Boeing has launched a new family of its best-selling 737 airplane that will be powered by a fuel-efficient engine, citing strong demand from airlines.

The new line will be powered by CFM International's LEAP-1B engines optimised for the 737, the company said.

With that engine the planes will have the lowest operating costs in the single-aisle segment with a seven per cent advantage over the competition, Boeing said.

Boeing's board of directors has approved the new line based on order commitments for 496 airplanes from five airlines and 'a strong business case,' the company said in a statement.

'The re-engined 737 will allow Boeing to continue to deliver the most fuel-efficient, most capable airplane with the lowest operating costs in the single-aisle market,' Jim Albaugh, president and chief executive of Boeing Commercial Airplanes, said.

'Customers tell us they want to improve profitability and fuel efficiency while reducing their environmental footprint,' said Albaugh.

'This solution meets all three of those needs.'

Albaugh said that Boeing was working with its customers to finalise the agreements. Deliveries of the re-engined aircraft are scheduled to begin in 2017.

Boeing last month announced it would build a re-engined 737 when American Airlines split a record order for 460 aircraft between Boeing and Europe's Airbus, breaking the US firm's monopoly on its fleet.

American Airlines parent AMR Corporation said on July 20 it would buy 200 Boeing 737s and 260 Airbus A320 jets.

Both the US aerospace and defence giant and Airbus are selling more fuel-efficient versions of their popular single-aisle passenger jets as part of the deal, valued at $38 billion at list prices.-Reuters