The move has been expected ever since American said last month that it would order 100 of the new airplanes, with options for 60 more, pending final airplane configuration and approval of the program by the Boeing board of directors.

Boeing said Tuesday that its board had approved the program and also that including the American order, it has "order commitments for 496 airplanes from five airlines and a strong business case." The other four airlines were not named.

"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," said Boeing Commercial Airplanes CEO Jim Albaugh, in a prepared statement. "This, coupled with industry leading reliability and maintainability, is what customers have told us they want."

The new 737 family will be powered by CFM International LEAP-1B engines optimized for the 737. Deliveries are scheduled to begin in 2017. Boeing said the aircraft has a 7% operating cost advantage over the A320NEO and a fuel burn that is 4% less, as well as a fuel burn 16% less than the existing A320.

In a note issued Tuesday, RBC Capital Markets analyst Robert Stallard said the announcement, while expected, is a positive.

"With formal launch, Boeing can now get on and sell the 737 NEF," Stallard wrote. "Airlines are reluctant to switch from one manufacturer to another, and so we think most of Boeing's existing 737 fliers will be taking a serious look at the NEF for either fleet replacement or growth.

"We think new orders on par with what Airbus has booked for the A320 NEO over the last nine months are possible, and we see this as a potential positive catalyst for Boeing and its aerospace suppliers," he wrote.

In early morning trading, Boeing shares were up 42 cents to $65.02, despite the down market.

Airlines have ordered more than 9,000 Boeing 737s, making it the most widely used airplane in history.