May 17 (Bloomberg) -- Boeing Co. said it will boost production on its 737 jet to 34 a month and is studying further increases to meet customer demand for the world’s most widely flown aircraft.
Output now runs at 31.5 of the twin-engine planes a month, the Chicago-based company said today in a statement. Suppliers are prepared for the increase, Boeing said. The 737 is valued at about $69 million at average list prices.
Investors and analysts watch the production rate because sales of the narrow-body jet generate the revenue to fund aircraft under development such as the 787 Dreamliner. Chief Executive Officer James McNerney said last month on a conference call that a decision would come this quarter.
“It’s a comforting feeling and a move in the right direction,” said Howard Rubel, a Jefferies & Co. analyst in New York who has a “buy” rating on the shares. “Boeing is being very orderly with its rate increases, and this is within the market dynamics.”
McNerney said last month that the number of requests from airlines to defer plane deliveries is decreasing as travel demand grows. The International Air Transport Association also said today that global traffic was reviving, with economy travel “back to pre-recession levels” in March.
“Even through the global economic downturn, our diverse 737 backlog has remained very strong,” Jim Albaugh, chief executive officer of the commercial airplanes division, said in the statement. “Increasing the 737 production rate is the right thing to do to meet the growth and fleet-replacement needs of our customers.”
Some analysts including Rubel had held off on including Boeing’s production increase in their economic models for the company until an announcement was made. Boeing said it has more than 2,000 unfilled orders for the 737.
“Boeing is not trying to jam planes into the market,” said Rubel, the Jefferies analyst. “It’s an encouraging sign.”
Boeing slid 14 cents to $69.68 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have climbed 29 percent this year, compared with a 2 percent gain for the Standard & Poor’s 500 Index.
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