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Boeing 7E7 jet moves towards launch

Boeing Co. is expected to hold a news conference on Tuesday which may signal the start of marketing its 7E7 jetliner, a major step toward a formal launch of its first new aircraft in a decade.
/ Source: Reuters

Boeing Co. is expected to hold a news conference on Tuesday which may signal the start of marketing its 7E7 jetliner, a major step toward a formal launch of its first new aircraft in a decade.

Boeing will build the new mid-sized jet in the Seattle suburb of Everett after mulling several other sites, The Seattle Post-Intelligencer said in its Tuesday edition.

It may also announce a launch order for the 7E7 at the Seattle news conference, possibly from All Nippon Airways Co Ltd., the newspaper said, citing unnamed sources. All Nippon Airways was not available for immediate comment in Tokyo.

By giving its Seattle-based jetliner unit permission to book orders for the 7E7, Boeing's board of directors -- who met in Chicago on Sunday and Monday, led by new Chief Executive Harry Stonecipher -- would raise the odds that the 200- to 250-seat jet would be officially launched, with passenger service beginning in 2008.

The 7E7, designed to help cash-strapped airlines save money on fuel and operating costs, could reinvigorate Boeing's sagging jetliner business, but is expected to cost about $10 billion to develop, making it a significant gamble for the Chicago-based manufacturer.

If the aircraft delivers the efficiency and comfort improvements Boeing has promised, it could help Boeing claw back sales from bitter rival Airbus SAS for years to come, experts say.

Big gamble
"This is a capital-intensive business and this aircraft is a gamble, but it's a smart gamble," said John Murray, an analyst who covers Boeing for Delaware Investments, which owns Boeing shares. "If they didn't do it, Airbus would be standing alone in this business in 40 years."

Without the 7E7, analysts say, Boeing would be relegated to also-ran status in the two-horse race with Airbus, which has become the world's most prolific jetliner maker and built a backlog of 1,467 jet orders compared to Boeing's 1,112.

"Boeing must act to fill a wide gap in its product line or risk ceding much greater market share to Airbus than it already has," analysts at Wachovia Securities wrote in a recent note to investors.

The 7E7 would replace the slow-selling 757, which Boeing is discontinuing, and the 767 line, which has slowed to just one aircraft per month to sustain production until a controversial order for 100 U.S. Air Force fuel tankers is finalized.

Boeing already builds its wide-body 767 and 777 models along with its 747 jumbo jet at its massive Everett plant.

The company had considered about 20 other sites for a 7E7 assembly plant, eliciting a wide range of tax breaks and infrastructure offers, including a $3.2 billion aerospace industry package from Washington state.

Shrewd deals with manufacturing partners, notably in Japan, could bring in billions in investment cash to lighten Boeing's load and spur 7E7 orders, yielding revenues to help pay for development and ultimately turn a profit.

As a result the company will avoid a massive all-or-nothing bet like those it made when it built the 707, which launched the airline jet age in 1958, or the 400-seat 747 jumbo jet, which slashed intercontinental air fares in the 1970s.

The new jet will provide only a modest boost to Boeing's battered commercial jet work force, which has shrunk to 55,328 from 93,000 since the Sept. 11 attacks hammered the airline industry and slashed jet orders.

Boeing has said it will need only 800 to 1,200 workers to assemble the 7E7, thanks largely to extensive outsourcing, though Boeing's Wichita plant will need as many as 4,000 new workers to build parts and additional work will go to sites in Winnipeg, Tulsa, Frederickson, Washington, and Australia.

Other key suppliers include three Japanese manufacturers -- Kawasaki Heavy Industries Ltd, Fuji Heavy Industries Ltd and Mitsubishi Heavy Industries Ltd, plus Dallas-based Vought Aircraft Industries and Italy's Alenia Aeronautica.

Several members of Boeing's massive supplier network, which includes engine makers, were worried that Boeing would not build the 7E7, leaving some of them on the brink of collapse.

"We've let them know that if they didn't do this airplane, we'd have to take a hard look at whether we could stay in this business," said a source at one aerospace parts maker.