AIRSHOW-UPDATE 2-Boeing's Conner says battery didn't slow other programs

Sun Jun 16, 2013 4:38pm BST

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By Alwyn Scott

PARIS, June 16 (Reuters) - Boeing's extraordinary effort to solve battery problems that hit the 787 Dreamliner early this year did not disrupt progress on other aircraft programs, which remain on schedule.

"It didn't slow down development," despite doing three years of work in three months to fix the problem of overheating batteries on the 787, said Boeing Commercial Airplanes CEO Ray Conner, speaking at a news briefing ahead of the start of the Paris air show which opens on Monday.

Conner said the company expects to deliver 11 or 12 787s by the end of the first half, counting from when the grounding of the 787 ended in April.

One 787 was delivered in January before the worldwide 787 fleet was grounded. Two lithium ion battery incidents aroused safety concerns with regulators, prompting the grounding.

Conner said Boeing was on track to deliver more than 60 Dreamliners this year, as promised.

Conner said the outlook remains positive for further increases in production rates and there were no constraints in the supply chain. But he said further rate increases are not yet a certainty, and the company is focused on bringing production costs down.

The company has said previously that there is an "upward bias" in production rates, but has not been specific on whether it would actually move to increase production beyond already established targets.

He added that costs associated with Boeing's focus on improving its supply chain would not alter the timeframe for profitability of the 787, which is due to break even in 2015.

Conner said Boeing is seeing strong demand for aircraft and that since production for current 737 models bridging to the next-generation 737MAX is almost fully booked, it is hard for customers to order airplanes.

"We haven't made any decisions but we have to think our way through," he said. "Do we want to look at higher rates? What's the capacity, both within the Boeing Company and the supply chain?"

Boeing is experiencing similar demand for widebody models such as the 787 and 777, Conner added.

He said there weren't constraints in the supply chain provided rates didn't go too high. The capital investment needed to raise the rate of 737 production to the current level of 38 a month and to 42 per month next year had left some scope to raise the rate further. "There is room to do that," he said. "it's really a question of whether or not we want to."

Boeing is currently building 8.3 of its 777 wide-body jets per month and 7 of its 787s. It aims to increase 787 production to 10 a month by year-end, but hasn't announced a further target for 777 production.

It is also building two 767 tankers per month under contract to the U.S. Air Force, and 1.75 of its 747-8 jumbo jet, where demand has slackened. Conner said the company remains committed to the 747 and that it expects more orders to arrive as a result of ongoing sales campaigns.

He said the company expects "a decent show" of orders at the Paris air show, but cautioned that airlines don't always sign deals in time for such events.

He said Boeing was having detailed discussions on the 777X, the next generation of its best-selling wide-body plane. He declined to comment on whether the 787-10X would be launched in Paris.

Boeing is poised to launch the larger version of its 787 Dreamliner jetliner family to meet demand for long-haul travel within Asia and other long-haul routes at the air show, sources told Reuters on Thursday.

Boeing is working to reduce costs so it can compete even more on price with Airbus. The competition will benefit airline customers and is healthy, and he declined to call it a pricing war.

"We're going to fight," he said, noting that to compete on price it has to bring production costs down.

He said there certainly would be a third competitor in the narrow-body market and that would further increase price pressure and require cost cutting.

China's COMAC, Canada's Bombardier and possibly Brazil's Embraer are likely to challenge the Boeing-Airbus duopoly in the narrow-body jet market, he said.

"I just anticipate that they'll all be there," because they've made the investment to develop new planes, he said.

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