Live video supplied by Boeing showed the smooth take-off of the plane, the fourth version of the original 737, which made its first flight in 1967 and has become one of Boeing's most profitable aircraft.

The 737 MAX features new engines from CFM International a joint venture of General Electric (>> General Electric Company) and Safran SA of France (>> SAFRAN), and other refinements that improve fuel efficiency by 14 percent compared with the current generation 737.

Boeing has sold 3,072 of the planes and is racing to sell more as it battles for market share against rival Airbus's (>> Airbus Group) competing A320neo, which earlier this month was delivered to its first customer, Lufthansa (>> Deutsche Lufthansa AG).

Boeing is expected to deliver its first 737 MAX to customers in 2017. Southwest Airlines Co (>> Southwest Airlines Co) is scheduled to be the first airline to add the 737 MAX to its fleet.

The first flight of the plane, which is filled with test equipment, was expected to last about two and half hours. Tracking web sites showed the aircraft cruising west over the Olympic Peninsula, the western part of Washington State.

Boeing surprised analysts on Wednesday when it said the company would slightly reduce output of current-generation 737s this year to allow the factory to build the 737 MAX. Boeing stock tumbled 8.9 percent that day, its biggest daily decline since October 2001, to close at $116.58 on the New York Stock Exchange.

Many analysts later said Boeing shares are likely to recover because the company's outlook for cash flow remains strong, as does its commitment to share buybacks and dividends.

On Friday, the stock was trading up 1.4 percent at $119.45.

(Reporting by Alwyn Scott; Editing by Grant McCool)

By Alwyn Scott