Boeing has received clearance from the FAA to ramp up MAX production to 47 aircraft per month. The new rate will be implemented anytime soon, President and Group CEO Kelly Ortberg said on Wednesday at the Bernstein Annual Strategic Decision Conference.
“We went to rate 42 last fall, and we continued at that rate. All of our KPIs were positive and stayed green during the period. We just recently had our capstone review with the FAA and passed the review to go to rate 47. So we are now in the process of running the line at rate 47”, said Ortberg.
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The rate increase is in line with expectations and was expected before the summer, but the FAA was conditional on Boeing consistently meeting all of its key performance indicators (KPIs). Ortberg said that Boeing has “pulsed” the production system ahead of the capstone review to see if there were any weaknesses that needed attention.
He repeated previous comments that getting from rate 47 to 52 will be more of a challenge, as Boeing will have depleted most of its inventory and will have to rely on the supply chain to keep up with the higher rates. Ortberg sees no particular commodity that could be a showstopper for another rate increase. He is happy with the quality coming from Spirit AeroSystems, which is now fully owned by Boeing. “The Wichita performance is not a big concern for us.”
Going up further to rate 52 will see the introduction of the fourth assembly line, the North Line in Everett. Going back to pre-2019 record levels of rate 57 or even 63 is not something that Ortberg is pursuing, although Boeing is looking at advanced planning. He prefers stability, but it is the market that will dictate this.
On the 787, Ortberg said that there are still some certification issues, primarily related to Business Class seats. He said there is still a lot of work to do with the regulators to get fully-finished aircraft out of the door. This issue is limiting the rate increase to 10 Dreamliners a month, which will not happen until the seat issues is in check. “We will not do anything to slow down production, but we may not go to the rate 10 as planned, had we not had these challenges.”
China
Ortberg also commented on the recent order from China during the state visit of President Trump. Analysts had expected Boeing to seal contracts for 500+ aircraft, but Trump and later Chinese authorities spoke of “only” 200 aircraft. This doesn’t concern Ortberg: “My primary objective was to reopen that market for narrowbodies. As you know, we hadn’t had an order for nearly a decade. We accomplished that, which is a major, major accomplishment.”
“I think people focus too much on the initial quantity. China need over 500 aircraft a year to support its GDP growth. So there is a great market opportunity for us. The initial commitment for 200 will turn into an order later in the year. Once the government decides on a batch of narrowbody aircraft, they then allocate them to the airlines. Then we go and work with the airlines to get a firm order. I never had a plan to go to China and return with a pack of 500 orders. Having said that, 200 is a huge number of airplanes. There will be more to come.”
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