Moody's: Commercial aerospace supply chain well-positioned to handle narrowbody production ramp-up

The commercial aerospace supply chain is well-positioned to handle an increase in production rates of Boeing and Airbus narrowbody jets in 2018, Moody's Investors Service says in a new report. The aircraft manufacturers plan to produce 52 narrowbodies per month by the end of next year.

"Boeing and Airbus, mindful of the challenges that their suppliers will face, signaled their intention to move to higher build rates several years ago, which has allowed suppliers to make the necessary capacity investments," says Eoin Roche, VP -- Senior Analyst at Moody's. "While these investments have weighed on supplier free cash flow generation over the last two years, we expect these headwinds to taper off in late 2018/early 2019 as suppliers begin to reduce their capacity investments."

Moody's believes the greatest execution risk in the supply chain over the next two years will reside with smaller, privately-owned suppliers. Many of these suppliers have won meaningful content on next-generation narrowbody aircraft, so their ability to meet the requirements of tier-one and airframer customers, while adapting to aggressive production schedules, will be a key factor in the broader supply chain's ability to deliver on planned ramp-ups.

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