Boeing may halt 737 MAX production if planes stay grounded through 2019

Posted By: Staff
July 25, 2019 @ 7:22 am
ABC Business

Wolterk/iStock

Wolterk/iStock(NEW YORK) — Aerospace company Boeing has not ruled out further reducing or temporarily shutting down production of the 737 Max aircraft if the plane does not return to service by the end of the year, chairman and CEO Dennis Muilenburg said Wednesday.

The company expects the 737 Max’s return to service will be “early in the fourth quarter,” Muilenburg said during a call discussing second quarter earnings, which revealed the aerospace giant’s biggest quarterly loss on record — $2.9 billion — due to problems with the Max.

Governments and airlines around the world have grounded the Boeing 737 Max aircraft after two fatal crashes in October of 2018 and March of 2019 killed a total of 346 people.

“We are continuing to produce at 42 aircraft per month and we will continue to evaluate potential future reductions in the production rate, including a temporary shutdown in 737 production,” the company said in an statement of accounting for its second quarter filed with the U.S. Securities and Exchange Commission (SEC) on Wednesday.

Prior to the 737 Max grounding in March of 2019, the company had projected a different financial narrative for 2019. Boeing originally expected 737 Max deliveries to comprise about 90 percent of its total 737 deliveries in 2019, and had planned to increase the production rate to 57 per month in 2019, according to the SEC filing. In addition to the Max grounding, the 737 Max program was plagued by supply chain delays in the first quarter of this year, the company said.

“We may face additional costs, delays in return to service, and/or further reductions in the production rate. The grounding has reduced revenues, operating earnings and cash flows during the first half of 2019 and will continue to adversely affect our results until deliveries resume and production rates increase. We are also working with our customers to minimize the impact to their operations,” Boeing’s SEC filing said.

In June, Boeing secured a letter of intent from International Consolidated Airlines Group (IAG), the parent company of British Airways, Iberia and Aer Lingus, for 200 737 MAX airplanes as well as commitments for other planes, according to the SEC filing.

Boeing also provided an update on its 777X plane on Wednesday, saying the jets are “progressing well through pre-flight testing.” While the company said it is still eyeing late 2020 as a target date for the first deliveries of the 777X, it disclosed “significant risk to this schedule given engine challenges, which are delaying first flight until early 2020,” according to a press release on Wednesday.

The family and wife of Antoine Lewis, a U.S. Army captain from suburban Chicago who was killed in the crash of Ethiopian Airlines Flight 302, publicly called for U.S. airlines to remove the 737 Max from their fleets on Wednesday, after filing a lawsuit against Boeing. Lewis was one of the hundreds of people killed in two plane crashes involving the 737 Max.

“We are fully cooperating with all ongoing governmental and regulatory investigations and inquiries relating to the accidents and the 737 MAX,” Boeing said Wednesday in its SEC filing. “We cannot reasonably estimate a range of loss, if any, that may result given the ongoing status of these lawsuits, investigations, and inquiries.”