Story ID: GPboeing10262022
Boeing Sees Supply Chain Constraints Through 2023
By: Gregory Polek
Caption: A shortage of engine castings has hindered Boeing’s commercial production.
Word Count: 550
Supply chain constraints continue to hamper Boeing’s ability to accelerate production of the 737 and 787 lines, leaving company CEO David Calhoun pessimistic about engine suppliers’ ability to reach full delivery capacity in 2023. Speaking Wednesday during the company’s third-quarter earnings call, Calhoun lamented Boeing’s immediate ability to take advantage of the robust demand for its commercial airplanes as it gradually sheds narrowbody inventory and delivers new 737s at a rate of 31 per month.

However, he called the inventory of 270 Max narrowbodies “an asset, not a liability” due to its ability to backfill deliveries. Still, the company delivered fewer Maxes in the third quarter—precisely 88—as it projects a total of about 375 for the year.  

While Calhoun identified engine castings for the CFM Leap engines in the 737 Max as the primary culprit, Boeing has sent personnel to suppliers that appear “more challenged than others,” he said. Meanwhile, the company has added more than 10,000 employees this year, he added, and it continues to invest in training and development to improve productivity.

“We're driving stability in the supply chain,” said Calhoun. “We've introduced all kinds of digital tools to watch what they're doing, but also we've added people to those organizations…and increased inventory wherever we can. The truth is, it'll still take time to normalize.”

One big unknown that relates to Boeing’s effort to normalize deliveries involves China, which has yet to begin taking deliveries of any of the 138 Max jets built for Chinese airlines and sitting in limbo in Renton, Washington.

“As we all know, the Covid restrictions and policies in China have reduced demand for airplanes in general,” said Calhoun. “And we hope that is what is restricting the acceptance of the airplanes they have on our tarmac. But we also have a clear eye about the geopolitical risks that are out there and we are not going to impart new risks on our investors.”

Also speaking during the earnings call, Boeing CFO Brian West outlined the company’s delivery timeline for the 737s still in inventory. “We continue to explore options to remarket some of these airplanes as we de-risk our near-term delivery plan,” he said. “Based on our latest assessment of China and the [737] dash-seven and dash-ten certification timelines, we now expect most of the inventoried airplanes to deliver in 2023 and 2024 with some moving into 2025.”

Meanwhile, Calhoun expressed some optimism about getting an extension to the year-end deadline for legislators to allow certification of the Max 10 and Max 7 without a modern engine indicating and crew alerting system (EICAS). The company continues to cite safety as the “driving factor” in the certification effort and laments the safety compromise that the loss of commonality between various submodels of the 737 would cause by a need to install an EICAS in the Max 7 and Max 10.

“We remain confident that we can get an extension of that deadline because this is the safe answer,” insisted Calhoun. “And we've heard from airlines, we've heard from pilots, we've heard from our associates, and we know that the FAA has been putting in the work to certify these airplanes. So we remain not just hopeful, but confident that we can get this across the finish line.”