CHICAGO -- Boeing Co. said it will move ahead with a new engine for its 737, matching a competing Airbus plane and giving its best-selling jet the fuel efficiency that airlines crave.
Airlines have been struggling with sharply higher fuel costs, so every improvement in fuel efficiency helps their bottom lines.
"Our customers have told us that they want efficiency, and they want it soon, and they want it with certainty, and that's what this airplane will do," said Jim Albaugh, the Boeing executive vice president who runs its commercial airplane division.
Boeing makes more 737s than any other plane, with more than 2,100 on order. It competes head-to-head with the Airbus A320, which will have a new, more fuel-efficient engine available starting in 2015. Boeing said its 737 with the new engine will be available in 2017.
Boeing said five airlines have committed to buy 496 of the planes. Airbus has booked more than 1,000 orders for its new-engine version of the A320.
Boeing is calling the 737 with the new engine the "MAX," as in maximum. It says the plane will be as much as 12 percent more fuel-efficient than its current 737, and 4 percent more efficient per seat than the Airbus A320neo.
Albaugh said most of the fuel improvements come from the new engine. The original 737 first flew in 1967. Its design has been tweaked since then, but Albaugh said Boeing would make minimal changes to it besides the new engine.
"We're going to make this the simplest re-engine possible," he said.
The new engine is the Leap-1B made by CFM International, a joint venture of General Electric and Safran of France. CFM makes the current 737 engine as well.
Several changes make the new engine more efficient than the old ones. It has a larger fan — the spinning part that passengers can see in the front of the engine. Also, more of the air that enters the front of the engine bypasses the engine core, which makes it more efficient, said Magdy Attia, an associate professor in aerospace engineering at Embry Riddle Aeronautical University. Other improvements include materials that can withstand more heat, and a smaller gap between the fan tips and the shell that encloses the engine, he said.
Boeing's decision has been expected since last month, when American Airlines said it would buy 100 of the new-engine 737s, if Boeing builds them. The airline, a unit of Fort-Worth, Texas-based AMR Corp., said it intends to order at least 460 new jets, including 200 from Boeing and 260 from Airbus. The deal ended Boeing's exclusive grip on the fleet of the country's third-largest airline.
Boeing, based in Chicago, is a massive company that typically plans years in advance for airplanes it will build for decades. As recently as May it said it was leaning toward building an all-new replacement for the 737 rather than putting a new engine on it. A growing number of orders for a competing plane made by Airbus — capped by American's willingness to place a big order — forced Boeing's hand.
Also, there's much less design work and government approval needed for a new engine versus a new plane.
American has said it does not expect to get the new-engine 737 until 2018, a year after Boeing expects to begin deliveries. Chances are "very, very high" that some other airline will get one of the new 737s before American, Albaugh said. Boeing has not identified any of the airlines that plan to buy the plane.
Besides competing with Airbus, Boeing is hoping to earn more with the new engine. The list price for an Airbus A320 is $85 million, plus another $6.2 million to get one with the new engine. Albaugh wouldn't talk about pricing, but he said he believes customers will pay more for a plane that is more fuel-efficient.
The 737 is assembled in Renton, Wash., the A320 in Toulouse, France. Both planes are already in such high demand that their makers are boosting production to 42 per month — Boeing in 2014, Airbus by early next year.
Boeing shares rose $1.43, or 2.2 percent, to close at $66.03.