Some analysts are warning Boeing may be facing a production gap between the current 737 model and the arrival of the 737 Max, a problem it also faces with the 777X series.
Seattle-area aerospace analyst Scott Hamilton on Wednesday predicted a production gap of more than 100 aircraft.
What this means is that Boeing may not have enough firm orders for the current model, the 737 NG, to keep production lines running at full throttle until the new 737 Max fully replaces the older model.
Boeing may not be able to ramp up to 52 planes per month by 2018, which is the first full year of Max production, Hamilton said.
This is a problem that Boeing and Airbus both have been encountering, especially as they’ve been re-engining current models rather than building entirely new ones to increase efficiency. The re-engined planes use the same production line, which can create problems in the transition.
Teal Group Analyst Richard Aboulafia echoes Hamilton’s caution, saying that the issue isn’t so much a shortfall as Boeing’s aggressive plans to increase production.
The 737 lines in Renton are now running at 42 monthly, but are scheduled to increase to 47 monthly, and then ramp up to 52 by 2018.
“I never expected them to bridge the gap (between the NG and the Max), but they did,” Aboulafia said on Wednesday. “But they kept raising the maximum target rate for ramp. That’s hubris.”
This is not a new worry and in a brief last year, entitled “Rethinking the 737 rate hike,” Aboulafia warned that factors as variable as cheap fuel, high interest rates, or a global slowdown, could make Boeing’s production boost plans untenable.
As concerns about a global economic slowdown grow and fuel prices continue to remain low, Aboulafia said Wednesday that he hoped Boeing would have the good sense to start rethinking the 737 ramp-up.
"I hope sanity would prevail,” he said.
In his piece, Hamilton said Boeing leadership is feeling the pressure of all those issues.
“The 737 gap increasingly is worrying 'Longacres,' where Boeing Commercial Airplanes is headquartered in Renton,” he wrote.
But Boeing disagrees with the two analysts, and issued a statement Wednesday.
“We are on track to complete the bridge from the Next Generation 737 to the 737 Max well ahead of the schedule required to ensure a smooth transition between the two airplanes toward the end of the decade,” the statement said.
Whatever the case, there’s no hammer over Puget Sound workers. If Boeing does decide to pare back its planned 737 rate increases, employment at the Renton site will stay as it is.
There’s no sense that Boeing will have to scale back current production. The unfilled orders for the 737 remain unprecedented, a total of 5,730 aircraft, of which 2,899, or 51 percent, are for the older model.
(Steve Wilhelm - Puget Sound Business Journal)