Yesterday, Boeing posted their biggest loss in history, as the impact of the 737 MAX grounding starts to bite. The manufacturer has warned of the possibility of stopping production of the 737 MAX temporarily if no end to the grounding is forthcoming soon.
In their second-quarter earnings call, CEO Dennis Muilenburg noted that any further delays to approval could result in a further slowdown of production rates, or even of a temporary shutdown altogether. He said that this was not something Boeing wants to do, but that it’s “an alternative that we have to prepare for … to make sure we’ve covered all scenarios.”
The earnings call highlighted the impact to Boeing of the MAX grounding, as the company reported losses of $2.9bn, compared to a $2.2bn profit in the same period last year.
MAX production could be stopped
Already Boeing has cut the rate of production as a result of the grounding. In April, the manufacturer slowed production by around 20% to just 42 aircraft a month. Since then, they have been maintaining that level of production but hadn’t anticipated the grounding dragging on for anything like as long as it already has.
As a result, numerous 737 MAX planes have started to pile up outside the production facility in Renton, as well as in their storage facility in Texas. Last month was revealed that even part of the staff car park had been taken over as additional storage space. With timescales for lifting the ban still very much uncertain, Boeing is faced with a major problem in terms of storing completed airframes.
Historical moment in Aviation history! ✈️
Aerial images show the Boeing 737 MAX aircraft parked in the staff car park because there is no more capacity left at the airport. pic.twitter.com/TZ3MKH8rdMAdvertisement
— Aviation photo ✈ (@Airplane_pic) June 23, 2019
Bloomberg analyst George Ferguson noted that just endlessly building 737 MAXs wasn’t going to work for Boeing, saying, that a fourth-quarter restart for the Max remains the likeliest outcome, especially with FAA officials working on-site with Boeing on a resolution. However, he noted that,
“…if something happens to extend that, they can’t just keep building planes.”
Muilenburg seems to be of the same mindset, stating in the earnings call that cutting production further could become a possibility. He said that,
“Should our estimate of the anticipated return to service change, we might need to consider possible further rate reductions or other options including a temporary shutdown of the MAX production … a temporary shutdown of production line could be more efficient than a sustained lower production rate”
Should the ban be lifted in the fourth quarter, however, the CEO noted that they would plan to ramp up production to 57 a month by 2020. Even then, Boeing warned that there could be delays in delivering new aircraft to customers due to the current reduced rate.
Where is the MAX right now?
So far, Boeing says that the software package has been developed, but is yet to be submitted to regulators. A number of other requirements needed to be filled in order to achieve re-certification of the type, all of which Muilenburg was positive about in the earnings call.
In it, the CEO said that everything was approaching being ready to submit to the FAA, and that Boeing planned to do so in September. Boeing has tentatively said that they hope the fixes will be approved for a test flight in October. Should the fixes be approved, this would still leave time for the 737 MAX to return to service in the fourth quarter of the year.
However, all this hinges on a lot of ‘what if’s. Should any further problems arise or any of the fixes be deemed to be insufficient, going back to the drawing board could add weeks or even months to the timeline for return to service.
Clearly, Boeing is as keen, if not keener, than any of the MAX operators to see this aircraft back it the sky. Every week that drags on into the unprecedented grounding period is another week of costs, losses and uncertainty for the manufacturer to bear.