Boeing to raise monthly production of 737 jets to 52 in 2018

Thu Oct 2, 2014 12:16pm EDT
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By Alwyn Scott

(Reuters) - Boeing Co (BA.N: Quote) on Thursday announced plans to raise output of 737 jetliners beyond its already blistering production pace, saying global demand for new aircraft justifies it.

The move to build a record 52 737s a month in 2018, from 42 currently, while widely expected, shows Boeing's confidence that its factory and its network of suppliers can step up to the fastest-ever rate for Boeing's single-aisle jet.

The increase will push production of 737 aircraft to 624 a year in 2018, almost matching the 648 jetliners the company delivered last year across all four of its main models.

While many suppliers will be able to meet the higher rate, they fear the increase won't last more than a couple of years, not long enough to justify the costs of increasing their capacity, said Ken Herbert, an analyst at Canaccord Genuity who recently surveyed about 45 companies that supply Boeing.

"It is not ideal from a supplier standpoint because of the capital investment required and the negative financial implications of then taking rates down," he said. "This significantly increases the risk, in the eyes of the suppliers."

But the largest suppliers and Boeing are being far more careful about over-straining suppliers than in prior business cycles, "so this provides some level of assurance," RBC Capital Markets analyst Robert Stallard said in a note.

The announcement comes just days after executives from Boeing and Airbus Group NV (AIR.PA: Quote) clashed over jet production strategy at an aviation gathering in Istanbul.

The European planemaker questioned the viability of its rival's plans to raise output, while Boeing insisted it will only build enough jets its buyers and suppliers can handle.   Continued...

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young