Orders May Come Soon From Delta, AA
Boeing may increase production of its popular 737 line of
narrowbody airliners, if domestic carriers place orders soon for
the planes.
In comments before Cowen & Co.'s Aerospace/Defense
conference last week, Boeing Commercial Airplanes CEO Scott Carson
said the planemaker has mulled over whether to increase production
of Boeing's best-selling line of aircraft. "It feels like there
might be enough solid demand to do it, but we're watching very
carefully," he said, according to TheStreet.com.
In addition to the question of whether suppliers could keep up
with increased production rates, there's also the matter of whether
a number of domestic carriers will soon place orders to justify the
increase. During a conference call with investors last month,
Boeing CEO Jim McNerney said the planemaker has "been in extended
discussions with a couple of the major carriers who have not
participated in this order cycle. It wouldn't surprise me if a
couple of deals with these folks came to fruition in '08."
Industry analysts think
big Boeing orders from American and Delta may soon be forthcoming,
as those carriers look to replace their fleets of McDonnell-Douglas
MD80-family aircraft. American, for one, has said numerous times it
wants to replace its aged MD-82s and -83s. The carrier is slowly
replacing its 300-plane fleet of MD-80s with new 737-800s, from a
previous order. The carrier is slated to receive 23 -800s through
2009.
This week, Carson (right) noted American's MD-80s "are not very
efficient with this fuel price," and will need to be replaced
sooner or later. If that order comes 'sooner,' it alone could be
enough to support increased production.
Less certain are Delta's plans to replace its own MD-88s and
-90s. Both types are somewhat newer than American's models, and
have more-efficient turbofans. But airline spokesperson Betsy
Talton says Delta has no plans for "a significant fleet replacement
order anytime soon.
"The strategy is to improve the fleet we have," she added.
"Acquisitions will be limited and strategic in nature."
There is a wild card, however -- a possible Delta merger with
Northwest Airlines. If such a merger takes place, the combined
carrier -- which many believe will be run by Delta -- may move
quickly to replace Northwest's ancient DC-9 fleet. The DC-9s are
paid for... but at such high fuel prices, the savings from using
more efficient aircraft would likely offset the added cost of
making lease payments.
If the decision to step up production comes, Boeing could make
as many as 40 737s per month, up from its current level of 32
planes, according to industry analyst Scott Hamilton. "They've been
looking at it for quite some time," he said. "The question has been
whether the supply chain can do that."
Hamilton adds Carson
criticized rival Airbus's plans in 2006 to ramp up production of
the A320 narrowbody line. "In this hot market, it would be easy to
be consumed with the desire to sell anything to people walking
through the door who want to buy and push our production system to
the point where you could break it," Carson said in September 2006,
as reported by ANN.
"It’s much harder to say, 'I’m sorry, we’re sold
out.'"
Indeed, Boeing was hamstrung by that very problem in the late
1990s... and the resulting flood of Boeing planes in a cooling
market, as it fought to compete with Airbus, almost bankrupted the
planemaker.
There's also the question of whether Boeing's current five-year
backlog on 737 production may be cut back drastically, as airlines
seek to cancel orders due to slackening demand... which, depending
on who you listen to, may or may not be coming.
ANN's Daily Aero-Linx (04.15.24)
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