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Monday, March 15, 2004

Boeing May Kill B717

Just as the battle for the large regional jetliner has the potential of heating up, one of the big boys may be throwing in the towel.

Aerospace giant Boeing [BA] recently disclosed in a filing with the U.S. Securities and Exchange Commission that it may end production of the B717 this year. Boeing may take a $400 million pre-tax earnings charge if it stops making the plane.

Originally the MD-95, Boeing continues to assemble the B717 at the former McDonnell Douglas plant in Long Beach, Calif. Since the plane was introduced in 1995, Boeing has sold only 148 units.

As of Dec. 31, 2003, Boeing had 22 planes on back order. The company said one customer had ordered 14 planes. However, a major sales campaign to sell a large number of jets to one customer failed to win an order.

AirTran Airways [AAI], the low-fare carrier with an all B717 fleet, last summer placed an order for 10 addition jets. Boeing has made a sales pitch to the airline members of the Star Alliance, which is planning a collective order for a jet smaller than the B737 or Airbus 320 family. Boeing in the filing noted that it is waiting for action on several pending sales proposals. If the sales pitches are unsuccessful, Boeing anticipates making a decision by summer's end.

The 117-seat B717 last year lost a potential contract with Air Canada, which decided to purchase 45 Embraer 190s (CRAN, Jan. 5).

As Bombardier [BBD] contemplates building a new regional jet family in the 100 to 120-seat range (CRAN, March 8), analysts predicted a new plane could out perform the aging B717 and the A318. At the same time the analysts felt the two major players, Boeing and Airbus, would fiercely fight to hold onto this market niche.

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