Boeing faces production slowdown as quality checks, FAA audits intensify

Boeing's 737 MAX jetliner production has experienced a decline recently, attributed to increased scrutiny from US regulators and efforts to address outstanding issues in assembly, according to industry insiders.

Sources familiar with the matter told Reuters that the Federal Aviation Administration (FAA) has imposed a production cap of 38 jets per month, but the output rate has fluctuated well below this benchmark, dropping to single digits by late March.

Boeing's Chief Financial Officer, Brian West, said that the company was making several efforts to address quality concerns and enhance confidence among stakeholders.

West added that the FAA had been involved in rigorous audits, saying that it was "undertaking a tougher audit than anything we've ever been through before".

The aerospace giant has been trying to reduce the amount of "travelled work" -- incomplete tasks remaining on planes as they move down the assembly line.

This endeavour, aimed at improving overall quality, has inadvertently slowed production and subsequent deliveries.

Boeing's stock saw a 1.7 per cent decline after increased scrutiny, including the loss of a door plug on an Alaska Airlines jetliner in January.

Boeing's production slowdown is expected to have ripple effects throughout the airline industry, which may cause carriers to adjust flight schedules or extend existing jet leases to meet demand.

Traditionally, production rates correlate closely with deliveries, but disruptions from the MAX grounding and the pandemic have complicated this relationship.

To gauge Boeing's production pace, independent experts analysed the number of first test flights conducted for new jets each month. In March, Boeing flew 13 MAXs, compared to 11 in February.

However, this figure is a far cry from the peak rate of around 38 jets per month recorded in mid-2023.

In contrast, Airbus is maintaining a comparatively strong production rate for its A320neo-family jets, flying an average of 46 per month in the first quarter.

While Airbus faces its own supply constraints, it has extended a comfortable lead in the single-aisle jet market amid Boeing's production challenges.

CFM International, the sole engine supplier for the MAX, is closely monitoring the situation.

GE Aerospace CEO Larry Culp noted that Boeing continued to receive deliveries for LEAP-1B engines at the contracted rate.

However, questions remain about the sustainability of this arrangement and the potential accumulation of engine surpluses.

The extended production slump at Boeing poses significant implications for CFM International and its stakeholders.

In previous crises, such as the 2019 MAX grounding, agreements were reached to maintain engine supply to Boeing at a minimum level to cover costs.

However, the duration of the current production slowdown remains uncertain, raising concerns about the accumulation of surplus engines.

(With inputs from Reuters)