*

Analysts are cautiously optimistic about Boeing ( BA ) CEO's

promises

to increase production

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Boeing's ( BA ) past leadership failures are a shadow over

current CEO

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Airlines want more jets, suppliers want more business, but

everyone is cautious

By Dan Catchpole

SEATTLE, Jan 29 -

CEO Kelly Ortberg took over at Boeing ( BA ) knowing that the

company was in trouble. Those troubles added up to an $11.8

billion loss last year, the company reported on Tuesday.

However, during its earnings call and interviews with

Reuters and other news outlets, Ortberg indicated the worst is

behind Boeing ( BA ). He said its commercial airplane division is

fixing lingering production problems and expects to ramp up

production of its most popular jet, the 737 MAX, to 38 per month

later this year, with further increases to follow, pending

federal regulators' approval.

A hopeful "show-me" was the reaction from half a dozen

industry analysts.

There are reasons for optimism, said Gautam Khanna, an

aerospace analyst with TD Cowen. Since Ortberg took the reins in

early August, Boeing ( BA ) appears to be taking a more deliberate

approach to solving production problems by slowing down now in

order to avoid getting derailed when output speeds up later.

As of Tuesday, Boeing ( BA ) had delivered 33 737 MAX jets in

January, company CFO Brian West said on the earnings call. That

was well above its pace in prior months.

Boeing's ( BA ) stock

is up 2.8% since Ortberg started on Aug. 8. It jumped after

Boeing ( BA ) released earnings results, but gave back some gains on

Wednesday.

Even if

Ortberg delivers on the goals he laid out, Khanna said,

whatever he says now is haunted by his predecessors' bullish

assurances that proved hollow: James McNerney on 787 delays and

cost overruns; Dennis Muilenburg and the 737 MAX crashes; and

David Calhoun on supply chain and production quality problems.

"Everyone's scarred from the history," he said.

SKEPTICAL SUPPLIERS

Suppliers, especially, have been hurt by investing for rate

increases that did not come through. Many are wary of investing

now and ending up financially vulnerable.

"A lot of people are holding on to their funds,"

Independent Forge president Andrew Flores said. The company in

Orange County, California, supplies aluminum parts for

the 737 MAX

.

"I see light at the end of the tunnel, but it's a long

tunnel," he said.

For the business to improve, suppliers need to trust

that Boeing ( BA ) will make good on ramping up production and invest

in capacity.

"The guys in the middle want to trust (Ortberg), because if

Boeing ( BA ) improves, their business improves," said Phil Gibbs, an

analyst with KeyBanc Capital Markets.

A problem for Ortberg: at the moment, suppliers are

making their own decisions, the head of a Boeing ( BA ) supplier said.

He spoke on the condition of anonymity out of concern of

retribution.

After a 53-day strike shut down almost all Boeing ( BA ) airplane

production last year, "it's easy to be optimistic in a relative

sense: The strike is over and production is ramping up," said

Richard Aboulafia, an analyst with AeroDynamic Advisory.

However, increasing production "is not the same as returning

the company to a positive strategic direction," Aboulafia said.

He pointed to management-employee relations during Ortberg's

brief tenure.

Boeing ( BA ) endured "a 53-day strike that should have been settled in

53 hours," and Boeing ( BA ) engineers' union is investigating

allegations that the company is using the reductions to move

work to non-union areas, Aboulafia said.

Ultimately, "the path (to increase jetliner production) is

there, and the market is with them," Aboulafia said. "The market

wants its jets."