Boeing’s Q3 deliveries to be hit as suppliers struggle with rising demand

On a visit to Boeing’s (BA) assembly plant in Renton, you would be amazed to find a large number of 737 airliners lined up on the taxiway. While it gives you a picture of the massive production capabilities of the company, the sight is turning out to be a nightmare for Boeing management.

The 737 airliner, a cash cow for Boeing, has been seeing a steady increase in demand. And to meet the delivery targets, the Chicago-based company had in June raised its monthly production rate from 47 to 52. Sadly, the company’s suppliers are struggling to meet the increasing demand, leading to production bottlenecks, and in turn, a higher number of idle unfinished airliners at the production facility.

Boeing had managed deliveries of just 45 on an average in the first half of this year and now expects the production snarls to affect deliveries in the upcoming quarter as well. Since the 737 accounts for over half of the revenue coming out of the Commercial Airplanes unit, a dent in deliveries could hurt its topline also.

Boeing CFO Greg Smith had said in a recent interview that every hour is precious for the company, in light of a monthly target of 52 jets.

The Seattle Times had last week reported about how workers were scrambling to install the parts that had arrived out of sequence or later than expected on around 40 aircraft parked on the airstrip as well as the taxiway at the Renton facility.

Boeing CFO Greg Smith had said in a recent interview that every hour is precious for the company, in light of a monthly target of 52 jets.

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Suppliers that are slowing down Boeing’s deliveries include France’s Safran SA, Spirit AeroSystems Holdings, which provides airframes, and engine maker CFM International. Meanwhile, supply-chain bottlenecks have gripped Boeing’s European rival Airbus as well, for its popular A320neo fleet, due to delay from engine supplier Pratt & Whitney.

Boeing is currently pursuing its efforts to streamline productions, besides investing in areas that would help suppliers meet the monthly targets. But meeting the delivery targets will take its own sweet time.

Boeing second-quarter earnings transcript