Boeing's Backlog Booms, but Is That a Good Thing?http://www.fool.com/investing/general/2013/11/02/boeings-backlog-booms-but-is-that-a-good-thing.aspx Rich Smith
November 2, 2013
When Boeing (NYSE: BA) reported Q3 earnings last week, it was the headline numbers that got all the attention:
But beyond what Boeing accomplished last quarter, less attention was paid to the single factor that will most influence how the company performs in the quarters ahead: Boeing's "backlog" of work to be done and planes to be built.
Records were made to be broken
By far the biggest bottleneck in Boeing's production line is the company's uber-successful 737 line of regional jet aircraft. With more than 3,400 planes still on order, 737s account for 71% of the company's commercial backlog.
Nice as it is to know that it has all this business "in the bag", though, it does pose a problem for Boeing. At its current 38-planes-per-month rate of production, Boeing is churning out 737s at the rate of 1.7 planes per workday. By any objective measure, that's a fantastically fast pace of production and a feat of production wizardry. Yet it's still too slow.
At its current rate, Boeing would need 89.5 months -- seven-and-a-half years -- to build enough 737s to satisfy all the folks who want to buy them. And that's if it takes in no new orders at all. (In fact, Boeing took in 65 new 737 orders over just the last couple of weeks.)
Use it or lose it
So what's the solution? Clearly, Boeing needs to build planes faster and get these orders filled before they disappear. And, in fact, it's been doing just that. Check out the chart below, which shows how Boeing has announced multiple accelerations in its pace of 737 production over the past few years:
This week, Boeing announced its most recent production rate increase: a plan to up 737 production to 47 planes per month, or about 24% faster than its current pace. Why? Former Boeing Commercial Airplanes President Jim Albaugh went on record a couple years ago, warning that the seven-year long backlog on Boeing's 737 lineup