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BOEING PHOTO  /  AP
This is an undated photo provided by Boeing of the Boeing 737-400 aircraft.
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updated 2/10/2011 3:43:48 PM ET 2011-02-10T20:43:48

Boeing is sending its strongest signals yet that it plans to build a new plane to replace its 737.

Boeing Chairman and CEO James McNerney told analysts on Thursday, "We're going to do a new airplane." He then seemed to backtrack a little, saying, "We're not done evaluating this whole situation yet, but our current bias ... is to move to a newer airplane, an all-new airplane, at the end of the decade, beginning of the next decade. It's our judgment that our customers will wait for us."

After McNerney spoke, the company tweeted that it expects to have more clarity by the middle of this year on its plans for the 737.

Boeing builds more 737s than any other model. It competes with the A320 made by Airbus, which recently said it will make a version with new engines that it hopes to bring to market in 2016.

Airlines have been watching closely to see whether Boeing would upgrade its 737 with new engines like Airbus' A320, or build an all-new plane. Either one would be more fuel-efficient, but designing and building an all-new plane will take longer. McNerney said he thinks the technology for more efficient engines and the plane itself, as well as customer demand, will come together around 2020.

Southwest Airlines Co. currently flies only the 737, and has bought more of them than any other airline. On Jan. 20, CEO Gary Kelly was asked whether Boeing's plans for the 737 will cause Southwest to look at other new planes.

"If they told us that we're not going to see a more fuel-efficient 737 for another 20 years, that probably would cause us to do something," he said. Southwest will acquire smaller Boeing 717s once its purchase of AirTran Holdings Inc. closes.

Also Thursday, Boeing submitted its latest bid to make a new tanker for the U.S. Air Force. Paris-based European Aeronautic Defence & Space Co. is expected to submit a bid as well. The winner will get a contract for tens of billions of dollars to build 179 aerial refueling planes.

McNerney called Boeing's bid "aggressive but responsible."

He told the analysts in his audience on Thursday, "The people in this room would be glad if we won at the bid level that we've put in, and would be happy if we lost at a lower level."

The Pentagon is expected to pick a winning bidder for the long-delayed tankers later this year.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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