AIRPLANE PRODUCTION TO SOAR; RATES MAY JUMP, TOO

Boeing plans to make more 737s; Airbus developing new plane

By Molly McMillin The Wichita Eagle 12:01 a.m.Oct. 16, 2013

Production wars are coming.

Airbus and Boeing have been boosting aircraft production, and Boeing has asked its supply chain to consider even higher rates for its 737, 767 and 787 airliners than announced, said Scott Hamilton, an industry analyst with Leeham.

“If some industry observers are concerned about the prospect of overproduction now, the current state of affairs may be only the tip of the iceberg,” Hamilton wrote in a newsletter.

Besides Boeing and Airbus, Bombardier, Embraer, Mitsubishi and Russia’s Irkut all have new airplanes going into production.

China’s COMAC has plans for a new C919, although those plans are less certain, Hamilton said.

The implications for the supply chain are obvious, he said. Many suppliers make parts for Airbus, Boeing, Bombardier and Embraer, and much of the work is on emerging programs.

Boeing has said it would boost production of its 737 single-aisle airliners from 38 a month to a record 42 per month next year. It’s increasing 787 Dreamliner production to 10 per month. And Boeing CEO Jim McNerney has hinted on calls with analysts that the company is exploring raising rates again.

At the same time, Boeing is working to revamp its popular 737 NG to the 737 MAX. And Airbus is developing the A320 neo.

Eventually, suppliers will need capital to expand and hire more people to keep up, Hamilton said.

That’s good news and bad news.

“The rewards are enormous, but the risk could be enormous as well,” he said, if there is a geopolitical event, a terrorist attack or another economic downturn.

That assessment may be a little alarmist, one supplier said.

Spirit AeroSystems, which builds parts of all Boeing airliners, tells its suppliers well in advance when there will be a production rate increase, said Jason Cox, Cox Machine’s chief technical officer.

That gives suppliers plenty of time to prepare.

“It’s not something that all of a sudden drops on you,” Cox said.

Most of the parts built at Cox Machine are for Boeing airplanes. Spirit AeroSystems is a major customer.

To keep up with rising production rates, Cox Machine expanded its factory space by 30,000 square feet. And it’s increased its workforce by about 50 percent from the low end of the downturn, Jason Cox said.

During the downturn, Cox Machine employed 130. It now employs about 200.
If there are additional increases, “it should be in plenty of time for us to react,” Jason Cox said. “If there’s growth, it will be in specific areas in our shop. We will expand those areas if we need to.”

Spirit AeroSystems’ focus is on exploring higher, sustainable rates in cooperation with its customers, such as Boeing, said Spirit spokesman Ken Evans. “We do that almost on a daily basis.”

“We always work hand in hand with our customers and with our customers’ work statement,” Evans said.

http://www.utsandiego.com/news/2013/oct/16/tp-airplane-production-to-soar-rates-may-jump-too/