Boeing has this week announced plans to gradually increase the production of the 737 MAX to 38 aircraft per month.
This of course will be under close monitoring by the FAA who have increased their oversight into the manufacturer.
Following the Alaska Airlines flight AS1282 incident, this will come with difficulty.
The Plans from Boeing…
At the Bank of America Global Industrials Conference this week, Boeing laid their cards on the table regarding the 737 MAX.
Their CFO Brian West said that they plan to increase up to 38 per month in the second half of this year:
“In the first half [of 2024] the [production] rates will be lower”, he said.
“In the second half, they’re going to be higher as we get towards that 38 per month. Beyond 38 per month will be up to the FAA”.
“As we have decided to hold airplanes in position longer and get after this travelled work broadly, it is going to impact revenue, earnings and cash flows both in the quarter and in the year,”
”We’re managing that supplier by supplier as we speak”.
”In fact, we understand that when we do this net-net, there will be spots where we are going to build inventory, and we’re doing that because we believe when the time comes and we want to increase our rates, [we] want to do it in a way that is stable.”
“So yes, it’s an investment, but we view it as an important investment.”
Between A Rock and A Hard Place…
With a significant backlog for Boeing 737 MAX aircraft, the planemaker is doing all it can to meet the requirements of oversight.
Concerns over safety and quality standards remains a big concern at the FAA.
The regulator has given the planemaker 90 days to come up with a comprehensive review into these topics.
This action follows a concerning incident in January 2024, where a panel detached from a Boeing 737 Max 9 aircraft mid-flight, raising serious safety concerns.
“Boeing must commit to real and profound improvements,” Administrator Whitaker said in February following the meeting with Boeing Chief Executive Officer and President Dave Calhoun and his senior safety team.
Once these improvements have been made, then the FAA will satisfy the wishes of the planemaker.
However, in the meantime, the focus needs to be on production improvements and not sales.
It is unclear whether this will mean less sales momentum this year, but all eyes will be on this.
Overall…
In conclusion, all eyes will be on whether Boeing can get to the production rate of 38 737 MAXs per month.
The FAA needs to be dead certain with satisfaction that the American planemaker will not falter again.
All eyes will be on what comes from the comprehensive safety plan and whether this will be approved.
If not, the American planemaker could be in this position longer than they wish.
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