Boeing expects 737 ramp-up decision before year-end

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Boeing will decide within four months on whether to increase the monthly 737 production rate from 35 to 40, chief financial officer James Bell says today.

"Demand is pushing us to look at rates higher than we've ever been at 40 [per month]," Bell says, addressing the Morgan Stanley global industrials unplugged conference.

The ongoing study follows Boeing's decision in May to increase 737 monthly output from 31 to 35 per month.

In July, Boeing chief executive officer James McNerney predicted making a decision on further increasing 737 production by September or October. Bell extended the horizon of Boeing's study until possibly the end of the year.

The company's analysts are still wrestling with supply chain capacity issues and long-term demand forecasts, Bell says, adding that he prefers to keep production rates beneath overall demand.

"My approach is not to ramp up to demand," Bell says, "and try to stay under what we think sustainable demand is."

At the same, Bell describes a "delicate balance" between staying under market share and giving away market share due to the limits of production capacity.

Boeing's top competitor in the single-aisle market, Airbus, has already announced plans to ramp up A320 production to 40.

Bell says Boeing's analysis extends beyond Airbus. The market for used 737s is also a factor in Boeing's study.

Besides demand, the study is also focused on the ability of the supply chain to support a production ramp up to 40 aircraft.

"There's a whole lot of things that make me nervous about 40," Bell says.