Aerospace giant Boeing is planning to stabilize production of 737 airliners during the second half of this year at a rate of 38 per month after the manufacturer slowed its production line in the wake of the midair cabin blowout on a 737 Max 9.
Chief Financial Officer Brian West said lower aircraft delivery volumes, customer considerations paid to airlines because of the Max 9 grounding and Boeing’s need to hold additional inventory from its supply chain will all contribute to the company’s cash usage in the first quarter. West spoke at the Cowen Aerospace & Defense Conference.
Boeing had previously said it was "cycling" at a rate of 38 narrow body 737s a month, but West said the company is having to periodically pause the line as it focuses on production quality after the incident.
"We have to acknowledge that we have lots of things to focus on in terms of keeping the airplanes in position longer so that we can incorporate all the learnings that we’re finding, and that’s just fine," West said.
Boeing is planning to stabilize 737 production in the second half of this year after the line has been paused to address quality issues in recent months. (David Ryder/Bloomberg via Getty Images / Getty Images)
He added that the Federal Aviation Administration (FAA) will have discretion over approving future production rate increases above the threshold of 38 737s per month.
The FAA launched an audit of Boeing’s 737 production line after the Jan. 5 incident in which a door plug panel detached during a flight from Oregon’s Portland International Airport to Ontario, California, at about 16,000 feet, causing the cabin to depressurize and prompting Alaska Airlines flight to return to Portland.
The FAA recently prohibited Boeing from increasing its 737 Max production rate without FAA permission.
Boeing will have to secure FAA approval to expand production rates for the 737 Max. (Reuters/Jason Redmond / Reuters Photos)
Boeing’s suppliers are planning to increase production of components used in making 737s to the levels necessary to make 42 planes a month. West indicated the company has the cash necessary to handle the spike in extra inventory to keep its supply chain on solid ground.
West said that if Boeing’s suppliers keep ramping up production as planned, "they will be in a much more stable position to be able to not have some of the issues that have been hampering us historically."
The company’s stock was down about 2.3% as of Tuesday's closing bell amid a broader market sell-off following a hotter-than-expected inflation report.