Boeing, Airbus cautioned on production pace

   The race between Boeing and Airbus to capture orders and produce commercial aircraft continues unabated, raising questions about whether their respective supply bases can keep up with demand, according to a new report from Forecast International. 
   The situation will only get worse with the introduction of the Boeing 787 Dreamliner and Airbus A350 XWB.
   The Connecticut-based market research firm estimates that more than 14,650 large commercial airliners, worth $2 trillion in constant dollars, will be produced during the next 10 years.
   United Airlines, for example, announced July 12 that it placed an order with Boeing for 150 new model 737 single-aisle aircraft. It will begin taking delivery of the planes in 2018.
   At the recently completed Farnborough Air Show in Great Britain Airbus won $16.9 billion worth of commitments for 115 aircraft, including 10 A350s by Cathay Pacific on top of 16 previously ordered.
   The aircraft manufacturers need to be careful about ramping up production too fast to meet demand for two reasons: supply chains may experience bottlenecks and the airline industry is still struggling to become healthy.
   The International Air Transport Association’s outlook for 2012 is for airlines to collectively make $3 billion in profit, which equates to a measly 0.5 percent margin. The profit forecast is at least better than the billions in losses suffered in recent years. The industry is marked by volatility, especially when it comes to fuel. 
   Plus, the profitability figure covers the entire industry. Many airlines are losing money or barely breaking even, and some of those have placed large orders for new aircraft.
   “The desire of Airbus and Boeing to expand production is putting a considerable strain on their suppliers, especially in light of ongoing global economic sluggishness and uncertainty. In such an environment, a number of suppliers may be unable or even unwilling to support continual production increases. Adding to the pressure on suppliers is the fact that Airbus and Boeing are shifting their focus from manufacturing to integration, and are looking to outsource more design and production responsibilities,” Forecast International said in a summary of its report.
   “At the same time, Airbus and Boeing have considerable incentive to keep production rates high and growing.  The two companies hold large numbers of unfilled orders, but this means long waiting times for customers to take delivery of their aircraft, which often results in considerable frustration for these customers. A lack of early delivery slots could also tempt potential buyers to take a serious look at new aircraft emerging from manufacturers outside of the Airbus/Boeing duopoly. Such aircraft include the Bombardier CSeries, the COMAC C919, and the Irkut MC-21,” Forecast International said.
   Extra capacity to attract customers could be part of the motivation behind Airbus’ recent announcement to build a new plant for A320s in Mobile, Ala.