Signs of Rebound Spark Production Rate Hikes at Boeing, Airbus

 - March 26, 2010, 11:03 AM

Boeing and Airbus each heeded signs of a recovering airline market this month with announcements of new plans for production-rate increases. In fact, Boeing committed to a new time frame for 777 and 747 rate hikes only 10 days after Boeing Commercial Airplanes president Jim Albaugh told analysts at the JPMorgan Aviation, Transportation and Defense Conference on March 9 that the company wouldn’t render a decision on the 777 until next month. Albaugh’s comments came on the same day Airbus announced it will increase the monthly production rate for its single-aisle A320 family by two airplanes starting in December.

Boeing previously planned to start increasing 777 production from five airplanes per month to seven in early 2012; now it plans to begin by the middle of next year. The 747 program’s planned production rate increase from 1.5 to two airplanes per month will move from mid-2013 to mid-2012.

“We anticipate hav[ing] a couple of orders in the near term for 777,” said Albaugh. “We have people coming back into the market to buy this airplane.” Last year Boeing decided to cut 777 production starting this June from seven to five airplanes a month. “Obviously we don’t want to go up in rate and then have to come down, and we’re guarding against that,” Albaugh stressed. Suppliers need as much as a year’s notice of a Boeing rate increase before they can accelerate their own production fast enough to accommodate it.

Albaugh also said 787 Dreamliner production rates would increase from two to 2.5 per month in August and 10 per month by 2013. He added that the company will consider raising production at the 737 line in Renton, Wash., where rates currently stand at 31.5 a month. “We will make a decision some time this summer about increasing that rate,” Albaugh said. “We are sold out in 2011. We’re overcommitted in 2012…There were some sales we could have made last year that we didn’t, because we thought if we waited we can sell airplanes for more. I think that was the prudent thing to do.”

Meanwhile, Airbus said “continuing demand for its eco-efficient aircraft and a record backlog in excess of some 2,300 A320-family aircraft” drove the decision to raise its single-aisle production rate.

“Leading economic indices and business confidence indicators are showing an upward trend again,” said Tom Williams, Airbus executive vice president for programs. “We see this reflected in the continuing solid demand for our eco-efficient products and our robust backlog. Thanks to our order-book management we have been able to keep production stable during the year of the downturn, but now it is definitely time to think ahead.”