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Boeing Co. (BA) is stepping up production rates of its airplanes as it expects airlines to continue growing and replace older, less fuel-efficient jets even as the world economy remains sluggish, a senior company official said Monday.
"Passenger business, which is the heart of our airline customers' business, has been very resilient," Randy Tinseth, Boeing's the vice president for marketing, told Dow Jones Newswires in an interview in Singapore. "Except in Europe, we expect airlines to be profitable. When business is growing, airlines are profitable, they buy new airplanes."
He said airline passenger traffic is likely to grow by about 5% in 2012 after it rose 6% last year. That comes at a time when global economic growth is likely to remain below its long-term trend this year.
There is also strong demand to replace older and less fuel-efficient aircraft, especially with the current high fuel prices, Tinseth, who represents Boeing Commercial Airplanes, said. He added that Boeing expects about 500 older planes will be retired each year.
"We never want to be in a position where we are providing airplanes to our customers who don't need them. We are actively managing our production rates and our skyline at all times," Tinseth said, describing the rising order backlog as a "challenge."
Boeing, which received orders for 412 jets in the first quarter, aims to deliver between 585 and 600 planes this year. New orders will still outpace deliveries in 2012, he said. Boeing booked gross orders for 921 planes last year, though that was overshadowed by 1,608 new orders for its arch rival Airbus, a unit of European Aeronautic Defence & Space Co NV (EAD.FR).
Asked about the competition from newer entrants such as Bombardier Inc. (BDRBF) and Commercial Aircraft Corporation of China, or Comac, for single-isle jets, Tinseth said that ultimately the market will decide which manufacturer is successful.
"We recognize that the duopoly between Boeing and Airbus is over. (However, the new manufacturers) will bring in new thoughts, new ideas which will make the market more competitive, which is good for our customers and I think it makes us better," he said.
Boeing will continue selling its twin-aisle 777 airplanes as it sees "a lot of runway ahead" for the model, with the production rate planned to rise to 8.3 jets a month by the first quarter of 2013 from seven now.
Similarly, Boeing aims to raise production of its latest 787 'Dreamliner' jets to five a month by the end of this year and 10 by the end of 2013 from 3.5 planes a month at present. The single-aisle 737 model, the highest seller in terms of volumes, will see production rates rising to 38 a month by the second quarter of next year from 35 now, Tinseth said.
-By Gaurav Raghuvanshi, Dow Jones Newswires; +65 64 154 154; email@example.com