Ed. Note: Bill Collins and his team mesh customer sales requirements with manufacturing capabilities to create Boeing’s long-term airplane production schedule, better know as the “skyline.”

In the current economic downturn, we manufacturers are getting plenty of production rate advice. It typically goes like this: “Boeing and Airbus need to cut production by (fill in percentage) or risk building “white tail” airplanes.”

Regardless of who’s offering advice, it’s important to remember that it reflects a perspective shaped by, among other things, self interest. We all have considerations that drive our decision making. So, here’s our perspective.

Bill Collins, Director Sales & Marketing Operations Boeing Commercial Airplanes

Production rate changes, as our CEO Jim McNerney said recently, are a big business decision. The market is certainly a concern. But we also consider obligations to customers, impacts to suppliers and implications for employees and stockholders, among other factors. This includes what our production team calls making a “controlled descent,” where we move downward without crashing our supply chain partners while preserving options to move up again without scrambling when things improve.

For example, in considering wide body rates, we look at demand. It has softened, particularly for freighters. We also look at order times for things like engines and seats, both of which are long-lead items. Total time to turn out a widebody can be two years or more because of the lead time required for such items. Consequently, we are conservative when committing to higher production rates, and that makes us less flexible. Thus, when we do have to reduce rates, it is not a drastic reduction. In the end, we decided to reduce 777 rates in June 2010, and hold off on modest increases to 747-8 and 767 production.

On the other hand, for standard bodies, implementation times are shorter – on the order of a year. Given the greater production flexibility, we were more aggressive in committing to rapid production of 737 Next Generation airplanes. Despite our aggressive rates, we still have some oversold positions next year and beyond, which has offset impacts from the limited deferrals that we’ve seen. For that reason, we have not needed to change current 737 rates and will continue to monitor conditions should future adjustment be required.

Fortunately, we’ve only had a small number of order cancellations (58) this year and have been more active in working with customers on deferrals from 2010 to 2011 and beyond. This activity has allowed us to significantly recovery production lost during the machinists’ strike last fall. Our remaining commercial backlog of $266 billion gives us even more flexibility than in the past to move customers forward when others ask to defer.

The scope and impact of production decisions are significant and need to be made deliberately. If we need to adjust, as we did after post 9/11, we will do so, and we’ll do so as efficiently as possible. In the meantime, we’ll be watching today’s very dynamic and fluid situation very closely.