By Scott Hamilton
Jan. 29, 2020, © Leeham News: Restarting production of the Boeing 737 MAX assembly lines will be slow, methodical and paced to avoid adding to inventory of about 400 airplanes in storage.
This was one of the take-aways from Boeing’s earnings call today. Boeing announced its first loss since 1997. This is when production of the 737 and 747 lines were shut down when rates outpaced the ability of the supply system to keep up.
Greg Smith, EVP, CFO and head of Boeing’s strategy, revealed the production restart in broad terms.
Smith declined to provide a specific timeline for restarting production. CEO David Calhoun previously indicated that Boeing planned to restart production “a couple of months” ahead of recertification of the MAX. Boeing previously indicated it expects certification mid-year. The Federal Aviation Administration called this projection conservative. These statements imply restarting production in April.
Calhoun, on the earnings call today, said financial reporting requirements and customer notices led Boeing to project the mid-summer date. He emphasized that regulators still control the process.
Smith said the assembly positions at the Renton plant, where the 737 is produced, are empty. Restarting production means loading position No. 1 and going from there.
Boeing does not want to add to the inventory of stored airplanes, Smith said. Production plans call for coordinating assembly with deliveries. This suggests a one-for-one basis. However, Smith didn’t explicitly say this.
It’s unclear how this can be achieved if certification trails restarting production. Deliveries can’t take place until the MAX is recertified.
Calhoun said it will take 1 ½ years to clear inventory. This averages about 22 airplanes a month.
The pace is expected to begin slowly and build over time.
Based on these factors, LNA estimates Boeing might deliver 180 MAXes from storage by year-end. This therefore infers Boeing may produce an equal number of MAXes over the same period.