Boeing Could Temporarily Close The 737 MAX Production Line

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.

Boeing 737 MAX
The MAX production could be halted temporarily. Photo: Wikimedia Commons

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.

Advertisement

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.

Advertisement
737 MAX 7,8,9 artwork
The entire MAX family has been grounded for several months now. Photo: Boeing

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.


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.

Boeing 737 MAX
If all goes to plan, the MAX could undertake test flights in October. Photo: Nathan Coats via Flickr

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.

Advertisement

12
Leave a Reply

10 Comment threads
2 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
9 Comment authors
newest oldest most voted
Nigel

I read an analyst report yesterday that indicated that, even if the MAX is re-certified to fly in Q4, it may take up to two years to clear the backlog of parked planes at the Boeing facilities. Mr. Walsh (IAG) says that he’s fed up with Airbus delays…but it seems that he won’t be much better off at Boeing 😉

Frank

So Boeing posts a $3 billion loss for the quarter, with analysts saying it’ll cost them $5 billion each additional quarter and now there is talk of this dragging on into 2020…but the share price is still sky high. What is wrong with this picture? It makes no difference to me, but doesn’t something seem off?

BTW – Nigel, I don’t see that IAG letter of intent getting turned into a solid order, anytime soon – if ever. Smoke and mirrors for the investors…

Nigel

I agree that the IAG letter is BS. I’m just deriding the underlying “logic” regarding delivery delays.

Shapes

The share price is what for any other company would be called “market manipulation”. For every 10 units sold another 10 or so get bought immediately, who on earth would buy such an expensive over priced stock? Its around 10 times more than the airline stocks, hardly “buy low, sell high”. I recommend anyone with interest to watch it fluctuating (try yahoo finance), you can see any dips being countered immediately.

Jones
John

Rushing things is what Boeing did to start with. Taking the time to do it right is step one, but gaining back customer trust is going to be a much greater hurdle.

Nigel

The bitchy tone of the FAA in the following Reuters news item suggests that it may take a LONG time before the MAX is re-certified…
https://www.reuters.com/article/us-boeing-737-faa/no-timeline-for-boeing-737-max-return-to-service-faa-official-idUSKCN1UK2FV

Ravioliollie

The MAX 8 is unairworthy, which spurred the “band aid” MCAS. This bir must never again get airborne.

Anthony Biddulph

I agree about the unairworthiness. My guess is that the aircraft will not fly again.

Geoff

I am amazed that Boeing are still building the 737 MAX. Not only are they parked all over the world but even in Boeing’s car park. Many airlines are cancelling their orders in favour of the A320 / A321 so the MAX will be gathering dust for a long time. Wait for the fire sale of the century. Now here’s a thought – China is keen to get into the airliner industry, they could buy all the Max’s they could get their hands on, re configure them to make them safe (back to the NG series) and sell them to… Read more »

Geoff

A few random thoughts…
Max 8 and 9 scrapped
Max 10 is built but renamed as the B737’s last hurrah
As Airbus has done with the A220, Embraer E2’s fill the 100-150 seat market
allowing Boeing to commit to the NMA…

Shapes

Continuing production of a plane with known and unknown faults that will need to be rectified is idiotic. Continuing to produce a plane when the aircraft cannot be delivered and there is no where left to store them is insane.
Production must be well over 700 planes by now, an impossible task to retro fit and make these planes airworthy again.
Boing gone nuts!