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Source: Reuters

UPDATE 2-Boeing to boost of production of 737 model

Published: 17 May 2010 18:41:53 PST

* Boeing to raise 737 production rate to 34/month

* Cites strong consumer demand

CHICAGO, May 17 - Boeing Co said it would boost production of its narrow-body 737 model to 34 aircraft per month, citing strong demand from airlines as they rebound from a steep downturn in 2008 and 2009.

The increase from 31.5 per month is set to begin in early 2012, the world's No. 2 plane-maker said.

"Even through the global economic downturn, our diverse 737 backlog has remained very strong," said Jim Albaugh, chief executive of Boeing Commercial Airplanes in a statement.

"Increasing the 737 production rate is the right thing to do to meet the growth and fleet replacement needs of our customers," he said.

Earlier this year, Boeing said it sees improved demand and fewer order cancellations and deferrals.

In March, Chicago-based Boeing said it would speed up planned output rates for two of its popular wide-body aircraft as demand resumed among airline customers who cut back during the economic downturn.

Boeing said it has more than 2,000 unfilled orders for the plane from 80 customers around the world.

The shares of Boeing, a Dow component, were up 0.3 percent in after hours trading.

Boeing executives said recently they were evaluating the need for a 737 production rate increase, as well as the ability of BCA and its suppliers to meet increased demand.

Such comments by Boeing CEO Jim McNerney squashed earlier speculation the company would either leave production rates steady or even cut them as some experts had believed.

Boeing's plans underscore a recovery in the airline industry that faced a sharp drop in orders in the last two years.

Boeing and its top rival, Airbus, were dogged in 2009 by fewer orders as carriers around the world grappled with falling travel demand in the sagging economy.

Orders for Boeing's commercial aircraft output fell 61 percent to 263 in 2009, as air travel and freight transport slumped.

"Going to 34 a month is easily obtainable. The capacity is in the system," said Alex Hamilton, senior aerospace analyst at C.K. Cooper & Co.

"If that implies that airlines are doing better, that also implies there are orders to come."

Boeing said its suppliers were prepared to support the increase. The increase is not expected to affect 2010 financial results, the company added.

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