Valerie Insinna and Tim Hefer
(Reuters) – Boeing (NYSE:) has shelved its supply chain plans to ramp up production of its popular 737 jetliner, according to a presentation seen by Reuters, as it faces regulatory restrictions on its products and increased scrutiny after mid-air emissions. MAX 9 in January.
The US Federal Aviation Administration in late January barred Boeing from increasing production of the 737 MAX following the January 5 crash and could prove a setback for the future as the US planemaker struggles to boost production levels to compete with its European rival Airbus.
Boeing was not available for comment.
According to Boeing’s latest master 737 delivery schedule seen by Reuters, the supply chain was previously ordered to increase production rates from the equivalent of 38 aircraft per month to 42 in February this year, which has now been delayed until June.
Boeing will delay raising tariffs from 47 aircraft per month from August 2024 to January 2025.
The transition to production of 52,737 aircraft per month, planned for February 2025, is now estimated at June 2025, a deadline that will allow Boeing to maintain its goal of producing 50 aircraft per month in 2025-2026, which is critical to achieving 10 billion dollars in free cash flow over the same period.
Boeing won’t reach its pre-pandemic goal of 57 planes per month until February 2026, down from its previous August 2025 estimate.
The supplier master schedule sets out the expectations for when suppliers should reach a given level of production. While this typically occurs before Boeing switches to the new tariff, it is an important signal of confidence for the supply chain, which relies on it to plan future investments in labor and equipment.
It also comes as Boeing is in talks to buy out its former subsidiary Spirit AeroSystems (NYSE:), the Wall Street Journal reported Friday, as the Wichita-based company also faces significant production delays and hits to its balance sheet.
Boeing executives said the supply chain will continue to expand in line with previous plans released in December, but acknowledged there could be changes in the future due to the ongoing FAA audit of Boeing’s production system.
Boeing said its 737 production line in Renton, Washington, is nominally running at a rate of 38 planes per month. However, actual productivity is lower because the company has to periodically shut down the line to resolve quality problems, Chief Financial Officer Brian West said last month.
West said at the time that maintaining the master schedule from December would force Boeing to carry extra inventory and contribute to its cash burn in the first quarter of 2024, but it would also allow suppliers to remain stable and reduce the likelihood of manufacturing defects that had previously hampered growth momentum. plans.
Some suppliers privately questioned whether Boeing would maintain the same master schedule if the production freeze lasted more than a couple of months, while others expressed concern that small and medium-sized businesses could find themselves in financial difficulty after making expensive capital investments in anticipation of increased production. .
The FAA has not indicated what criteria Boeing will have to meet to gain approval for future production increases. Earlier this week, FAA Administrator Mike Whitaker told Boeing CEO Dave Calhoun that the company would have 90 days to develop a plan to address the quality problems.
Boeing expects to increase actual production to 38 737s per month in the second half of the year, “but that will be dictated by regulators,” West said last month.
Airbus produces about 50 narrowbody jets a month, Reuters previously reported, and its CEO said in February that the company was on track to meet a key goal of producing 75 narrowbody jets a month in 2026.