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Boeing Weighing Contingencies for Further 737 Rate Hikes

AIN AIR TRANSPORT PERSPECTIVE » JULY 29, 2013

by  GREGORY POLEK

Now building 737s at a rate of 38 per month, Boeing plans to speed production to a monthly rate of 42 by next year’s second quarter. (Photo: Boeing)

July 29, 2013, 1:15 PM

Boeing president and CEO Jim McNerney said he sees “a clear path” to raising 737 production rates above 42 airplanes a month as 737 Max 8s begin to supplant current-generation airplanes on its assembly lines in Renton, Washington, and its share of the market for its re-engined narrowbodies reaches equilibrium with that for Airbus’s A320neo.

Speaking during his company’s second-quarter earnings call last Wednesday, McNerney wouldn’t concede any need to price the Max more aggressively to gain a 50-percent market share, despite the fact that the A320neo has outsold the Boeing product by some 800 aircraft.

“They introduced the Neo about a year-and-a-half before we did,” said McNerney. “I think if you look at relative orders along a similar point in time you’d see that we’re at or slightly ahead of where they were as we penetrate our customer base…I fully anticipate about a fifty-fifty [percent distribution] when it all sorts out, when we’re at equal points in customer penetration [and] when we’re both fully ramped up to rates that we targeted.”

Boeing plans to reach a monthly rate of 42 by next year’s second quarter. Airbus reached that plateau during last year’s fourth quarter, but it has announced no plans for further increases.

Notwithstanding suggestions that Boeing and Airbus have already created a market “bubble” with their aggressive rate hikes, McNerney cited potential “pressure” for further increases assuming the world economy holds form and other “variants” remain in place. He also said he sees no particular internal barriers at Boeing to meeting that demand. “Rate breaks are never easy, but we see a clear path to execution there and we’re assessing the scenarios right now of how and where we would do that,” added McNerney.

Whatever it decides, Boeing won’t risk disrupting the introduction of the Max, schedules for which now call for entry into service in the third quarter of 2017, as much as six months earlier than originally planned. Last week Boeing announced that it completed firm configuration of the 737 Max 8, marking the start of the detailed design phase. Boeing expects to start final assembly of the 737 Max 8 by the end of 2015.