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At Boeing Factory, Unfinished 737s Pile Up

The Wall Street Journal. logo The Wall Street Journal. 4/9/2018
a large passenger jet sitting on top of a runway © jason redmond/Reuters

Boeing Co. is facing a problem as it races to meet demand for single-aisle, fuel-efficient jets: where to store unfinished 737s piling up at a factory near Seattle.

One answer in late July was the taxiway of the small airport in Renton, Wash., next to its Boeing factory there.

“Boeing is running out of space,” Renton public works administrator Gregg Zimmerman wrote to city council members in a July 27 memo about the taxiway plan. “They have encountered an emergency production challenge that threatens to interfere with their ability to keep their airplane production lines running.”

A Boeing spokesman said the request for parking space was part of a “recovery plan” to get deliveries to match production rates. Mr. Zimmerman declined to comment.

The unfinished airplanes illustrate a challenge to Boeing, the world’s biggest aircraft manufacturer by sales, as it tries to make enough of its new 737 Max jets to meet fast-growing demand. Boeing and rival Airbus SE together have more than $1 trillion in orders for planes, driven by a global boom in air travel that is adding 100 million passengers a year.

Boeing delivered just 29 of the 737s in July, though more than 50 mostly-finished jets roll off the production line each month. Company officials have said deliveries could slow in the third quarter but pick up in the fourth as suppliers get back on track. The 737 is Boeing’s most popular commercial aircraft and a top moneymaker that has helped propel the company’s stock more than 40% in the past 12 months.

The delays are due largely to two suppliers: engine maker CFM International, a joint venture between General Electric Co. and Safran SA, and fuselage manufacturer Spirit AeroSystems Holdings Inc. Both companies have said some of their own small suppliers are struggling to meet demand.

CFM executives have pledged to catch up on engine deliveries that have been several weeks behind. Spirit AeroSystems said it has resolved problems and resumed on-time shipments to Boeing.

Airbus has missed delivery deadlines for the A320neo, its popular single-aisle competitor to the 737, because of parts shortages, and the world’s No. 2 plane maker has had to park unfinished jets around its factories. The company is working on reducing a fleet of undelivered planes that peaked at more than 100 earlier this year.

Both companies stand by their full-year delivery guidance and have put pressure on suppliers to catch up. Until then, Boeing and Airbus will have to deal with the unfinished planes.

Boeing’s urgent request to store planes on the Renton airport taxiway came in late July, according to emails and other documents that city officials provided to The Wall Street Journal in response to a public-records request.

The documents show how local officials tried to help a hometown company meet the surging demand for its products. In one email exchange, Boeing also asked the city to enforce parking rules around railroad tracks to make sure fuselages could reach the factory during Renton River Days, a local festival.

The emails reflect Renton officials’ interpretation of Boeing’s problems. The engine shortage is “severely hampering production needs as we now have aircrafts ready to go but no engines,” one Renton airport official wrote to Federal Aviation Administration officials on July 24.

“The plant manager indicated they may be in crisis mode this afternoon,” another Renton official wrote to other city leaders the next day, relaying what another Boeing employee told him.

Renton Mayor Denis Law said in an interview that Boeing didn’t suggest the storage crunch was an existential threat to the factory’s production, Renton’s biggest employer. Boeing had 16,531 employees in Renton last year, according to financial disclosures.

But, the mayor added: “There was no question that time was of the essence.”

When Boeing signaled earlier this year that it may need more plane-storage space, Renton officials initially offered other areas at the airport, said Harry Barrett Jr., Renton’s airport director.

Boeing eventually struck an agreement to store up to seven planes on the taxiway for 90 days in exchange for about $39,000 in rent, documents show. According to Mr. Barrett, Boeing later said it only needed to park four planes there.

The airport has about 35 spaces for Boeing 737s. In recent photos of the airport provided by a union official, planes without engines can be seen parked at the airfield. Weights are attached to their wings to help maintain form.

The FAA in late July approved a plan under which large planes taking off from and landing at the Renton airport provide two hours’ notice to give Boeing time to move planes on the taxiway.

Boeing is also tucking planes between airport buildings and parking them on at least one employee parking lot at its factory, people familiar with the matter said.

Boeing is outfitting 737s with temporary engines so pilots can fly them to nearby King County International Airport, also known as Boeing Field, these people said. The temporary engines are removed there and trucked back to Renton to fly more 737s to Boeing Field, they said. The airport is Boeing’s main delivery center for new jets.

The Boeing spokesman said the temporary taxiway parking helps the company “expedite airplanes to Boeing Field for delivery,” adding that “we are maximizing space efficiently at the site and focusing on our recovery plan.”

Mr. Law said Renton is considering helping Boeing store planes in another of its parking lots.

Boeing plans to make more than 57 of the 737s each month next year, up from 52 currently. It has orders for almost 4,500 Max jets, a revamped version of a plane that first flew in 1967.

Some Boeing customers say their Boeing 737 deliveries are behind schedule.

“We have experienced some minor changes with the timing of upcoming aircraft deliveries but have not experienced any service disruptions or schedule changes,” said a spokeswoman for Southwest Airlines Co., which expects to take delivery of 45 new 737s by year’s end.

John Plueger, chief executive of Air Lease Corp., said Boeing told the plane-rental company it would delay delivering two 737s by a month or less this year. “That’s really not significant,” Mr. Plueger said on an investor call last month. “So far, I think it’s pretty well under control.”

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