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Exclusive-Boeing plans new 737 MAX output jump in late-2022, sources say

[May 22, 2021] By Eric M. Johnson and Tim Hepher

SEATTLE/PARIS (Reuters) -Planemaker Boeing Co has drawn up preliminary plans for a fresh sprint in 737 MAX output to as many as 42 jets a month in fall 2022, industry sources said, in a bid to extend its recovery from overlapping safety and COVID-19 crises.

The plans would lift output beyond an early 2022 target of 31 a month, which the sources said Boeing aims to reach in March.

But implementation will depend on a cocktail of factors including demand, the uncertain capacity of some suppliers and Boeing's success in reducing a surplus of jets already built.

Boeing declined to comment and pointed to its latest guidance. Last month it reaffirmed plans to raise MAX output from an unspecified "low" rate to 31 a month by early 2022.

Shares in the planemaker rose as much as 3.7% in early trading, outpacing a slightly firmer U.S. market.

Production was halted in 2019 after Boeing's fastest-selling model was grounded in the wake of fatal crashes. It resumed last May at a fraction of its original pace while Boeing navigated regulatory approvals and a fragile supply chain.

It is still awaiting the go-ahead from China after winning Western approvals late last year. Chief Executive Dave Calhoun has warned that the timing of remaining approvals will influence the shape of Boeing's final production ramp-up.

As an interim step, Boeing hopes to speed monthly output from single digits now to about 26 a month at the end of 2021 at its Renton factory near Seattle, two of the sources said.

Higher production could inject much-needed cash into the supply chain and reduce Boeing's component costs.

The Puget Sound aerospace industry has already started to pick up steam. Sources say Boeing has been placing parts orders again, while fuselages can be seen heading by rail to the Seattle area from Spirit AeroSystems' Wichita factory.

STEEP CLIMB

That comes as demand for medium-haul jets such as the 737 MAX and competing Airbus A320neo begins to recover from the effects of the COVID-19 pandemic, boosted by widespread vaccinations, especially in the busy U.S. domestic market.

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A Boeing 737 MAX airplane lands after a test flight at Boeing Field in Seattle, Washington, U.S. June 29, 2020. REUTERS/Karen Ducey/File Photo/File Photo

However, several U.S. and European suppliers view output plans of both planemakers as optimistic, saying that concerns remain over the health of the global aerospace supply chain.

"The biggest risk that we can see with Boeing's plans is the inability of the supply chain to keep up," Vertical Research Partners analyst Rob Stallard wrote in a client note about Reuters' story.

Boeing's efforts to restore production are also tied to the pace at which it offloads an inventory of parked airplanes that swelled during the nearly two years the MAX was grounded.

The published target of 31 a month has already slipped from late 2021 to early 2022.

In Europe, Airbus has ordered suppliers to get ready for higher output while warning them over quality glitches that can reflect overstretched supply chains.

Both plane giants are embarking on their steepest ever climb in output, drawing reassurance from accumulated parts inventory and the fact that their plants had already covered the same territory in the past, albeit at slower rates of increase.

But neither yet feels ready to return to the record volumes seen before recent shocks to the industry.

Before the 2019 grounding, Boeing was producing 52 MAX a month on its way to a target of 57. Airbus was making close to 60 of its A320neo airplanes a month before last year's lockdowns.

Airbus plans to raise output from 40 to 45 airplanes a month by end-2021. Reuters reported last week it had asked suppliers to prepare for 53 a month by end-2022.

Output of larger long-haul jets remains depressed by a business travel slump and is not expected to recover soon.

(Reporting by Eric M. Johnson in Seattle and Tim Hepher in Paris, additional reporting by Tracy Rucinski in ChicagoEditing by David Goodman, Louise Heavens and Nick Zieminski)

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