Boeing to Boost 737 Production 33% to Clear 7-Year Backlog
Boeing Co. (BA), the world’s second- biggest builder of commercial airplanes, plans to boost production of its 737 jetliner by 33 percent a month to work off a record order backlog for the most widely flown jet.
The company said in a statement today it will build 42 of the single-aisle planes a month by the first half of 2014. Workers now assemble 31.5 each month at the plant in Renton, Washington, and Boeing last year announced two increases to raise monthly output to 38 in 2013.
The 737 is Chicago-based Boeing’s best seller, with 8,888 planes sold as of last week since it entered service 43 years ago, and is a staple of short-haul airline routes. Jim Albaugh, president of Boeing Commercial Airplanes, has said he may raise production to reduce a seven-year backlog of more than 2,100 737s because he can’t offer customers delivery slots until 2016.
“The earlier than anticipated decision would imply continued robust airline demand for the plane, but also Boeing’s ability to reassure suppliers that this is a realistic, achievable and sustainable rate increase,” Rob Stallard, an analyst with RBC Capital Markets in New York, said in a note to clients today. “We remain positive on Boeing heading into next week’s Paris Air Show.”
Boeing competitor Airbus SAS has said it may have as many as 500 orders for its A320neo by the end of the show next week, since the December decision to offer it. The airplane is a variant of the Toulouse, France-based company’s single-aisle model that will sport new engines as of 2015.
Boeing plans to decide this year whether to follow suit with new engines on the 737 or develop a new plane by 2020. Boeing has said its existing 737-800 with winglets will be cheaper to operate on a per-seat basis than the A320neo.
Boeing has updated the 737 with a new interior, based on the one psychologists and architects developed for the 787 Dreamliner, that includes bigger luggage bins and LED lighting. It also made tweaks to the engine and used smaller parts outside the plane to reduce fuel burn by 2 percent starting this year.
A “second pip” of configuration changes, including maintenance improvements, may be ready around 2015, Beverly Wyse, the 737 program chief, told reporters in a June 3 briefing.
Moving Assembly Line
In the 737 ramp-up, production will jump to 35 a month in early 2012 and 38 a month in the second quarter of 2013, Boeing said. That would more than double the 17 single-aisle jets that machinists were assembling each month at the end of 2002, helped by improvements at the plant including a switch to a moving assembly line, Wyse said.
“We believe that many of the capital investments and production system changes made for 38 airplanes per month will already position us to build 42,” Wyse said in today’s statement. “We are very well situated for this rate increase.”
The company has been in talks with suppliers about the backlog, looking at whether the rates were sustainable “ideally for a minimum of two years” and making sure the increase would support long-term growth and not flood the market with too many jets, she said earlier.
Airbus said May 18 it’s boosting production of the A320 to 42 a month by the end of 2012, from 36 now. The two companies have a duopoly in the market for now, with competitors including Montreal-based Bombardier Inc. set to enter the market. The suppliers shared across the industry are ramping up to manage the increased demand.
“A big factor for our suppliers is how well we managed through the 2008 recession,” Wyse said. “We were able to go through the worst recession since the Great Depression without reducing our production rates” on the 737.
Boeing fell 55 cents to $74.09 at 12:40 p.m. in New York Stock Exchange composite trading. It increased 14 percent this year before today.
Making 42 737s a month would translate to an average of two each workday and almost 500 airplanes a year. That’s more than the 462 aircraft across all its models that Boeing delivered last year. The rate increase isn’t expected to have a material effect on 2011 financial results, Boeing said.
-- Editors: Romaine Bostick, Donna Alvarado
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