Boeing is in a fiercely competitive race to stay more or less even with Airbus in supplying the world’s growing fleet of single-aisle airliners, though this game of chicken could lead to unsustainable rates of production.

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Airbus is pushing to churn out single-aisle jets at an unprecedented pace — 60 airplanes every month — and Boeing seems determined to match it.

Many analysts and suppliers, concerned at the potential for a downturn ahead in the booming aviation market, doubt that either manufacturer will actually achieve such a rate four or five years from now.

Yet Boeing cannot afford to ease off the gas pedal for fear of losing orders. The jet maker is in a fiercely competitive race to stay more or less even with Airbus in supplying the world’s growing fleet of single-aisle airliners.

It’s a game of chicken that might lead to unsustainable rates of production.

But as long as Boeing continues to accelerate, its 737 final assembly plant in Renton — which today employs some 12,000 people — should see hundreds more jobs added in the next few years.

Head to head with Airbus

Both manufacturers today roll out 42 single-aisle jets per month, and Boeing had previously announced plans to boost its 737 rate to 52 per month in 2018.

Airbus last week leapt past that figure with a plan to increase production of A320 single-aisle aircraft to 60 jets per month in mid-2019. Its chief financial officer said the rate could potentially go as high as 63 jets per month in 2020.

Commercial Airplanes chief Ray Conner in May said that Boeing can match Airbus if it chooses.

“We can go to 60 a month,” Conner told an investor conference. “We’ve got to just make sure that we’ve got the kind of demand necessary to take it up there.”

Single-aisle-jet production climbs relentlessly

Both Airbus and Boeing plan steep increases in production of their A320 and 737 jet families. *Total delivery estimates based on when in the year the rate change is expected and allowing for vacations. Sources: Airbus, Boeing (Mark Nowlin / The Seattle Times)
Both Airbus and Boeing plan steep increases in production of their A320 and 737 jet families. *Total delivery estimates based on when in the year the rate change is expected and allowing for vacations. Sources: Airbus, Boeing (Mark Nowlin / The Seattle Times)

Reporting Boeing earnings late last month, Chief Executive Dennis Muilenburg said “strong market demand” exists to go beyond 52 per month.

Boeing is studying whether its supply chain can take the strain of such a production pace. Once that’s complete, expect Boeing to match Airbus.

At the British-American Business Council (BABC) aerospace conference in Seattle this week, Ken Herbert, an analyst with investment bank Canaccord Genuity, said he believes Boeing has to keep pace with Airbus or it will lose sales.

Boeing is already under intense competitive pressure, having slipped from a 50:50 split of the single-aisle-jet market with Airbus to now a 47 percent share of the total backlog of orders.

Airbus’ rate hike means it’s now able to promise more finished airplanes in 2019, and sales chief John Leahy can offer new delivery dates to airlines that need planes in that time frame.

If Boeing wants to compete for those sales, it needs more deliveries then, too.

Boeing’s ability to match Airbus by raising rates is complicated by its concurrent introduction of a new model, the 737 MAX, set to enter service late in 2017.

Boeing has already introduced new automation and airframe changes on the current model to smooth the switch-over to the MAX.

The first MAX will roll off the assembly line next month and Boeing will spend all of 2016 getting MAX production stabilized before taking the next rate step-up to 47 jets per month in 2017.

A year later, Renton’s workforce should swell further as the rate increases to 52 jets per month.

The theoretical maximum capacity in Renton is 21 jets per month on each of three final assembly lines — 63.

A bubble?

Though the pace of growth in both aviation traffic and airplane manufacturing has not abated for a decade, can it really just keep on going?

In 2005, Airbus and Boeing together delivered a total of 503 single-aisle jets, not counting the 13 717s that Boeing built in California that year. Rates have all but doubled since then; by the end of this year, the total will approach 1,000 jets delivered.

With both aircraft makers now eyeing 60 jets per month, that’s more than 1,400 new single-aisle jets built per year.

Yet today, there are signs of macroeconomic weakness worldwide.

Growth in China, which has been one of the biggest drivers of aircraft sales, has dropped off, depressing prices of commodities from metals to corn.

Air cargo has been in a prolonged slump.

And the plunging price of oil has led airlines to push off retirement of older jets.

At the BABC conference, an executive with one local supplier — who asked not to be named to preserve his relationship with Boeing — said his company can ramp up to supply parts for 60 single-aisle jets per month if Boeing gives the go-ahead.

He said that would require moving from two work shifts to three and hiring more employees.

And because it would also involve spending some capital, his company would seek contractual reassurance from Boeing that the rate would be maintained for some years, he said.

But while he said he expects Boeing to announce soon that it will hike Renton production to 60 per month toward the end of the decade, he believes reality will catch up before then.

“I don’t think it’s going to happen,” he said. “Market forces are going to slow things down.”

An executive with a bigger supplier, who formerly worked at Boeing, said in a phone interview that he, too, thinks output is unlikely to reach 60 planes a month.

“It’s still a cyclical business,” the former Boeing executive said. “Once you see interest rates go up, which I think is inevitable, then you’ll see pressure on the leasing side, and that could burst the bubble.”

According to Airbus Americas President Barry Eccleston, the European jet maker has already factored in that possibility.

At the BABC conference, Eccleston said that in making the decision to go to a rate of 60, Airbus has considered its ability to manage any possible downturn.

He said that during the 2008 global financial crisis, Airbus’ large backlog of orders allowed it to quickly fill any production slots that opened up if a customer deferred a delivery.

As a result, jet deliveries continued unfazed by that economic crisis. Today, the Airbus backlog is even bigger than it was then.

“Having 10 or 11 years of backlog really gave us the confidence that yes, we can support this buildup” to 60 single-aisle jets per month, Eccleston said. “And if we do have to build it down, we think we can manage that, too.”