Boeing Squeezes in MAX Line to Protect Profits From 737

Boeing Co. (BA) will add a third production line to its single-aisle aircraft factory to make the new 737 MAX without risking output for the current version of its best-selling jet.

Squeezing the line into the plant in Renton, Washington, will “isolate” MAX assembly ahead of its 2017 debut while meeting Boeing’s goal of building 42 of its single-aisle 737s a month by 2014, said Beverly Wyse, the 737 program chief.

The 737 is the world’s most widely flown jetliner, raising the stakes for a smooth start to the MAX variant with upgraded engines. With the 737 family comprising almost two-thirds of all unfilled orders, Boeing’s challenge is to keep making the existing model and avoid delays on the new plane like those that snagged the 787 Dreamliner and 747-8 jumbo jet, Wyse said.

“The production system is at least as important in this equation as the design of the product to ensure that we can deliver on time and as efficiently as we do today,” Wyse said last month in a presentation to reporters in Renton.

Boeing committed to the MAX last year to counter Airbus SAS’s A320neo, which also features upgraded engines. After considering whether to go with composite construction like the 787, Chicago-based Boeing opted for traditional aluminum, citing lower costs and less development time.

The MAX will have an 8 percent fuel-burn advantage over the A320neo because of a lighter design, new engines, winglets and tail improvements, according to Boeing. The company is on schedule to complete detailed configuration of the plane by mid-2013 and design in 2014, Wyse said.

List Prices

Boeing lists the MAX at an average price of $91.5 million, compared with $84.4 million for the 737-800, the most-ordered variant of the current 737 lineup. Airlines typically buy at a discount. MAX orders have reached 451, a tally Boeing expects to climb to 1,000 by year’s end as it confirms commitments.

The MAX will be the latest version of a 737 family whose first version entered service in 1968 and which was dubbed Boeing’s “bread and butter” by Nicole Piasecki, the company’s business-development chief. The 2,605 unfilled orders for 737s through May accounted for 66 percent of Boeing’s backlog.

The current 737 will stay in production with the MAX for a transition period of about two years, Wyse said. Beyond that, Boeing may make only a couple of the older models a month for conversions into P-8 military surveillance jets, she said.

Once MAX production is running smoothly, Boeing will integrate the building of that plane into the main two assembly lines, Wyse said.

Third Line

The third line then will be kept for future expansion to meet demand in a market for single-aisle planes that Boeing predicts will grow to 23,240 deliveries in the next 20 years.

“As we continue to go up in rate, which we would expect to, we would have the capacity at the site to do that,” Wyse said. Boeing would need additional investment to raise the third line’s capacity to the rate of its existing two lines, which will each pump out 21 planes a month by 2014, Wyse said.

Putting in a third production line in a space now occupied by two will require moving assembly work and tools to different parts of the Renton factory, said Eric Lindblad, vice president of 737 manufacturing operations.

“It’s like your house, you accumulate stuff,” Lindblad said. “We can use this space more efficiently than we are right now.”

Boeing’s two newest wide-body planes, the 787 and 747-8, both missed original delivery targets by more than two years. Those planes are assembled north of Seattle in suburban Everett.

Wyse said she is “passionately engaged” to make the introduction of the MAX as smooth as the latest 737 production increase to 35 planes per month at the beginning of this year from 31.5, which went “almost flawlessly,” she said.

“The company is taking incredibly seriously the issues that we’ve had on some of our recent development programs,” Wyse said.

To contact the reporter on this story: Thomas Black in Dallas at tblack@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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