Boeing CEO warns 737 Max production shutdown possible
Boeing's top executive is anticipating the firm will receive federal approval for a software update to fix the issues with the beleaguered 737 Max jet in September and deliveries to ramp back up in 2020, but stressed the timeline is in flux as regulators continue to scrutinize the manufacturer.
The March grounding of the Max fleet after two fatal crashes has reverberated through the aviation industry.
Carriers like American Airlines and United Airlines previously extended the potential for flight cancellations until early November and are purchasing older aircraft to accommodate the delays in deliveries of the updated 737 that will extend well into next year.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BA | THE BOEING CO. | 143.41 | -2.67 | -1.83% |
The Chicago-based planemaker previously cut production to 42 Max jets each month. That is expected to rise back up to 57 in 2020, according to CEO Dennis Muilenburg, but a delay in approval from the Federal Aviation Administration for the software patch could result in further production delays -- or even a full halt.
"Both within Boeing and our supply chain, we are using this time to improve the production system's health and stability," he told investors and reporters on Wednesday. “We might need to consider possible further (production) rate reductions or other options including a temporary shutdown of Max production.”
A temporary shutdown could be more effective from a production standpoint, argued Muilenburg, because it gives some suppliers time to "catch up to the master schedule."
And while increasing production from 42 to 57 jets a month would be a significant undertaking, Muilenburg argued it is doable given that the manufacturer was previously running at higher rates.
"That experience, that learning, that understanding gives us confidence in how we can rate back up and we factored that into our analysis as well," he said on the firm's earnings call.
The company has held a dozen conferences with customers on the Max grounding, along 225 new simulator training and weekly technical calls. Despite the push, however, key stakeholders remain skeptical.
A top pilots association is pushing Boeing to release more details on what updates were included in the Max jet and warned the flying public that the fleet should not be considered safe until union members give the green light.
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Boeing on Wednesday reported a second-quarter profit loss of $5.21, much less than the $1.87 per share that Wall Street expected and the largest loss in the company's history. Meanwhile, revenue was $15.8 billion in the three months through June, also less than analysts predicted.
The company previously said it expected to take a $5 billion hit as a result of the Max grounding.