Supply Constraints Force Boeing to Cut 737 Output Target

 - July 27, 2022, 1:28 PM
Boeing's 737 delivery output reached 43 airplanes in June but the company expects a "light" July as it tries to stabilize production rates at 31 per month. (Photo: Gregory Polek)

Supply chain constraints have prompted Boeing to downgrade its target for 737 deliveries from some 500 to a range in the “low-400s” for this year despite a relatively strong month of June when it shipped 43 of the narrowbody airplanes. The projection comes on the same day as Airbus too reported that supply chain kinks have forced it to delay a planned increase to 65 per month from mid-2023 to early 2024. Still, the European company expects to deliver about 700 A320neos this year, albeit 20 fewer than it had projected last quarter.

For Boeing, any increase in its comparatively modest goal of rate-31 per month for this year will hinge directly on the availability of engine castings for the CFM Leap-1Bs that power the 737 Max, said Boeing CEO, David Calhoun. Although Airbus faces similar constraints, it benefits from the fact that its A320neo family offers two engine choices—CFM Leaps and Pratt & Whitney PW1000s.

Although Boeing CFO Brian West also cited shortages of raw materials and semiconductors as factors, Calhoun placed most of the blame squarely on the second-tier suppliers of castings for the Leap-1Bs. West said that Boeing has delivered 189 of the narrowbodies this year and that he expected a “light” month of July. Meanwhile, some 200 Maxes remain in inventory, and West noted that the delivery rate for those airplanes ranges from between eight and 12 per month.

“It is a very important issue to be resolved, and it is not yet resolved—that structural casting part of the puzzle,” said Calhoun during the company’s second-quarter earnings call on Wednesday. “So that capacity is limited and it’s not just about money, it’s qualification. It’s one of the toughest components within the supply chain to ultimately get to a qualified status…So I do think we all have to moderate our rates to make sure we are ahead of that.… Unfortunately, our choice to not move up to [rate] 38 as soon as we had originally predicted is honestly based on that constraint.”

Calhoun, however, also stressed that the suppliers will need to invest in capacity to keep up with what he called continued robust demand. “Somehow, some way, that constraint in my view in the next three to five years needs to get resolved,” he explained.

Separately, Calhoun said the return to delivery of 787s, shipments of which have halted for more than a year due to findings of various production faults, appears close to imminent. Of course, he deferred any definitive timing projection because that depends on the FAA’s schedules. “We’re approaching closure on all that,” he stressed.

West explained that Boeing and the FAA have completed the needed flight checks and that customer on-site presence has increased as Boeing prepares to start delivering the 120 aircraft that remain in inventory. He added that Boeing continues to produce the airplane “at a very low rate” but that plans still call for a return to a rate of five per month after the FAA clears the model for delivery.