Analyst sees 737 MAX production restarting at fewer than 20 aircraft per month

The new production of the Boeing 737 MAX has been halted as the company waits on global regulators to clear the troubled jet to return to service.

Whenever production of the Boeing  737 resumes, one aerospace analyst expects the initial output rate to be at least 60 percent lower than where Wichita ended on the program in 2019.

And for suppliers ranging from Wichita’s largest employer, Spirit AeroSystems Inc. – which last week announced 2,800 local layoffs due to the production freeze on the MAX – to the numerous smaller local companies that support it, and expectedly slow ramp back up in production from there will mean even more difficult days ahead.

“The impact on suppliers is going to be profound,” says Seattle-area analyst Scott Hamilton. “The slow ramp-up means recalling employees, at Spirit and any other supplier will be a gradual return to previous employment levels. It will be challenging for small suppliers to stay in business.”

Hamilton, a managing editor of the aviation-focused Leeham News and Analysis, writes on his website that of the multiple production scenarios being considered at Boeing that his sources put the most likely return output at 10-15 aircraft per month.

From there, he writes, a return to 42 per month isn’t likely until 2021.

That was the rate Boeing reduced to last year following the March grounding of the MAX after two crashes of the jet in five months killed all 346 people aboard the aircraft.

But in Wichita, Spirit (NYSE: SPR) continued to build at the rate of 52 aircraft per month on the 737 program as part of a staggered production plan designed to keep the linchpin supplier healthy in advance of potential future output increases.

Spirit (NYSE: SPR builds 70 percent of the MAX in Wichita, including the aircraft’s full fuselage, as part of a 737 program that accounts for half of its annual sales. The company said at the time it announced the layoffs last Friday that it had not yet received information from Boeing on when production would restart or at what level.

Wichita and Spirit AeroSystems Inc. has significant ties to the Boeing 737 MAX. Click through the following slideshow for a look back at the Air Capital’s role on the program and a timeline of events leading to a production halt on the MAX by Boeing.

Prior to the grounding, plans and investment in the workforce and facilities were already in place at Spirit to increase production on the 737 to a record rate of 57 per month in the middle of last year.

While some industry observers have questioned if that rate will ever be met in the future, Hamilton forecasts it won’t be until late 2022 at the earliest.

Production of the MAX – which now almost exclusively drives the overall 737 program – has been halted for an unknown length of time by Boeing as it awaits re-certification of the aircraft by global regulators.

Hamilton, who has been in aerospace news more than 30 years and is a former board member of the Pacific Northwest Aerospace Alliance, notes that because of the uncertainty of when that return will happen that any production forecast, as well as any plans at Boeing, are subject to ongoing change.

Also adding to the dynamic around how many new MAX jets the company will start building again is how long it will take Boeing to work through the nearly 400 aircraft it assembled but did not deliver to customers because of the grounding.

There is also the matter of the nearly 100 completed fuselages that Spirit has built and is holding in inventory in Wichita.

And lower production rates and potentially slipping delivery schedules will begin to reduce cash flow at companies from Boeing on down through the supply chain.

It all points to even more challenging weeks and months ahead, Hamilton writes, for the individual aircraft program that has the most impact on the Wichita economy.

“Boeing hasn’t hit bottom yet,” he says. “The worst is yet to come for suppliers.” www.bizjournals.com