Daily Insight: Monday 8 April 2019: MAX Impact on the Supply Chain

News

Boeing has cut production of its 737MAX from 52 per month to 42 per month while the aircraft is grounded pending regulatory approvals for proposed changes.  Some key suppliers, like Spirit, who supply the fuselage, will continue to deliver 52 per month, and anticipates Boeing increasing its production rate once the aircraft is back in production again.

We have not yet heard from every supplier for the 737, but suspect that many will follow Spirit’s lead and continue to produce at a rate for 52 aircraft, anticipating that Boeing will attempt to catch-up on late deliveries by increasing its production rate temporarily once the aircraft is re-certified.

Analysis

The supply chain has been taxed by the growth in aircraft deliveries over the last few years.  With the industry projected to deliver the same number of airplanes over the next decade as it has in the past 30 years, the need to expand capacity is well understood by the suppliers.  They also understand the dynamics from past experience that Boeing

will likely try to increase production and build as many aircraft as possible once re-certified.