You are here

Boeing temporarily halts production of 737 Max

Decision confirms investor fears that the company's recovery from the crisis is dragging on longer and creating more uncertainty than anticipated

nz_boeingplane_181219.jpg
Boeing said on Monday that it will temporarily suspend production of its globally grounded 737 Max jets in January 2020 - its biggest assembly-line halt in more than 20 years - as safety regulators delay the aircraft's return to the skies after two crashes.

Washington

BOEING said on Monday that it will temporarily suspend production of its globally grounded 737 Max jets in January 2020 - its biggest assembly-line halt in more than 20 years - as safety regulators delay the aircraft's return to the skies after two crashes.

The decision confirmed investor fears that the company's recovery from the crisis is dragging on longer and creating more uncertainty for Boeing than executives anticipated.

Boeing's travails since March have weighed on the US economy, holding down American manufacturing output, trade and sales of durable goods while damaging the company's performance on Wall Street's benchmark Dow Jones Industrial Average.

In a statement, the company said it would continue to pay its workers despite the temporary production stoppage, but the decision immediately raised questions for the future of parts suppliers that contribute to the jets' manufacture.

Your feedback is important to us

Tell us what you think. Email us at btuserfeedback@sph.com.sg

"We have previously stated that we would continually evaluate our production plans should the Max grounding continue longer than we expected," the company said. "As a result of this ongoing evaluation, we have decided to prioritise the delivery of stored aircraft and temporarily suspend production on the 737 programme, beginning next month."

The company said it would focus on delivering 400 jets that it has kept in storage.

Although the jets have been grounded worldwide since March following deadly crashes in Indonesia and Ethiopia, which left 346 people dead, Boeing had continued to produce 40 of the planes per month at a Renton, Washington facility.

Last week, US aviation regulators issued the company an unusually sharp rebuke, accusing it of pursuing an "unrealistic" timeline for the Max's return to service and of making public statements intended to put pressure on federal authorities.

The Federal Aviation Administration (FAA) said last week that it could not approve the jets' return to service before 2020, even though Boeing had long said it planned to get officials' green light before the end of this year.

Boeing and the FAA have been under intense scrutiny for their responses to issues with the aircraft, including the flight-handling system involved in both accidents, the Manoeuvring Characteristics Augmentation System (MCAS).

"Boeing seems to have finally come to terms with the new reality that international safety regulators will not be bent to their whim, and the process of returning these planes to service is not as simple as a quick software fix," Senator Richard Blumenthal said in a statement.

Analysts said that Boeing's prospects will remain clouded until the manufacturer can get the all-clear for the Max to fly again.

"As we have throughout the 737 Max grounding, we will keep our customers, employees and supply chain top of mind as we continue to assess appropriate actions," the company said, adding that it will disclose financial information tied to the suspension when it releases quarterly results late next month.

Major air carriers that had purchased 737 Max jets have repeatedly pushed back the dates on which they anticipate a return to service.

Southwest said last Thursday that it had reached a confidential agreement with Boeing partially compensating the airline for costs related to the grounding of the jets.

Nevertheless, the manufacturer in November unveiled an updated version of the jet, the 737 Max 10.

Shares in Boeing fell 4.3 per cent as investors anticipated Monday's decision. They were down another 0.4 per cent in after-hours trading at 5 pm (Tuesday 6 am, Singapore time). AFP

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes