Boeing plans to decide by the end of this quarter whether or not to raise production rates for its 737 family, as the company anticipates further strengthening of the market for new narrowbody airliners. During a conference call this week to discuss the company's first quarter earnings, Boeing CEO Jim McNerney expressed more optimism about the direction the market for commercial airliners in general appears headed, following the company's decision earlier this spring to accelerate the timing of production rate increases for both the 777 and 747 programs.
“With clear indications that a global economic recovery is under way, we are also seeing tangible signs of improvement in the commercial airplane market,” said McNerney. “Passenger traffic is increasing, led by activity in emerging markets, and freighter traffic has rebounded strongly from the severely depressed levels of last year. Consequently the financial outlook for the world's airlines has improved noticeably since last quarter.”
McNerney said that while some customers continue to defer or cancel orders, Boeing has seen growing demand from other customers for the resulting delivery slots through both acceleration of planned deliveries and new orders. “The backlog of deferral requests continues to decrease,” said McNerney. “The improving market conditions and the disciplined approach we have taken in managing production rates are paying off.”
BCA now builds some 31 Boeing 737s per month, said McNerney, who noted that the company is now considering “a couple” of options on rate increases. “Obviously the things we have to be sure of are our backlog and demand beyond that-the visibility-and the readiness of our suppliers to support the upgrade…I would just say we're looking at meaningful increases; I really don't want to say though exactly what we're looking at.”
McNerney reiterated his previous projections for a decision on a possible re-engining of the 737 by the end of this year, however, regardless of whether or not the company decides to move ahead with a rate increase this quarter. “As we look back at Boeing's history, we try to make these decisions in a way where the current demand for the current products is supported as we move into derivatives or all new airplanes, and we've got a process in place that we don't think is going to cannibalize the demand we see now.”
