MAX was the only decision left after customers told Boeing in no-uncertain terms they would not wait for Yellowstone 1
Because Boeing was dithering!
If they'd permission to offer a 737RS from 2008 onwards, there would have been no worries about neo.
Airbus knew that Boeing could develop a plane with similar overall performance and economics to the A320 family because it would have been of similar dimensions using the same engines and systems. The only area Boeing could stake a clear technical advantage was aerodynamics thanks to a wing three decades newer. But as we have seen with the A330neo and 787, engines are the significant majority of where an airframe can show a marked improvement and both frames would have had GTF and LEAP-X s a new wing would have helped, but it would not have "invalidated" all the other areas the A320 had parity with Yellowstone 1. And Boeing would have to charge significantly more for it because they would have to recoup the costs of completing development, testing and certifying it, putting it into production and then ramping that production as quickly as possible to scores per month.
Ah, now need to correct a common misconceptions here.
The 737RS would not have been using the same systems as an A320. Diagnostics and maintenance would have been significantly
improved - with resulting improvements in both dispatch rates and in check intervals.
The A320 systems were extremely good for their time, and have received updates - but there are still some fundamental things they cannot work around. Fuel system drainage limitations being one I know of for definite.
Yes, the 737RS would have had better aerodynamics, it would also have had improved field performance and a wider fuselage leading to better turnaround times.
There is probably 3-5% CASM on the table from improved systems/aerodynamics etc.
When you are faced with selling maybe 10,000 aircraft over the production run - on a $10B USD program, that is $1m USD extra per airframe you need to charge for R&D cost (relative to competition). The lifetime cost of a single-aisle aircraft is probably somewhere around $200-300m USD - so every 1% lower CASM is relative to the competition gives $2-3m USD in value to the airline. At 3% CASM, that'd be $6-9m USD. Boeing could take at least
$1m of that back in higher pricing.
Boeing knew about the GTF. Heck, Pratt's VP in charge of the thing was saying in 2009 that he thought they could still shoe-horn it onto the 737NG.
2009 was too late.
If Boeing knew about it in 2005 and did nothing, then the shareholders should be pulling the BoD into a courtroom.