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Boeing is cautious about plane boom !

Filed in archive Market Overview by ehsan on December 10, 2005

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Reuters reported that record demand for commercial jetslinks is forcing planemakers and their suppliers to plan carefully as some key raw materials become scarce, executives and analysts say.

Managing the supply chain will be crucial to Boeing Co. and European archrival Airbus as they seek to boost margins on a new generation of aircraft that use composites to boost fuel economy.

"In a brutal market share war and an industry where your customers have razor-thin margins and you're promising discount pricing to everybody, you really have to be careful with the cost of your supply chain," Teal Group analyst Richard Aboulafia told the Reuters Aerospace and Defense Summit. "That's one of the biggest uncertainties moving forward."

Boeing and Airbus are on track for their best year ever, helped by a recovery in air travel and strong demand from Middle Eastern and Asian carriers.

But Boeing, which struggled to handle its last production upswing in the late 1990s, is treading carefully to make sure that it boosts output in an orderly way this time.

"We're in constant conversations with our suppliers," Randy Baseler, Boeing's vice president of marketing for commercial airplanes, said at the summit in Washington.

The leading U.S. planemaker surprised some analysts recently by keeping its aircraft production forecast for 2006 unchanged at 395 instead of raising it after a strike depressed output by about 30 planes this year.


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