Boom or bust?

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At this year’s Paris Air Show, airlines ordered more than $100 billion worth of aircraft and engines from the likes of Boeing, Airbus and General Electric. Since then, Boeing has announced significant production increases over the next couple of years for every one of its commercial aircraft models. It plans, for example, to build 42 737s a month by 2014, up from 31.5 a month now. Production of the 787 will climb to 10 a month by 2013, up from around two a month today. Can Boeing handle the added production? In 1997, when the company tried to double production of its 737 model in 18 months, parts and materials shortages became so acute that production was shut down for a month, resulting in more than $1.5 billion in charges. And the 787 Dreamliner program continues to be plagued with production problems.

Aerospace analyst Scott Hamilton thinks Boeing has learned its lesson. “Boeing has 1997 seared in its corporate memory,” says Hamilton, “so as they consider these unprecedented rates, they do a real stress test of the supply chain, and they are bound and determined to not have a repeat.”

If Boeing performs to plan, that’s great news for Washington’s 650 aerospace parts manufacturers. They have seen order volumes soar. New orders would do a lot to help the parts makers recover from what has been a disastrous experience with their participation in the 787 program, for which many parts suppliers built up capacity that has largely been put on hold.

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