Lessors see demand for Boeing 757 jet replacement

Steven Udvar-Hazy, chief executive officer of Air Lease Corp and widely seen as one of the industry's most influential figures, told a conference there would be demand for a new jet that seats 200 to 250 people in the next eight to 12 years.

That timeline leaves room for Boeing to focus on upgrading its smaller 737, which provides much of the Chicago-based company's cash, while also giving engine makers time to develop improvements aimed at significant further fuel savings.

But it could represent a shift of emphasis for Boeing, which has recently been telling investors that it favors incremental improvements to existing models rather than major new products.

The last 757 was delivered a decade ago but it remains popular with U.S. airlines due to its range and performance, while its larger contemporary, the 767, is being replaced by the 787 Dreamliner.

"In the Boeing family, there might be a gap between the largest 737 and the smallest 787 as the 767 fades away," Udvar-Hazy said at a conference organized by the International Society of Transport Aircraft Trading (ISTAT).

Until recently, it faced little challenge but Airbus has begun encroaching on the small but potentially lucrative segment with the largest version of its A320 family.

Boeing told this week's ISTAT gathering that it was talking to customers about an aircraft slightly larger than a 757 with 20 percent more range, but did not say whether it favored a narrowbody or, considered more likely, a small twin-aisle jet.

It has also previously said it will not build a direct successor to the single-aisle 737 MAX until 2030, but has not ruled out a small twin-aisle plane that some in the industry say could also seed technology for the next generation of smaller planes.

Jeff Knittel, president of CIT Transportation and International Finance , said Boeing's best bet would be to offer a family of aircraft rather than just one model if it did anything to fill the gap between small and big jets.

Lessors meanwhile saw overall stability in the aircraft market despite recent concerns about lower oil prices and a possible hike in US interest rates. But they urged manufacturers to watch execution and ensure smooth ramp-ups in production.

(Reporting by Tim Hepher; Editing by Lisa Shumaker and Edwina Gibbs)

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