The highly touted Boeing 7E7 Dreamliner took one step closer to reality today with the announcement that after months of intense proposal reviews, a final decision regarding engine manufacturing was reached. And the winners are... drum roll, please, General Electric (NYSE: GE ) and Rolls-Royce. The world's largest and second-largest commercial aircraft engine makers, respectively, were selected to outfit the plane with engines that will "enable the 7E7 to fly higher, faster, farther, cleaner, quieter, and more efficiently than comparable airplanes," said 7E7 Senior Vice President Mike Bair in a press release.
The Dreamliner, which received its moniker from an online poll conducted by Time Warner's (NYSE: TWX ) America Online, will be Boeing's first foray into the jet market in more than a decade. The new model is slated for delivery in 2008 and is expected to counter French rival Airbus, set to deliver its A380 in 2006.
With a capacity of 200 to 250 passengers, the 7E7 will be slightly smaller than most intercontinental airliners currently in operation, but much more efficient. According to specs, fuel consumption will be cut by 20%, providing a range of more than 9,000 miles. Boeing anticipates the Dreamliner will open up new routes, such as Singapore to Denver, without a layover. Passengers may not mind the long flight either; higher cabin pressure, increased humidity, and high-speed Internet connectivity are just a sampling of the proposed features designed to enhance cabin comfort.
Through an unprecedented design feature, the 7E7 can be fitted with either engine interchangeably. Both General Electric's engine, called the GE Next Generation (GENX), and the Rolls-Royce Trent 1000 will be capable of delivering between 55,000 and 70,000 pounds of thrust with dramatically lower emissions.
Boeing projects a demand for 3,500 Dreamliners within the next 20 years, many in Asian markets. With a price tag of $120 million per plane, it doesn't take a calculator to figure that the engine contracts represent immense revenue potential for both Rolls-Royce and General Electric. Based on a more conservative figure of 3,000 units, initial sales could top $60 billion. The estimate jumps to $100 billion when spares and maintenance are included.
Other companies, however, will have their hands in the pie. Up-front development costs are enormous, and Rolls-Royce is already in talks with revenue-sharing partners such as Honeywell (NYSE: HON ) and Goodrich (NYSE: GR ) to assume 30% to 40% of the cost.
Frequent fliers may applaud the release of a new aircraft, but investors should tread carefully. Until sluggish passenger volume improves, demand for new planes will be restrained, meaning that $100 billion figure attached to the Dreamliner may only be, well, a dream.
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