Boeing this year plans to gradually increase 737 production, but its output will be restricted to “below 38” jets monthly as it works through quality issues raised by two recent safety audits.
Speaking at the Bank of America Global Industrials conference in London on 20 March, Boeing chief financial officer Brian West said the monthly figure is set to rise over the course of 2024, as the company addresses its numerous production problems.
“In the first half [of 2024] the [production] rates will be lower,” West says. “In the second half, they’re going to be higher as we get towards that 38 per month. Beyond 38 per month will be up to the FAA.”
The company has been forced to reduce jet output after an accident early this year brought new scrutiny and criticism from the National Transportation Safety Board and the Federal Aviation Administration (FAA).
Following the 5 January in-flight blow-out of an Alaska Airlines 737 Max 9’s mid-cabin door plug, the FAA launched an audit of Boeing, and as a result, capped the company’s narrowbody output to 38 airframes per month pending quality improvements.
Boeing seems to have failed to reinstall bolts designed to hold the plug in place following their removal for fault rectification work, according to a preliminary accident report.
Some of the quality failures noted in the audits related to so-called “travelled work” – work completed at a different stage in the production process than is typical.
The need for travelled work can arise when some issue, for example parts shortages or the need to fix a quality problem, prevent work from being completed at the normal stage on the production line. In such cases, Boeing sometimes keeps the line running to avoid broader delays, and performs the work later.
Lowering production in order to crack down on this travelled work to improve production quality will also hit the company’s bottom line in 2024, West says.
“As we have decided to hold airplanes in position longer and get after this travelled work broadly, it is going to impact revenue, earnings and cash flows both in the quarter and in the year,” West says.
The production slowdown is designed to pace suppliers “just ahead of final assembly”. That means the suppliers who are behind will need to get caught up, and those who are ahead will be forced to slow down.
”We’re managing that supplier by supplier as we speak,” West says. ”In fact, we understand that when we do this net-net, there will be spots where we are going to build inventory, and we’re doing that because we believe when the time comes and we want to increase our rates, [we] want to do it in a way that is stable.
“So yes, it’s an investment, but we view it as an important investment.”
The FAA’s audit had also uncovered failures in fuselage supplier Spirit AeroSystems’ compliance with manufacturing quality control requirements.
West adds that going forward, the company will “only accept a fully conforming fuselage” from Wichita-based Spirit.
“Which means in the near term, there might be variability of supply,” he adds. “But long term, the predictability that we’re going to get is dramatically better. And non-conformances drop significantly in our factory because it takes those non-conformances and it pushes them upstream where they belong, to get action.”
Earlier this month, Boeing confirmed reports that It was interested in acquiring Spirit, a move some industry experts think could help the airframer finally address troubles at its largest supplier. Spirit was spun out of Boeing in 2005.
West says that discussions are ongoing, but no decision or transaction agreement has been reached.
“I point back to comments that we’ve made in January around how Boeing more than 20 years ago probably got a little too far ahead of itself on the topic of outsourcing,” West says. ”And this is probably the example. We believe, and Spirit believes, that reintegrating these two companies is what’s best for safety and for quality for the aerospace industry. We have conviction on that.
A potential acquisition, he adds, would not be funded by equity. “We would fund it with a mix of cash and debt.”
This story was updated on 21 March to remove references to Boeing’s current 737 production rate, as Boeing has not specified that figure.
