Memories of program mistakes are weighing on Boeing as it considers the timing of whether to re-engine or replace the 737 Next Generation family.

Two weeks ago, when Boeing CEO James McNerney told analysts that the company’s “current bias is not to re-engine [but] to move to an all-new airplane,” his comments were taken by some to mean that a new airplane is on the way. In fact, he was reiterating Boeing’s view that it cannot find a compelling business case to re-engine. But it has not made a final decision. The complexities of replacing the Boeing 737NG family, which is selling so well that Boeing is boosting production rates, is not easy. The single-aisle family accounts for 65-70% of Boeing’s airplane sales year after year.

When she recalls McNerney’s comments, Nicole Piasecki, the commercial airplanes vice president for strategy and business development, jumps on a phrase he used in a different context: “aggressive but responsible.” The need to be “aggressive” in a highly competitive market is obvious. Being “responsible” relates to “understanding where air travel is going”—the rise of low-cost carriers in burgeoning markets, for instance—before building a new airplane, she says.

Airbus has opted for an intermediary step in the “what’s next” race with its A320 family New Engine Order (NEO) re-engining plan. The A320 will come first, followed by the A321 and A319. VIP corporate customers want the A318 included. “The market will decide,” says John Leahy, the company’s chief operating officer for customers.

Leahy expects “several hundred” A320NEO orders by the Paris air show in June and predicts that Boeing will pursue a clean-sheet aircraft design and then abandon it—like the Sonic Cruiser—to opt for re-engining because of the “low level of maturity” for “radically new powerplants” needed for a replacement.

Piasecki understands that customers may be confused by this back and forth. “We know that [they] need to know, need to have clarity around where we are going,” she says. “We want to see how the NEO is going to do in the marketplace. We want to see how the engine companies and airlines respond. We’ll know a lot more in six or 10 months.”

Piasecki has her own take on maturity of engine designs. For the NEO, Airbus is offering a choice of Pratt & Whitney’s PW1100G geared turbofan (GTF) or CFM International’s Leap-X, the follow-on to the CFM56-7B that powers 737NGs. Both must prove themselves, she says, especially the PW1100G, the maintenance of which she regards as an unknown. “We love the GTF technology,” she says. “We hope to be working very closely with [Pratt] to understand the technology. But nobody seems to be asking such a fundamental question, particularly as it relates to the NEO.”

Piasecki also says Airbus faces greater challenges and more complexity than it is acknowledging in the integration of the new powerplants on the A320 in terms of weight, new nacelles and struts. “You’ve got complexity in the production system, complexity in the design and, inevitably, the maintenance cost and reliability are big, big questions.”

Boeing is mindful that its shift to the NG from the second generation of 737s, called “classics,” was too abrupt for many customers. Its mistake was not to have a separate set of assembly mechanics to preserve the old line plus start up the new one. “By planning that way, we had to artificially shut [the classic line] down,” she says. “At the time, we had several customers that really, really wanted more airplanes and we couldn’t do that.”

It is not clear how Boeing plans to extend its NG line while developing a new airplane, since it has given no indication that it expects a marked increase in shop floor employment. But it has been nearly two decades since the NG was introduced and productivity is far higher now.

“Whether or not we bring a new airplane into the market, the NG will live on for a long time,” she says. “We can’t afford to [abruptly shut the NG line] with the number of NGs flying. The length of time it will take to transition into any new production will take years.”

The 737 replacement equation is paired with the potential that the Boeing 777 will need to be updated to meet the A350-1000 challenge. So far, Airbus is focused more on the smaller members of that new widebody program, giving Boeing breathing room. Boeing’s resources, especially its engineering staff, were strained by simultaneous development programs for the Boeing 787 and the Boeing 747-8, both of which fell years behind schedule.

Boeing’s 777 vice president and general manager, Larry Loftis, says there are “probably not the resources” now to undertake 737 and 777 replacement programs simultaneously.

McNerney and other Boeing executives acknowledge the “painful” process of bringing the 787 to market. But Piasecki says the pain of running three years late will translate into stronger design and production for the 737 replacement.

Boeing expects to benefit from a competitive reaction to the 787’s wide use of composites in the airframe. “The aluminum industry really stepped up when they saw us go to composites,” she says.

Piasecki also issues an emphatic “absolutely” to the question of whether 787 testing is underscoring Boeing’s commitment to a more “electric” airplane. But it is not clear that composite structures scale down well to smaller fuselages, nor that every avionics advance will fit a new narrowbody. “You can’t take the flight deck of a 787 and put it in a 737-size airplane,” she says.

“We try to take our technology and apply it in an [appropriate] way. We know that [customers] won’t pay for technology. They’ll pay for something that is going to get them better economics, safety, simplicity, commonality,” Piasecki says.

Such advances might include more use of head-up displays (already options on 737NGs) and other devices that help pilots navigate bad weather and congested air spaces. But other 777/787 features, such as electronic flight bags, are more questionable because airlines are unlikely to pay for them. That bottom-line view prompted Boeing not to invest in fly-by-wire technology in the 737NG.

Another matter is that the empowered and extended 787 supplier base bruised Boeing’s schedule. Company officials do not assign blame publicly, but Boeing had to buy out the interests of Alenia Aeronautica and Vought Aircraft to resuscitate fuselage completion, and production was halted when Alenia struggled with horizontal stabilizers.

Asked if Boeing would have been more cautious if it had known then what it knows now, Piasecki responds, “It goes both ways. More cautious and more confident.” She is not explicit, but it is not hard to read between the lines: Boeing now knows that it did not fully understand the costs of building a composite airplane using an extended supply chain that had key design authority and which, in some instances, was not fully prepared to fulfill its role.

“I would say one thing for sure,” she says. “We believe that our strategic partners need to have very aligned objectives with us.”

Lessons from the “challenges” posed by the 787 will not be forgotten on the 737, she vows. “Part of our learning on the ’87 was that we need key strategic capabilities inside the walls of Boeing.” Those words will be welcomed by engineers and production workers in Boeing’s Seattle area factories, who say the company would have had fewer problems if they had played a larger role. But there is a caveat. “When I say the walls of Boeing, I mean a global wall. I’m not saying Puget Sound,” she says.

“We’re a much better [original equipment manufacturer] for our entire supply chain if we have the lead and the capability [in production], if we, for example, know what a large composite structure costs to build, which we now do. Those are capabilities that allow us to understand what can realistically be done, from a production systems point of view, [in] production and technology.”

With Michael A. Taverna in Paris.