The jetliner supply chain might find itself the victim of someone else’s idea of success. As both Airbus and Boeing consider a further ramp-up of their A320 and 737 single-aisle jetliner families, everyone involved should consider the likely ramifications.

Talk of higher rates has been increasingly heated lately. Airbus, now building 42 A320-family jets per month with plans to go to 50 by early 2017, in May began voicing the possibility of 63 per month by 2018. At the Paris Air Show, Airbus termed the case for 60 per month “sound.” Boeing, also building 42 737s per month today and planning to reach 52 in 2017, has been discussing an increase to 60 per month as well.

The airframers’ rationale to increase production is understandable. Backlogs are at record levels, and order intake remains quite strong. Airbus also has an 18-month advantage over Boeing in next-generation single-aisle availability and it is determined to exploit that advantage. Boeing, of course, is eager to ramp up 737 MAX output as quickly as possible to make up for lost time.

But consider the backdrop to the single-aisle-rate debate. Typically, the jetliner business is a cyclical market, with roughly seven good years followed by about three bad ones. As our chart indicates, this pattern has been disrupted recently, with 11 straight years of growth.

The numbers are remarkable. Deliveries of large aircraft by value have seen a 9.6% compound annual growth rate (CAGR) over the last 11 years. Ten years ago, the market was not even half the size it is today. The past five years have all had record-high delivery rates.

Yet this market has not been driven up by the usual organic factors of airline passenger demand and current fleet retirements. Ten years ago, neither Airbus nor Boeing produced market forecasts calling for 10% growth every year for the decade to come, and airline traffic certainly hasn’t justified this. Instead, much of this success has been due to factors unrelated to actual consumer demand—low interest rates and high fuel prices. Since 2008, for the first time in decades airlines have had both the incentive to re-fleet (expensive fuel) and the economic means to do so (cheap cash).

Today the price of fuel has softened, and its direction is unknown. Interest rates remain at rock-bottom levels, but if they change, they can only go up. Given the uncertainty associated with these market drivers, this would be the time for caution on production rates, not a ceaseless quest for endless increases. Looking solely at passenger demand, producing at a rate of 1,500 per year starting in 2018 virtually guarantees a serious problem with airline industry overcapacity after 2020.

As a cautionary tale, consider Bombardier’s Global business jet production cut last month. They had been pushing metal out the door, growing market share and bringing in very badly needed revenue. Yet the market couldn’t sustain this output, and production rates had to drop, resulting in 1,750 jobs being cut.

But the best reason to keep a lid on rates involves profitability. Jetliner production rate increases are happening only in the context of relentless discounting, especially as Airbus and Boeing sell the last of their current A320ceo and 737NG products. This industry has become a poster child for deflation, with new airplane values at about the same level as aircraft built more than 10 years ago. If production rates were going up as a response to higher demand, it would be reflected in higher, not lower, prices.

Worse, as the primes discount their jetliner sales, they need to force suppliers to cut their prices, by about 10-15%, according to many accounts. Thus demand for components and structures is going up even as prices are falling, another violation of basic economic laws.

Supplier companies should beware: They are under the gun to make the majority of the investments needed to permit the higher single-aisle rates. They also are being asked to make that investment while the airframers demand that they lower their prices. Worse, there is the very real risk that they will be stuck with overcapacity and higher fixed costs if the market turns down when output of 1,500 single-aisle deliveries per year proves to be unsustainable. 

Contributing columnist Richard Aboulafia is vice president of analysis at Teal Group. He is based in Washington.