Suppliers say Boeing plans to accelerate 737 MAX production

RENTON — In the next two years, the Boeing Co. plans to go from making about one 737 MAX a month to more than 50 a month.

No company has ever turned up production of a new jetliner that quickly. And Boeing has a lot riding on successfully pulling off the feat. Company leaders are counting on the jump in 737 production to bolster Boeing’s bottom line over the next few years as profits drop on its 777 program.

So far, introducing the MAX has been smooth, and Boeing expects to hand over the first 737 MAX to launch customer Norwegian in May. The airplane maker says it has put time and money into ensuring plans stay on track.

Still, it is early in the program, caution analysts.

Introducing a new jetliner while cranking up production rate is like a daredevil “walking between the wings of an airplane at fairly high altitude and high speed,” said Richard Aboulafia, an aerospace analyst and vice president of the Teal Group in Washington, D.C.

The last time Boeing revamped its 737 models, supply chain problems forced it to temporarily shut down production in the fall of 1997 and cost the company about $1 billion.

The first big jump in production rate is coming in June, when Boeing’s Renton plant will go from making about 1.5 737 MAXes a month to 10.5, according to several suppliers.

At the same time, Boeing plans to increase overall 737 production — including MAX and Next Gen versions — from 42 a month now to 47. The increase in output means work for Boeing employees in Renton and Everett — where stow bins and other interior items are assembled — as well as for suppliers around Snohomish County. All 737 airplanes are assembled in Renton.

Boeing declined to comment on specific production plans, typically a closely guarded secret by airplane makers. However, speaking to several suppliers, The Daily Herald pieced together the company’s tentative production schedule for the 737 program. None of the suppliers is approved to publicly discuss the information and could face retribution for doing so. They agreed to speak only if they are not named.

Based on tentative schedules Boeing has given to suppliers interviewed by The Herald, MAX output is scheduled to increase every few months over the next few years. At the same time, the company plans to wind down Next Gen production.

Production of all 737 versions is slated to increase to 52.5 airplanes a month in January 2018 and to 57 a month around April 2019, the suppliers said.

Those increases are driven by Boeing’s plan to crank out MAX airplanes and make fewer of the current Next Gen models.

Boeing plans to step up MAX output to 17 airplanes a month later this year and to 24 a month around April 2018. Production is slated to pick up that summer to 31.5 a month and then to 42 a month around the end of 2018. The final increase to 52.5 a month is slated for around March 2019, the suppliers said.

So far, Boeing has made a handful of the 737 MAX 8, the first of the upgraded versions. Four of the aircraft have been used for flight tests. In March, the U.S. Federal Aviation Administration certified the MAX 8 for commercial service, and the first MAX 9 — a stretch of the MAX 8 — rolled out of Boeing’s Renton plant.

The test aircraft already are either back in the Renton plant or will return for tweaks and improvements. The work is a standard part of the test phase during development. It includes improvements to the airplanes’ CFM Leap 1b engines.

In addition to new engines, the MAX airplanes also include new avionics and modified winglets, among other changes over current production versions, a group dubbed 737 Next Generation models.

The company relies heavily on the popular single-aisle airplanes for revenue. The equity investment firm RBC estimates that the 737 program made up about 35 percent of operating profit for Boeing Commercial Aircraft in 2015.

The twin-aisle 777 brought in about as much profit that year, according to RBC. For more than a decade, the 777 program has been a spigot of cash for Boeing. Now, that is going away as Boeing winds down 777 production and starts making its successor, the 777X in Everett.

Company leaders are counting on 737 production to make up much of the drop in 777 profits.

The pace in the Renton plant is picking up, though. And if all goes to Boeing’s plans, it will accelerate at dizzying speeds over the next couple of years.

Some suppliers already are delivering parts at higher rates.

Production delays plagued the 787 and the 747-8 programs. Boeing learned painful and costly lessons from its production problems in 1997. Those lessons have been applied to current 737 production plans, company spokesman Adam Tischler said.

The MAX versions were designed to have as much similarity as possible with the NG models. That limits the number of new suppliers added to the program. The vast majority of MAX suppliers already make 737 parts.

Even so, there are potential supply-chain bottlenecks, said Aboulafia, the analyst.

In recent years, Boeing has squeezed cost out of its supply chain. That has some suppliers “starved for cash,” which could make it harder to keep up with the increasing 737 production pace, he said.

Boeing says it has stress-tested its supply chain and is working with suppliers to limit any delays.

Of course, “the ramp up is only as good as the weakest link” in the supply chain, said Scott Hamilton, who runs the aerospace consulting firm Leeham Co. on Bainbridge Island.

Even suppliers already on the 737 program face risks, he said. “You have to incorporate changes into production and do it at a record rate.”

There is little margin for error, said Tom Brosius, vice president at Orion Industries. The supplier provides parts for all Boeing aircraft programs from its plants in Auburn and Mukilteo.

Brosius declined to comment on future 737 production rates.

“The 737 is a very unforgiving production line,” he said. “Those planes come out of the plant so fast that you can’t have any delays or any quality problems. You’ve got to bring your A game on the 737 program.”

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com. Twitter: @dcatchpole.