Boeing Restarts Third 737 Line at Renton Plant Amid Engine Delivery Challenges

Boeing has restarted the third production line for its 737 aircraft at its Renton plant, a move aimed at boosting output amidst ongoing supply chain disruptions. The decision comes as French aerospace manufacturer Safran reported a decrease in LEAP engine deliveries, which has impacted both Boeing and Airbus. Safran, which produces the LEAP engines through a joint venture with GE Aerospace called CFM International, has faced issues with the high-pressure turbine (HPT) blade supplier yield, affecting their commitments to airframer customers.

In the first half of 2024, CFM International delivered 664 LEAP engines, which is 121 less than the 785 engines delivered in the same period the previous year. The shortfall was particularly severe in the second quarter, with deliveries down by 29.1% to 297 units. Safran's CEO, Olivier Andries, attributed this decline to lower yields of HPT blades supplied to GE during April and May. Although the yield levels have slightly improved, they have not yet returned to normal.

Howmet Aerospace, the primary supplier of HPT blades, asserted that it has ramped up production by 40% in recent months and does not expect to limit LEAP-1A build rates. Despite this, Safran has revised its full-year LEAP delivery guidance downwards, now anticipating flat to 5% growth over 2023, a significant reduction from earlier forecasts of 10-15% in April and 20-25% at the start of the year. The downward revision is due to reduced deliveries of LEAP-1B engines to Boeing because of decreased 737 MAX output and the HPT situation. While the HPT issue mainly affects Airbus, Boeing has mitigated some impact through inventoried LEAP-1B engines.

Nevertheless, Safran expects to deliver more LEAP engines in the latter half of the year, with improved HPT yields and a focus on supporting Airbus. However, Safran continues to manage the situation carefully to serve both airframers and airliners.

Strong 1H aftermarket revenue

In the first half of 2024, Safran's revenue from its propulsion segment rose by 13.8% year-on-year to $6.46 billion, driven by a 29.9% increase in civil aftermarket revenues. This growth was mainly due to the demand for CFM56 spare parts and LEAP service contracts. CFM56 deliveries increased by four units to 28 in the first half, high thrust engine deliveries rose by eight units to 91, while M88 military engine deliveries more than halved to 14 units from 31 in the same period last year.

Equipment and defense revenues increased by 26% to $5.17 billion, primarily driven by higher original equipment sales. Deliveries of nacelles and landing gear sets increased across the A320 and A330 programs, as well as 787 landing gear sets. The strong demand in the civil aftermarket prompted Safran to raise its revenue guidance for that segment to "upper mid-20s" growth, up from the previous estimate of around 20%.