Boeing's production problems appear to be over the worst, but the company now fears that the Asian economic crisis may prove deeper than it expected as the number of new aircraft in storage continues to rise.

"We continue to watch developments in Asia with concern," says Boeing chairman and chief executive Phil Condit. "If the situation continues to worsen, there will be softening of widebody demand."

The number of aircraft now in storage has grown to 19 this quarter, largely because of the Asian crisis, says Boeing. In the fourth quarter of 1997, only eight aircraft were stored, compared with 13 in the first part of 1998. The latest figures show nine 737-300/ 400/500s, five 747-400s, one 767, one 777 and three MD-90s.

"We think the Asian crisis will be relatively long-lasting," says Condit. "We don't know the impact yet, but we'll be going down on the 747 and 777 production rate as we have already announced."

Among the Asian-based carriers worst affected by the region's economic turmoil are Garuda and Philippine Airlines (PAL), which both have undelivered Boeing aircraft in storage. Of the fate of the PAL aircraft, Boeing Commercial Airplane Group president Ron Woodard says: "We are aggressively marketing them. You can't expect a bankrupt carrier that's reducing its schedules by 80% to take aircraft. We expect to deliver the majority by the end of the year."

The gloom in Asia contrasts with a brighter picture for Boeing's production recovery plan. The manufacturer is now virtually back on the schedule it set itself nine months ago when the crisis first hit hard. By the end of June it had delivered 247 aircraft, just three short of its target for the first half of 1998. Deliveries in June itself reached a record 61. Deliveries for the second quarter reached 139 as a result, which Boeing says is another record.

"The figures prove we're making progress on deliveries and stabilising production," says Woodard. "Our main issues now are production inefficiencies, getting ready for the next rate increases on the Next Generation 737, and working aggressively to reduce our overall cost structure. We're still confident we'll deliver 550 aircraft this year."

Source: Flight International