Boeing poised to boost 737 production, analysts grow wary of demand ceiling

|About: The Boeing Company (BA)|By:, SA News Editor

Boeing (NYSE:BA) is finding it hard to meet demand for its 737 aircraft; it now makes 42 each month, it has announced plans to increase production to 47 by 2017, and analysts expect it to announce plans to boost capacity further - but should it?

Airbus (OTCPK:EADSF, OTCPK:EADSY) is scheduled to deliver its first re-engined A320neo competitor to the 737 early in 2015, and Boeing may have to increase the build rate of its existing 737 just to keep up.

"The real problem is long-term," says Teal Group analyst Richard Aboulafia, noting the record-high output for single-aisle airplanes over several years, with no slowdown until both the A320neo and 737 MAX are in production - "a recipe for overcapacity by the end of the decade.”

Canaccord Genuity seconds the concerns, noting that as a general rule of thumb, many suppliers cite 100/month combined for both Boeing and Airbus as a natural limit and are concerned that anything more is unsustainable for more than a short time.