September 8, 2014 / 6:34 PM / in 3 years

Boeing feels strong pressure to increase 737 jet output

A Boeing 737 jetliner is pictured during a tour of the Boeing 737 assembly plant in Renton, Washington February 4, 2014. REUTERS/David Ryder

NEW YORK (Reuters) - Ray Conner, chief executive of Boeing Co’s (BA.N) commercial airplanes business, said on Monday the planemaker is being pressured to raise the production rate of its 737 jetliner, another signal the company is about to announce rate increases beyond current targets.

“There’s incredible pressure to go higher,” Conner said at a news conference in New York to announce the $11 billion sale of 737 MAX planes to Irish low-cost carrier Ryanair Holdings Plc (RYA.I), starting in 2019.

“We still see tremendous demand across the board, way beyond 47 a month,” Conner said, referring to Boeing’s target to produce 47 737s a month, starting in 2017.

Boeing currently produces 42 737s a month at its factory in Renton, Washington, using fuselage sections produced by Spirit Aerosystems Holdings Inc (SPR.N) in Wichita, Kansas.

Conner said there is capacity at Spirit to go beyond 47 a month.

The 737 competes with the Airbus Group SA (AIR.PA) A320 family of single-aisle airplanes.

In August, Boeing Chief Financial Officer Greg Smith signaled that Boeing was close to deciding whether to push 737 production to 52 a month.

Increasing the production rate is a benefit to Boeing and to carriers since it allows the planemaker to offer airlines the chance to buy planes sooner, rather than putting their orders at the end of its record order book.

In contrast to the 737, Conner said Boeing will not raise production targets for the widebody 787 beyond current levels, which call for 12 a month in 2016, rising to 14 a month by the end of the decade.

“We just want to stabilize around the 10 right now and then get ourselves to that 14,” he said. “Let’s see how things play.”

Boeing has had difficulty with 787 production this year, with unfinished work building up along the assembly line, prompting workers to finish jets outside the factory.

Widebody production also is less flexible than it is narrowbody jets such as the 737 because of the wider range of seating available and the need to coordinate seat suppliers’ production with the assembly line, Conner said.

“You have to really watch that overall capacity of the seat suppliers,” he said. “Everybody wants to do something new in the widebodies with respect to business class and first class.”

Boeing’s 787 faces competition from Airbus’ A330neo, a updated version of its popular A330 aircraft fitted with new, fuel efficient engines. Although not as advanced as the carbon-composite 787, the A330neo costs less and attracted 121 orders at its launch during the Farnborough Airshow in July.

Editing by Jeffrey Benkoe, Matthew Lewis and Andre Grenon

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