Boeing Sees First 737 MAX Deal in 2011 Even With AMR Filing
December 05, 2011, 4:13 AM ESTBy Susanna Ray
(Updates with executive’s comment in next-to-last paragraph. For more on the AMR bankruptcy, see EXT2 <GO>.)
Nov. 30 (Bloomberg) -- Boeing Co.’s commercial aircraft chief expects to book the first firm orders for the new 737 MAX before year-end, even after a bankruptcy filing by the first airline to provisionally commit to the jet.
Some of Boeing’s about 700 preliminary orders for the 737 MAX will be confirmed this year, Jim Albaugh said yesterday in an interview at Bloomberg’s headquarters in New York. Pending deals include 100 planes for American Airlines and 201 for Indonesian budget carrier Lion Air.
Boeing, based in Chicago, is confident that American will press ahead with its 737 MAX orders, Albaugh said, even after the carrier’s parent AMR Corp. sought court protection from creditors yesterday. The carrier this year signed record commitments for 460 narrow-body planes, including MAX aircraft and Airbus SAS A320neo planes, to refresh its aging fleet.
“They think their future is tied to the neo and the MAX order,” Albaugh said. “I’m assuming that they will go through this and they will emerge and sign the deal and take the planes.”
American’s plan also included 100 current-model 737s, worth about $8.7 billion at list prices. Boeing hasn’t yet announced a price for the more-expensive MAX.
2011 Orders
Boeing has already more than doubled its internal goal for total commercial-jet orders this year, Albaugh said. The planemaker had won 516 contracts through Nov. 22, after saying in March it wouldn’t be able to match the 530 orders in 2010.
“We’ve got more orders we’re going to announce this year, and this is all in the face of a lot of bad economic news,” Albaugh said.
Boeing climbed 2.5 percent to $66.90 at 8:15 a.m., before the start of regular trading in New York. The shares were unchanged this year through the close of trading yesterday.
Boeing decided to offer the 737 MAX, an upgrade with more fuel-efficient engines, to fend off the A320neo and help capture half of a $2 trillion market in the next 20 years.
The company had intended to replace its single-aisle aircraft with an all-new plane. It switched strategies after the Airbus neo became the fastest-selling jet ever, winning more than 1,000 orders and commitments from December through July. The neo also prompted American to order Airbus planes for the first time since 1987.
Structural Changes
American’s deal for 260 Airbus planes has been confirmed, along with the order for the 100 current-model 737s. The MAX contract hasn’t been completed because Boeing is still finalizing planned adjustments.
The MAX requires structural changes as its engines are heavier and larger than the ones fitted on the current 737. The alterations include new struts for attaching the power plants to the aircraft as well as strengthening parts of the wing and body, chief 737 program engineer John Hamilton said earlier this month.
Boeing also expects to win a record number of orders for the twin-aisle 777 this year, with the final tally likely to be about 200, Albaugh said. The planemaker had 192 orders through last week, already breaking 2005’s record of 154.
Rising orders have pushed Boeing’s backlog to seven years’ work, which is deterring new customers, Albaugh said. Within six months, the planemaker will likely have about 4,000 orders in hand, he said. The company is trying to whittle down the backlog to three or four years’ worth by boosting production about 60 percent through 2013 to about 660 jets a year.
The boost may mean that Boeing will build more planes each year than Airbus by 2013, Albaugh said. That would let Boeing reclaim the title of world’s biggest planemaker, which it lost in 2003.
787 Production
Boeing is also increasing production of 787 Dreamliners after handing over the first one to All Nippon Airways Co. in September.
Workers at the planemaker’s widebody-jet plant north of Seattle have been building 2.5 Dreamliners a month since Oct. 31, and “it’s gone well,” Albaugh said. The production rate will climb to 3.5 in late winter or early spring, he said. It will reach five a month next fall as the company works toward a target of 10 a month by the end of 2013.
The company’s new South Carolina factory, where employees have begun assembling their first two 787 Dreamliners, may also deliver its first jet before a June goal, he said.
‘Pleasantly Surprised’
“I’m pleasantly surprised by how well they’re doing,” he said. Boeing was able to obtain experienced workers for the plant by hiring one-time employees of NASA’s space operations in Florida, as well as former military personnel and airline maintenance workers, he said.
Operations at adjacent facilities in South Carolina, where workers assemble the middle and aft sections of the Dreamliner, are still pinch points, Albaugh said. Still, he doesn’t foresee another production pause, after several freezes this year at the main assembly line in Everett, Washington.
“It really wasn’t a problem with suppliers, it was us,” he said. The pauses “allowed us to work a lot of the change traffic.”
Now that U.S. regulators have certified the aircraft “and we have a configuration we have to build to,” the need to retrofit aircraft after assembly at the Everett, Washington, factory “has dried up,” Albaugh said.“There’s a lot more stability, and the condition of assembly is much better than it was,” he said.
In the meantime, “there’s a forest of tails out there in Everett when you look around” and it will take several years to retrofit the dozens of Dreamliners that had already been built before the August certification, he said.
Boeing is working on its 51st Dreamliner and has about $18 billion in 787-related inventory, said Mark Hooper, a spokesman.
--Editors: James Langford, Neil Denslow
To contact the reporter on this story: Susanna Ray in New York via sray7@bloomberg.net.
To contact the editor responsible for this story: Ed Dufner in Dallas at edufner@bloomberg.net
