‘Not So Fast.’ A New Boeing Jet Would Take a Long, Long Time.

A Boeing 737 MAX jet, shown in 2023. (GEOFFROY VAN DER HASSELT/AFP via Getty Images)

Key Points

• Boeing is likely prioritizing productivity, improving the outlook for its defense business, and the development of the 777X development over a new jet design, according to Jefferies.
• A next-generation single-aisle jet from Boeing is not expected until after 2035, the bank says.
• Airbus’s A320/321neo family has received over 11,000 orders, significantly more than the 8,600 for Boeing’s 737 MAX.

Investors might want to wait to hear what Boeing has to say before they celebrate Monday’s Wall Street Journal report that the company is starting to work on a new jet to eventually replace the 737 MAX.

“Not so fast,” wrote Jefferies analyst Sheila Kahyaoglu in a Tuesday report. “Although Boeing is likely interested in next-gen technology, it is likely more immediately focused on driving productivity and rate increases, improving the [defense business] outlook, coupled with the ongoing 777X development to help restore the balance sheet.”

In other words, Boeing has a lot to do before tackling the design of a new jet. The Federal Aviation Administration has capped production of the MAX jet at 38 a month, a quality-control measure imposed after a manufacturing issue allowed an emergency-door plug to blow out during a flight of an Alaska Air 737 MAX 9 jet. Ramping up MAX production is key to reporting a profit, something Boeing hasn’t done on a full-year basis since 2018.

What is more, Boeing still has to win government certification for the 737 MAX 7 and 737 MAX 10 versions of the jet. It is also working on certifying the 777X. Kahyaoglu estimates that a next-generation single-aisle jet won’t arrive until after 2035.

When asked about a new jet, Boeing said it was always evaluating the market and was focused on the current recovery plan.

Kahyaoglu’s view echoes recent comments by Boeing CEO Kelly Ortberg, who has said the market opportunity, Boeing’s financial capacity, and new technology all have to align for the company to go ahead with a new jet. He said in May that none of the three factors was ready yet.

Eventually, a new jet will come. Wall Street has speculated about it for years.

Any new single-aisle jet wouldn’t have to replace the MAX. It is likely to be a little larger than a 737 MAX, possibly sized between a 757 and 767 jet, capable of carrying anywhere from 200 to 250 passengers.

“The important thing is that [Boeing is] publicly mulling their options, which is something they haven’t done in many years,” says AeroDynamic Advisory managing director Richard Aboulafia. “Whatever it becomes, it will be a family, probably baselined to be a bit larger than the 737. This will allow the largest family member to equal or even outflank the A321neo.”

The A321neo is a little larger than a MAX. Over time, it has outperformed its Boeing competitor. Airbus has taken more than 11,000 orders for the A320/321neo family of jets, including planes already delivered. The comparable number for the MAX is closer to 8,600.

New planes often mean new engines that drive down operating costs because they burn less fuel. That is potential new business for Rolls-Royce, RTX, GE Aerospace , and Safran , depending on who wins.

An engine competition “looks like a horse race between RISE/Open Rotor and something ducted and geared from Rolls or Pratt,” added Aboulafia. GE Aerospace’s RISE program, developed with CFM joint venture partner Safran, dispenses with the housing that covers rotors on traditional turbofan jet engines, giving it the look of an advanced turboprop. RTX has invested in gearing technology to improve efficiency.

All new designs come with potential benefits and tradeoffs. “The big challenge is deciding whether to offer a choice, and if going with open rotor might leave no room for an alternative engine, due to wing requirements.”

A new plane would be a multiyear, multibillion-dollar commitment. When Boeing finally announces a new program, it will be an exciting moment for the industry and a sign that Boeing feels better about the state of its existing operations.

Kahyaoglu rates Boeing shares at Buy and has a target of $255 for the price, while the stock was at $214.82 on Wednesday morning. The average target among analysts tracked by FactSet is about $259. Overall, 81% of analysts covering the stock rate it at Buy, while the average Buy-rating ratio for stocks in the S&P 500 is about 55%.

Write to Al Root at allen.root@dowjones.com