February 12, 2020 / 3:58 PM / 7 days ago

Boeing unlikely to hit pre-grounding output targets for 737 MAX before 2022

CHICAGO (Reuters) - Boeing Co (BA.N) is unlikely, for several years, to hit the monthly 57-unit production rate it had targeted for the 737 MAX preceding the grounding of the jet due to delays in regulatory approval, Chief Financial Officer Greg Smith said on Wednesday.

Greg Smith, Boeing CFO, is seen during the 53rd International Paris Air Show at Le Bourget Airport near Paris, France, June 17 2019. REUTERS/Pascal Rossignol

Boeing was building 52 MAX aircraft per month before the plane was grounded last March following two fatal crashes, which slowed production rates and ultimately spurred an output freeze beginning in January this year.

U.S. approval for the 737 MAX to fly again is now expected by mid-year and Boeing has said it could slowly resume production before the plane is allowed back in the air.

“As we gain confidence in that time frame of when the grounding will be lifted, that’s when we’ll reassess and start to wake the line up,” Smith said at an investor conference.

But the monthly output rate will depend largely on the suppliers that feed the program, and the 57-per-month target will not be reached for “a couple of years,” he said.

The company’s suppliers have been shedding jobs and capacity to cope with the production halt. While that staves off chaos, aerospace executives worry the industry might be unable to ramp up factories quickly enough when the plane wins approval to fly again.

Boeing said last October that it would bring the production rate to 57 in late 2020, though sources told Reuters in December that a new target was set for April 2021.

Discussions on the supply chain have been “front and center” of daily company calls on the 737 MAX, Smith said on Wednesday.

Boeing is eager to boost production as more plane deliveries would mean more cash, and lower payments for parts.

The company also collects pre-delivery payments according to production rhythms.

The number of 737 MAX jets it can make each month will also depend on how quickly it will be able to deliver planes that have already been produced but could not be delivered due to the global grounding, Smith said.

Returning the aircraft safely to service following the two crashes was the “single biggest” cash driver for the planemaker, Smith said.

The two 737 MAX crashes in Indonesia and Ethiopia in 2018 and 2019 killed 346 people.

Speaking separately at the Singapore Airshow, Boeing executives warned that concerns were growing over the impact of travel restrictions to and from China following the outbreak of the coronavirus, adding to recent worries over trade tensions and signs an industry cycle is peaking.

Reporting by Tracy Rucinski in Chicago; Additional reporting by Eric M. Johnson in Seattle; Editing by Bernadette Baum

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