NEW YORK (Reuters) - A new supplier of economy-class seats for Boeing Co’s (BA.N) top-selling 737 jetliners has signed its first two airline customers, allowing it to begin production, a person familiar with the matter said on Monday.
The agreements with Huntington Beach, California-based LIFT by EnCore, which are due to be announced as early as this week, are the first in which Boeing buys the seats from the supplier, known as “seller-furnished equipment,” essentially guaranteeing they will arrive on time.
With other seat makers, which include B/E Aerospace BEAV.O and Zodiac Aerospace (ZODC.PA), airlines are required to buy the seats and have them delivered to aircraft factories, a process that has led to problems for the plane makers when seat deliveries are late.
European plane maker Airbus (AIR.PA) made a similar move in 2015 when it chose German seat maker Recaro to supply seats for the A320 family. Recaro and LIFT are privately held.
LIFT’s initial orders will equip at least 50 of Boeing’s 737 MAX aircraft with seats designed for the Boeing 737 Sky Interior, with deliveries beginning in 2017, said the source, who could not be named because the negotiations are private. The airline customer names could not be learned.
The deals for seats on Boeing’s top-selling 737 show initial market acceptance and would allow LIFT to begin certification and production, the source said.
Boeing’s choice of LIFT as its sole seller-furnished seat supplier prompted drops in B/E Aerospace and Zodiac shares when the deal became public in April.
Boeing currently has orders for 4,350 of its 737 jetliners.
Boeing declined to comment on LIFT’s orders, but said it is seeking new seat suppliers to solve capacity problems that have hampered its assembly lines in the past.
“To bring more capacity into the market ... we are looking for and helping to develop more seat companies,” Boeing spokeswoman Jessica Kowal said.
Boeing shares were up 0.37 percent at $134.00 in afternoon trading on the New York Stock Exchange.
Boeing also has been working with Chinese seat maker Ali-Jiatai, which delivered its first set of 737 seats to a Chinese airline over the summer, Kowal said.
LIFT by EnCore, founded in 2011, has not delivered seats before. Founders Tom McFarland and Jim Downey sold their previous company, C&D Aerospace, to Zodiac in 2005. EnCore has produced galleys and other aircraft fixtures for customers such as Southwest Airlines.
Reporting by Alwyn Scott; Editing by Leslie Adler and Will Dunham