Boeing expects that the 737 MAX will return to service by the fourth quarter of 2020. Once the aircraft is recertified, the planemaker is planning to deliver most of its 400+ stored 737 MAX aircraft within a year.
Targeting a fourth quarter return
Dave Calhoun, the CEO of Boeing, stated the following in the company’s second quarter earnings call held on July 29th:
“Based on our latest assessment, we now expect the necessary regulatory approvals will be obtained in time to report the resumption of deliveries during the fourth quarter. Of course, the actual timing will ultimately be determined by the global regulators.”
In indicating a fourth quarter return, Boeing outlined that there were recent, encouraging developments. First, the 737 MAX finished its FAA recertification flight tests earlier this month. Then, just last week, the FAA announced it would be soon posting a Notice of Proposed Rule Making (NPRM) on the 737 MAX. While these are positive steps forward, there are still plenty of other milestones and procedures that must be carried out before the 737 MAX returns to service.
At this point, however, it is looking like the FAA is starting to reach the end of the recertification process. Despite this, just about every aircraft operator is cautiously optimistic. In Southwest’s second quarter earnings call, the airline’s COO, Michael Van de Ven, stated that the most iconic 737 MAX operator and customer was hopeful to see the MAX reenter revenue service in December. Still, the airline is prepared if it does get delayed into the first quarter of 2021.
Delivering almost 450 Boeing 737 MAX jets in a year
Boeing has about 450 Boeing 737 MAX aircraft built and in storage, ready for delivery. At the same time, the company is producing 737s at a low rate. With the assumption of fourth quarter regulatory approvals, the planemaker believes it can deliver a majority of the almost 450 stored MAX aircraft during the first year after the company can resume deliveries.
When prompted further, Boeing’s executives indicated that discussions with customers have led to the plan to get those planes out for delivery in the first year. In addition, because these are completed aircraft, Boeing can turn the aircraft around and get them ready for delivery pretty quickly. This is what Boeing hopes will drive the planemaker’s goal of delivering most of those stored MAX within a year. Some, however, may and most likely will slip to beyond that timeline depending on how and when customers need the jets.
Over $6 billion in liability for customer concessions
Boeing and various 737 MAX operators have been engaged in discussions over compensation relating to the MAX grounding. Thus far, Boeing has accrued over $9 billion in liability for potential concessions and other considerations to customers. The company has made $2.6 billion of payments to customers in cash and other forms of compensation. In the second quarter, Boeing paid out $600 million in compensation. The company does have a remaining liability balance of $6.7 billion.
Boeing makes compensation agreements and concessions with each customer. The two parties weigh impacts of the MAX disruption to their schedule and are taking into consideration the current, ongoing crisis. These discussions and final agreements, however, are not made public. But, the total liabilities accrued is a staggering amount that represents the seriousness of the 737 MAX grounding for both Boeing and its airline customers.
Do you think Boeing will be able to deliver almost 450 737 MAX planes in one year? Let us know in the comments!