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Boeing 737 MAX production increase seen key to financial

stability

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Boeing ( BA ) plans to quickly go to 42 737 MAX jets a month

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FAA administrator called Boeing ( BA ) CEO to confirm the rate

increase

(Adds share price, details in paragraphs 9-16)

By David Shepardson and Dan Catchpole

WASHINGTON/SEATTLE, Oct 17 (Reuters) - Boeing ( BA ) won

approval on Friday to raise its 737 MAX production to 42 planes

per month, the Federal Aviation Administration said, easing a

38-plane cap in place since January last year and boosting its

efforts to shore up its finances and move past concerns over

safety and quality.

The FAA imposed the unprecedented production cap shortly after a

2024 mid-air emergency involving a new Alaska Airlines

737 MAX 9 that was missing four key bolts in a door plug,

causing a gaping hole to open in the fuselage at 16,000 feet

(4,900 m). The incident revealed widespread production safety

and quality lapses at Boeing ( BA ).

Increasing deliveries of the popular single-aisle airplane

is critical to restoring Boeing's ( BA ) financial stability, following

years of production disruptions and crises that have left it

deep in debt and losing money. Planemakers receive the bulk of a

customer's payment when they hand over an airplane.

The FAA said on Friday its safety inspectors "conducted

extensive reviews of Boeing's ( BA ) production lines to ensure that

this small production rate increase will be done safely."

BOEING PLANS TO BEGIN BOOSTING PRODUCTION QUICKLY

FAA Administrator Bryan Bedford called Boeing ( BA ) CEO Kelly Ortberg

on Friday to confirm the planemaker could raise the production

rate to 42 planes, a person briefed on the matter said. Boeing ( BA )

plans to quickly begin boosting production accordingly, the

source added.

Workers at the company's Seattle-area factories have been

preparing to increase the 737 production rate by adding

equipment for greater capacity, two other sources familiar with

the matter said.

Boeing ( BA ) said it appreciated "the work by our team, our

suppliers and the FAA to ensure we are prepared to increase

production with safety and quality at the forefront."

Boeing ( BA ) shares were up 1.2% in after-hours trading.

Boeing ( BA ) has produced 737s at higher rates in the past but the

supply chain is more stressed now. Forgings, castings, engines

and even interiors have all caused supply chain headaches for

planemakers in recent years, aerospace analyst Glenn McDonald

said.

Supply chain problems seem to be more sporadic and unpredictable

than before the COVID-19 pandemic, when they were more systemic,

he said, noting that a factory fire in February left Boeing ( BA )

scrambling to find new sources for specialized fasteners.

"Boeing ( BA ) seems to be better prepared for this ramp up than

they have been for previous ones," he said.

Under enhanced FAA oversight, the company has taken a

cautious approach to stabilizing and then increasing production.

Boeing ( BA ) has built up substantial inventories of parts and

materials as a buffer against supply chain bottlenecks.

It had $11 billion in raw materials stockpiled, according to

its second quarter earnings filings. That compares with $6.4

billion in inventory in 2018, when it was producing more than 50

of the 737 jets a month.

Boeing ( BA ) also has $53 billion in debt now, compared with about

$12 billion in 2018. Wall Street analysts expect Boeing ( BA ) to lose

money again this year but project a profit in 2026, which would

mark Boeing's ( BA ) first profitable year since 2018.

Last month, the FAA partially restored Boeing's ( BA ) authority to

issue airworthiness certificates for new 737 MAX and 787

airplanes.

That authority had been revoked for individual MAX planes in

2019, following fatal crashes in Indonesia and Ethiopia, and for

wide-body 787 airplanes in 2022, due to production quality

issues.

In September, the FAA proposed a $3.1 million fine against

Boeing ( BA ) for a series of safety violations, after it found

hundreds of quality system violations at its 737 factory in

Renton, Washington, and at the 737 fuselage factory of Boeing ( BA )

subcontractor Spirit AeroSystems ( SPR ) in Wichita, Kansas,

from September 2023 through February 2024.

The Alaska Airlines incident in January 2024 prompted the

U.S. Justice Department under then-President Joe Biden to open a

criminal investigation.