Boeing ups 737 production to 42/mo from 1H2014

Boeing announced today that it will increase the production rate of the 737 to 42 a month from the first half of 2014. This is on top of consecutive rate increases from 31.5 to 35 to 38 a month, which haven’t even been implemented yet. The 38/mo is due to be effective in 2013 and 35/mo next year.

Here is the press release.

This compares to an announced rate of 42/mo for the Airbus A320, although 737 Program Vice President and General Manager Beverly Wyse said during the Boeing pre-Paris Air Show briefing that because Airbus shuts down production in August for the month, the 42/mo really equals 40/mo. (With the announced rate increase, Boeing lifted the news embargo on Wyse’s presentation; embargoes on other briefings remain until June 19 Paris time.)

Wyse acknowledge that the supply chain, some of which also serves the A320 family, closely studied the return on investment and duration of this unprecedented rate level. A small number of suppliers need to expand facilities to meet the rates. Boeing wants to sustain any such rate increase for at least two years, Wyse said.

Key to providing comfort to the suppliers, Wyse said, was Boeing’s ability to manage the backlog during the most recent recession. Despite calls by some lessors and some aerospace analysts for Airbus and Boeing to cut rates by as much as 30%, Airbus reduced rates at a lower percentage while Boeing maintained its rate of 31.5 per month. The company achieved this by shifting delivery positions, delaying planes for customers wanting to delay them and trading these positions for customers who wanted earlier positions.

The Renton (WA) plant, where the 737s are assembled, has two commercial 737 lines each capable of 21 per month. One line currently is at the maximum. There is a third line, for the 737-based P-8A Poseidon, in another building producing one per month, which could be dramatically increased to accommodate additional commercial demand.

Boeing had a backlog of 2,101 737s at May 31, a 5.5 year backlog at the rate of 31.5/mo. Boeing officials have said publicly that they expect to produce the 737 to at least 2026.

5 Comments on “Boeing ups 737 production to 42/mo from 1H2014

  1. “Boeing had a backlog of 2,101 737s at May 31, a 5.5 year backlog at the rate of 31.5/mo. Boeing officials have said publicly that they expect to produce the 737 to at least 2026.”

    Then where is the incentive to spend the capital necessary for a 737 NEO?

    • What about the military line?
      In that context the statement is certainly true.

      In all other respects Boeing is trying to rush an
      evaporating resource through the doors.

      Cheaper and available on shorter notice may
      well be the only redeeming quality remaining
      with the 737 family.

  2. Backlog isn’t worth too much. Especially lessors with unannounced customers and airlines ordering far more aircraft than they actually possess are easy prey when recession strikes (which – like an aerodynamic stall – always comes as surprise).

    I would really like to learn what the true reasons are behind this move (also from Airbus).
    > making room for NEO?
    > reaction to CSeries?
    > reducing unit cost and hence make way for more aggressive pricing?
    > freeing production slots for “valued customers” in the near future?

  3. One possibility is that by reducing the backlog more rapidly it clears the way for a clean sheet design for Boeing. The 737s could be sold at a discounted price due to volume but still at a reasonable profit for the company. I would think that the 2026 comment suggests that the line would be open for top-off orders of existing fleets and would gradually decrease as the NSA ramps up.

    I would anticipate that all the airlines with 320s on order will want to convert to NEOs, especially the closer they get to 2016. Certainly, no one will want a 320 after the NEO has arrived since it is going to require reinforcement/weight gain even without the new engines.

    Three interesting scenarios:

    1. Boeing reengines, no new NSA for 10 years… Boeing happy, Airbus happy, airlines happy, Bombardier happy, COMAC and other competitors have a chance.
    2. Boeing no rengine, starts NSA entry with in 2019…Airbus happy gets early advantage with NEOs but the bottom drops out in 2020-2025 period. Airbus responds with program of own or decides to wait it out until 2025-2030 range for new tech. Airbus ok, but nervous since the 350 has to draw most resources until 2017-18 entry and rampup…and it has to be good. Boeing stressed, Airbus stressed, rest of competition marginalized except maybe Bombardier at low end for 2016-2020?
    3. Boeing rengine AND NSA. Boeing stressed, Airbus stressed. Everyone stressed. Competition marginalized?

    They should make this into a strategy videogame like Civilization…

  4. I would think that the 2026 comment carries a lot of hope.

    Buying a 737 in 2018 for first delivery in 2022, operating it until 2042 and expecting some rest value. With a pack of superior competititors ramping up from 2015.

    I think nobody within Boeing really believes this. Listen to Southwest and Delta, look at the Paris Airshow.

    If they do, there’s a big problem..

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