, he talks to 250 airline chief executives and hears in frank terms exactly what they want and need from Boeing

He said his team of airline experts at Air Lease has been working with Boeing on the new small airplane project for a long time and provides airline input "on an almost daily basis."

Udvar-Hazy surely knows more about Boeing's internal thinking than other outsiders. And that makes his comments about the location of final-assembly plants for this next plane worrisome for Washington.

Udvar-Hazy expressed doubt that either of Boeing's existing assembly plants, in Everett and Renton, has enough room for a new high-volume facility.

And while he made clear Boeing's engineering core is nontransferable, he talked about the need to reduce the costs of production work as China and others become more competitive long-term.

"The brains trust of Boeing Commercial is in the state of Washington," he said. "But is that where they can build it for the cheapest cost? You know the answer."

Some aviation analysts have expressed doubts that technology will have sufficiently advanced by 2019 to give Boeing a new airplane that's enough of an improvement over current jets.

But Udvar-Hazy imperiously dismissed the doubters.

He pointed out that over nearly 40 years, he and his management team have bought more than 2,000 airplanes from Boeing and Airbus.

"We'd like to see Boeing come to a final decision as soon as possible," he said.

"The analysts aren't the guys who buy the airplane," Udvar-Hazy added, smiling broadly.

"I'm the guy who has to buy the airplane and live with these decisions."