Boeing's Problems Mount (GE and Raytheon Take Note)
The recent news that Boeing (NYSE: BA) is removing engines from its inventory of 737 MAX aircraft and using them to produce new 737 MAX aircraft demonstrates the supply chain issues in the industry. It also highlights the ongoing issues that engine makers, such as Raytheon Technologies (NYSE: RTX) and General Electric (NYSE: GE) in its joint venture with Safran, CFM International, are facing. Here's the lowdown on what it means to investors.
The news, coming from industry blog Simple Flying, is a stark reminder of the pressure the aviation industry is under to meet demand levels and execute on its backlog. In a nutshell, Boeing is finding it difficult to increase its production rate in the 737 MAX -- a plane that, along with the Airbus A320 neo family of aircraft, is the workhorse of the skies. The main reason is a lack of engine availability.
On the last earnings call, Boeing CEO David Calhoun dialed back expectations for a production ramp on the 737 MAX. Instead, he aims to stabilize at a production rate of 31 a month, and he needs "confidence that engine suppliers will have their castings in order." In terms of engine suppliers, Calhoun is talking about GE's joint venture, CFM International -- the sole supplier of engines to the 737 MAX. For reference, CFM and Raytheon's Pratt & Whitney offer rival engines on the Airbus A320 neo family of aircraft.
Source Fool.com
