Boeing MAX-centuates the Positive
"You've got to accentuate the positive
Eliminate the negative
And latch on to the affirmative
Don't mess with Mister In-Between."
-- "Accentuate the Positive," Johnny Mercer and the Pied Pipers, 1944
Boeing (NYS: BA) "blew out da box" when it reported earnings last week, and yet, one troubling issue continues to dog the airplane builder: Boeing's got so much demand for its products, it's having trouble building planes fast enough to fill all the orders. With a backlog stretching out seven years long, the company has already had to up production rates on its 737 airliner four times in a row to keep up with demand. And -- cry Airbus a river -- Boeing's "problem" is getting worse.
You've heard about Boeing's new 737 variant, right? The one it designed for AMR (NYS: AMR) last summer? Well, it turns out this reengined 737 MAX is almost as popular as the original 737. The company has already booked more than 600 orders for the 737 MAX in the past four months, a number that jumped 20% since Boeing's previous report. And according to the 737's chief program engineer, "several hundred" more MAX orders are expected "soon."
As a result, Boeing confirmed last week that it's unlikely to make much progress working down plane backlogs in the immediate future. While production rate increases have been approved, Boeing won't max out production of the classic 737, for example, until 2014 (by which time it expects to be churning out 42 planes per month). Meanwhile, the company expects to be selling planes faster than it can build them for at least the next two years.
This may not please customers impatiently awaiting their planes, of course, but as problems go, it's a nice one for Boeing to have.
Ac-cen-tu-ate the positive
Boeing also pointed out last week that, whatever problems it may be having keeping up with demand, at least it doesn't have to worry about kinks farther up the supply chain. According to Boeing Commercial Airplanes President Jim Albaugh, parts makers that include Spirit AeroSystems (NYS: SPR) , General Electric (NYS: GE) , and Honeywell (NYS: HON) are in "pretty good shape."
In other words, assuming Boeing can build it ("it" being the planes), the parts will come.
Care to place a wager on when Boeing will announce its next production ramp-up to help keep pace with all these new orders?Add the stock to your Watchlist,and we'll keep you updated on all the most important developments.
At the time this article was published Fool contributorRich Smithdoes not own (or short) shares of any company named above.Motley Fool newsletter serviceshave recommended buying shares of Spirit AeroSystems Holdings. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.