Boeing sees no-frills airlines taking lion's share = = = = Wednesday June 25, 1:37 PM EDT = (Adds quotes, comment on BAE, probe details) By Jason Neely, European Aerospace & Airlines Correspondent LONDON, June 25 (Reuters) - Boeing Co (BA), the world's largest aircraft = maker, expects no-frills carriers to grab the bulk of the airline market = in the future, Chief Executive Phil Condit said on Wednesday. Boeing, planning its first all-new airliner in more than a decade, and ar= ch rival Airbus SAS (EAD) are both working on new planes that will offer = lower costs to operators mired in the airline industry's worst slowdown. "I think we will continue to see a migration of the value passenger into = that segmented product which means that the full-service carrier is going= to have to decide how to deal with lower traffic," Condit told reporters= at a lunch meeting. = Condit said airlines offering full services such as hot meals which now d= ominate the market could slip to 40 percent of the market in terms of rev= enues as no-frills carriers continue to steal a march from them. NEW PLANE ON THE HORIZON He said among Boeing's top priorities now was its planned 200-seat 7E7 Dr= eamliner due in 2008, two years after Airbus plans to introduce its much = larger 555-seat A380. He said the market would decide which approach was right. "The answer is going to play out over a decade or two, not the next six m= onths." After three models that did not make it past the drawing board, Boeing ho= pes to get board approval late this year or in early 2004 to offer the 7E= 7 to potential customers. It is "highly likely" to get the go-ahead, Condit said, reiterating that = development would cost less than the 777 programme launched in 1990. He d= eclined to comment on investment size. The aircraft is expected to replace the ageing Boeing 757 and 767 models = and spawn a stretched version with 250 seats, a size analysts see as a ke= y niche. Condit also said the unprecedented slowdown in the sector was showing sig= ns of easing, but the risk of more shocks, including a return of SARS, re= mained. "We are seeing a pick-up in forward bookings," he said, but noted the ind= ustry had work to do before returning to 2000 levels. Air attacks in the United States in September 2001, a global economic slo= wdown, SARS and war in Iraq have badly hurt travel demand. MERGER, PROBE Asked about the chances of a Boeing takeover of BAE Systems Plc (BA), Bri= tain's largest defence firm and the subject of tie-up talks with Boeing f= or years, Condit said a deal remained "potentially interesting". "If it were a no-brainer, it would be done (already)," Condit said, addin= g the idea was only part of its continuing broad examination of merger an= d acquisition possibilities. "We will continue to look on a global scale, we are looking at a range in= terms of small enterprises up to bigger enterprises," he said. Condit said a U.S. probe into actions by Boeing employees during a 1998 d= efence contract bidding process was not expected to hurt its defence syst= ems business, which is set to top commercial aircraft in revenues this ye= ar for the first time. "We are co-operating completely with that investigation," he said, adding= Boeing had launched an internal probe alongside one being conducted by t= he U.S. Justice Department. The probes focus on whether Boeing employees used documents from rival Lo= ckheed Martin Corp (LMT) in a bid to win a $1.88 billion rocket launcher = contract. "Two (Boeing) people were directly implicated, there's a question right n= ow: Did that go any further?," Condit said. Boeing fired two employees in 1999 in connection with the incident and th= is month took out full-page advertisements in U.S. newspapers to explain = its position. = =A92003 Reuters Limited. = Roger EWROPS