Oct. 14--Production wars are coming to aviation.
Airbus and Boeing have been boosting aircraft production, and Boeing has asked its supply chain to consider even higher rates for its 737, 767 and 787 airliners than announced, said Scott Hamilton, an industry analyst with Leeham Co.
"If some industry observers are concerned about the prospect of over-production now, the current state of affairs may be only the tip of the iceberg," Hamilton wrote in a newsletter.
Besides Boeing and Airbus, Bombardier, Embraer, Mitsubishi and Russia's Irkut all have new airplanes going into production.
China's COMAC has plans for a new C919, although those plans are less certain, Hamilton said.
The implications for the supply chain are obvious, he said. Many suppliers make parts for Airbus, Boeing, Bombardier and Embraer, and much of the work is on emerging programs.
Boeing has said it would boost production of its 737 single-aisle airliners from 38 a month to a record 42 per month next year. It's increasing 787 Dreamliner production to 10 per month.
And Boeing CEO Jim McNerney has hinted on calls with analysts that it's considering raising those rates.
At the same time, Boeing is working to revamp its popular 737 NG to the 737 MAX. And Airbus is developing the A320 neo.
Eventually, suppliers will need capital to expand and hire more people to keep up, Hamilton said.
That's good news and bad news.
"The rewards are enormous, but the risk could be enormous as well," he said, if there is a geopolitical event, a terrorist attack or another economic downturn.
Hamilton said he expects consolidation in the supply chain to continue.
Small and medium-size suppliers still have difficulty in the capital markets
"If a key supplier is unable to raise the money to do the Cap X to expand, and there's still a capital squeeze out there ... merger to become larger may be the only way," Hamilton said.
Reach Molly McMillin at 316-269-6708 or firstname.lastname@example.org. Follow her on Twitter: @mmcmillin.