Aviation

Narrowbody production may grow

After an extensive survey of global airlines over the past month, a Wall Street analyst has concluded that Boeing and Airbus can justify raising their narrowbody production rates in 2011 and 2012.

The interviews were conducted with 67 airlines and airline leasing companies. They included 80 percent of Airbus and Boeing's top narrowbody customers, Macquarie Securities analyst Rob Stallard said in a report called "The Plane Truth."

The research looks at the growth of global airlines and leasing companies and their replacement requirements, delivery, traffic and capacity outlook and upcoming order campaigns.

Increasing production rates of Boeing's 737 jetliner would be good news for Wichita-based Spirit AeroSystems, which builds the plane's fuselage and derives more than 50 percent of its revenue from the plane.

Last year, analysts had predicted Boeing would have to cut 737 production.

The survey "has given us hard evidence that Airbus and Boeing can justify modest narrowbody increases over the next couple of years," Stallard wrote.

He is encouraged to see that airlines are considering placing "decently sized" new orders, he said.

Stallard expects Boeing to raise 737 rates in 2012, although he didn't say by how much.

The sustainability of the increase, however, will hinge on decisions by Boeing's top customers, such as Ryanair and American Airlines, he said.

The survey also shows that Boeing's 737 order book is more contingent on North America and European airlines, which make up 40 percent of its backlog, while Airbus has a significant Asia-Pacific presence, which makes up 37 percent of its backlog for the A320 family.

Boeing may need to firm up more deliveries for beyond 2012 to feel more comfortable with the rate increase, Stallard wrote.

Delivery slots for 2010 for the 737 and A320 family were oversold, Stallard said, and more than 99 percent of the delivery positions for 2010 through 2012 have been committed.

"Interestingly, for 2013, we were able to identify 83 percent of the expected production for Airbus but only 58 percent for Boeing."

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